One of the basic assumptions of liberal democratic thought in the postwar era has been that free trade and economic development would tend to retard war and create a world in which more liberal democratic states could flourish. The idea is, to say the least, not entirely uncontroversial. It propelled development efforts in the former Soviet space that now appear to have been less than successful. On the other hand, this perspective also was in the back of the minds of the architects of the modern Europe—men like Jean Monnet and Robert Schuman, who were convinced that first a consolidation of the steel industry in north central Europe, and then broader economic ties, would make a rerun of the two world wars unthinkable. That analysis seems unassailable at this point. How would this approach work in one of the most intractable conflicts of the modern age: the Israel-Palestine conflict? In the October issue of Harper’s, Bernard Avishai takes a look at the promise of economic interdependence and the vexatious reality of life for entrepreneurs on the West Bank. He starts with the promise dangled in front of them:

Benjamin Netanyahu ran for prime minister last winter rejecting a Palestinian state but promising to advance “economic peace.” In his much anticipated speech at Bar Ilan University in June, he cautiously reversed himself on statehood but returned to his favorite theme: “Economic peace is not a substitute for peace, but it is a very important component in achieving it. . . . I call upon the talented entrepreneurs of the Arab world to come and invest here.” For Netanyahu’s boosters, the phrase often means little more than increasing jobs for Palestinians on Israeli construction projects, including settlements that ring Ramallah, and in tax-exempt industrial zones; as well as more opportunity for West Bank farmers to sell to Israeli fruit wholesalers (who, in a grotesque twist, then pad their profits by controlling the distribution of their produce in Gaza). Economic peace slyly implies that Israelis can have no “partner” for a political settlement until Palestine looks more like Delaware. Meanwhile, presumably, fuller bellies and fatter wallets will make Palestinians more tranquil. Nevertheless, economic peace prompts a reasonable question. If a Palestinian state rises, will it work?

Avishai offers no definitive answer to that question. The solution depends, understandably enough, on many of the political variables that affect the business environment. He paints a very bleak picture of the current environment, in which endemic corruption and oppressive political circumstances leave little hope for economic success. Here’s a striking example from the core of the article:

The minute business seems “as usual,” it isn’t. Suddenly a component or a process is declared illegal. Or you cannot get to the ports. Or settler violence in the heart of Hebron, the West Bank’s largest city, causes the closure of its once flourishing market. Or a customer in Ashdod doesn’t pay the 200,000 shekels he owes you, claiming he was “harmed” by the Gaza violence. You are managing four currencies—shekels, euros, dollars, and Jordanian dinars—and cannot hedge them. Hashim Shawa told me that his correspondent bank in Israel, which ordinarily accepted the Bank of Palestine’s excess cash shekels, suddenly cut ties, anxious about armored cars delivering piles of “Palestinian money” that Israeli victims of a suicide bombing might be tempted to sue for. The result, Shawa told me, is the loss of about $1 million a year in interest, about 5 percent of the bank’s net profit. “The banks that are thriving are the informal, black-market banks funding the Hamas people who manage the tunnels from Gaza to Egypt,” he said, sighing. “They offer 20 to 30 percent a month in interest.”

Discussions about the Israel-Palestine conflict focus incessantly on matters of high politics, as witnessed by the recent Goldstone report—whose detractors see everything in terms of national politics, refusing to recognize that the report is about war crimes. But Avishai’s piece gives us a good glimpse into the dismal realities of the business world, showing that if economic interdependence does furnish the basis for peace, the forces at play in Israel and Palestine today serve mostly to promote the interests of war.