For decades, Israeli and Palestinian politicians have pursued a political solution to the Arab-Israeli conflict, only to see their hopes dashed again and again. Today, the prospects for a comprehensive peace agreement remain dim. Policymakers must therefore start looking for other ways to improve the situation on the ground and preserve the possibility of a two-state solution.
Creating a viable Palestinian economy will be central to this effort. Should the Palestinian economy collapse, that failure would hurt Palestinians and their neighbors just as much as a failed political state would. And it would jeopardize their future as well, since no peace deal will succeed unless the Palestinian economy is able to stand on its own.
The idea of economic development as a precursor to peace is not new. But so far, efforts to boost growth have largely failed. Per capita GDP in the Palestinian territories is currently just $2,000, and a quarter of the labor force is unemployed. What growth the economy has achieved has come primarily from foreign aid and cash remittances from Palestinian workers abroad. And that aid—which in any case has done little to create good, high-paying jobs—has been declining since 2012.
As the economy has stagnated, a sense of despair has grown among many Palestinians. Such hopelessness, combined with the already volatile mixture of religious extremism, a large population of young people, and a stalled peace process, could prove extremely dangerous.
A huge market awaits would-be Palestinian technology entrepreneurs.
To break out of this trap, the Palestinians must look to private industry, not external aid agencies or the territories’ bloated public sector, to drive growth. More specifically, technology start-ups offer the best path forward. High-tech start-ups create well-paying jobs and support growth elsewhere in the economy while avoiding many of the roadblocks that prevent other Palestinian businesses from succeeding.
That said, the Palestinians cannot create a thriving technology ecosystem by themselves anytime soon. Israel and the United States will have to help. If entrepreneurs, engineers, and
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