Why have nearly 400,000 Israelis decided to live in Israeli settlements in the West Bank? Are all of them trying to reclaim the biblical lands of their forefathers and foremothers? Why, despite the international community’s objections, are new homes continuing to be built in Jewish communities east of the Green Line?

Like most of the discourse surrounding the Israeli-Palestinian conflict, the Israeli settlement enterprise has often been viewed through the lens of religious, political and ideological extremism. However, geographic phenomena do not take place in a vacuum devoid of economic influence. In reality, many Jews emigrating from Israel proper to West Bank settlements in the past few decades have chosen to do so in search of a seemingly impossible combination: a lower cost of living that allows for a higher quality of life.

Israeli think tanks such as the Adva Center and MACRO have provided vital analyses of the economic costs of the occupation and the massive amount of human, physical and financial capital from the state coffers which have been poured into the settlement enterprise, even at the expense of national priority areas in Israel’s periphery. On average, the Israeli government spends 135 percent more on the ordinary settler than the average Israeli citizen. In addition, there is a NIS 1.099 billion (308.7 million USD) annual difference in aggregate per-capita government spending on settlement residents than on per-capita expenditures for citizens in Israel proper (west of the Green Line). There are also four times as many public construction projects initiated per capita in West Bank settlements than in Israel proper.

It is clear that the Israeli government seems to be playing favorites. But its intervention in the West Bank market directly contradicts the orientation and principles of Israel’s increasingly neoliberal and market-oriented economy, a phenomenon which has accelerated since the 1985 Economic Stabilization Plan that sought to curb stagflation with Reaganomic policies. Israel’s economy — which was once described as “the most socialist country outside the Eastern Bloc” — has since been transformed by increasing privatization, the slashing of government spending on social welfare and the massive decline in the political and popular power of the Histadrut (the national trade union).

Professor Danny Gutwein of the University of Haifa argues that Israel’s transition from socialism toward neoliberalism is a direct causal mechanism of settlement population growth. As a corollary to his argument, he adds that Israel’s right-wing has strengthened in recent years because it has promoted heavily financing the settlement project as a way to compensate for the not insignificant negative side-effects of neoliberal economic policy, especially rising housing prices and increasing inequality and poverty.

Intuitively, his argument makes sense. Neoliberalism and its close cousin, capitalism, manifest themselves in policies which produce winners and losers. In Israel, the “losers” are being compensated by the advocates of these policies with incentives, subsidies and entitlements that allow them to maintain, or even raise, their quality of life by living in West Bank settlements.

I decided to put Gutwein’s theory to the test and see if his theoretical argument holds its ground. I created an original dataset using openly-sourced data since 1977 from the World Bank, the OECD, the Israeli Central Bureau of Statistics, and the Knesset electoral archives, and then constructed ten statistical models to measure the extent to which various economic and political indicators can explain population growth in West Bank settlements.

Here are a few of my findings:

Gutwein’s theory holds significant merit:
In all seven models in which it is regressed, Israeli government consumption as a percentage of GDP (which captures both increasing privatization and decreased government spending) is found to be highly significant at the 1 percent significance level. The first five models reveal that a 1 percent increase in government consumption as a percentage of GDP is associated with an approximately 18 percent reduction in the West Bank settler population. That’s not to say that 18 percent of the West Bank settler population — approximately 72,000 people — will decide to pack up and move back to Israel proper if the government decides to increase government consumption by one percent. What this does say is that the decline of the Israeli welfare state in Israel proper is clearly associated with the rise of the settlement enterprise

GDP growth alone is insignificant:
While the annual GDP growth rate is found to be a significant variable when regressed along with the government consumption variable, it loses all significance when regressed alone. In fact, when regressed alone, GDP growth explains 0 percent of the variability in the West Bank settler population. What does this mean? Maintaining a fiscally healthy economy with a high GDP growth rate will not lessen the economic burdens which act as push factors for Israeli citizens looking for a lower cost of living in certain settlements. High GDP growth may only exacerbate the existing socioeconomic inequality which exists today in Israeli society and contributes to settlement migration.

The government’s political orientation is insignificant:
This statistical analysis also shows that the political orientation of both the Knesset and the prime minister in power has not had a statistically significant effect on settlement population growth. This finding has important ramifications for the current discourse surrounding Israeli society’s relationship with the settlement enterprise. Netanyahu, the Likud and its right-wing partners are not the only ones culpable for the proliferation of settlements. While Gutwein argues that settlements act as a compensatory mechanism for Israel’s right-wing, this analysis shows that the settlement enterprise is not merely a left-wing versus right-wing issue. The annual population growth rate of West Bank settlements has averaged almost 7 percent in the past 30 years, under both right-wing and left-wing governments. As long as the settlement issue continues to be normalized as part of Israel proper across the political spectrum, especially by the Israeli left, the viability of a two-state solution will continue to be under threat.

The Israeli political establishment — like many in the world — is imbued with inherent contradictions. While it outwardly professes support for a two-state solution, it continues to support forces, such as West Bank settlements, which pose fundamental threats to such a solution. While it outwardly touts free market principles and continues to lessen state involvement in economic affairs in Israel proper, the Israeli government continues to directly support the construction and maintenance of West Bank settlements.

The growth of settlements is not a purely organic phenomenon. There are very real and observable economic forces at play which promote and perpetuate the settlement project. This research offers new considerations for Israeli policymakers as they critically evaluate the state of socioeconomic equity in Israel today, and the extent to which those inequities are exacerbating the fundamental tensions found in the Israeli-Palestinian conflict.

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