The Political Economy of Palestinian Children:
An Examination of the Linkages between
Economic Policy and Child Welfare
With over 52 percent of its population under the age of eighteen,
Palestine’s future will be determined by the strength of its children.
Current Palestinian economic strategies, however, do not consider how their
policies impact child welfare. Most of these reports recognize the
importance of primary health care and education for child development, but they
fail to consider how particular macroeconomic strategies influence healthy child
growth. Recognizing these linkages between macroeconomic policy and child
welfare is particularly important in Palestine given its skewed age
distribution. The difficulty is that the returns from a child-focused
policy often are not realized for many years. If Palestinian economists
and development analysts continue to ignore the effects of their programs on
children, however, they are only hindering the sustainability of Palestinian
development. The goal of this paper is to begin to elucidate the impact
economic polices have on the welfare of Palestinian children. It is our
hope that this process will enable policy makers to devise the child friendly
economic plans that will foster development and strengthen tomorrow’s parents,
laborers, and decision-makers.
The framework for this paper is two-fold. First, the Convention on the
Rights of the Child (CRC) dictates that government’s must use “the maximum
extent of their available resources” to ensure a child’s right to survival,
development, protection and participation. Although the CRC stresses the
need for strong governmental action, they do not elucidate the exact processes
governments should undertake to guarantee children’s rights. Palestinian
policy-makers must determine on their own the level of resources they are
willing to commit to ensure the articles of the CRC. The costs of creating
vibrant and educated children are high and necessitate spending trade-offs, but
such child centered investments will have great social and economic returns in
the long run.
This paper is also guided by the belief that economic growth must be structured
around human development. Economic development that does not expand a
population’s human capabilities is simply unsustainable.
This paper is by no means a comprehensive assessment of how economic
policies impact child welfare. In fact, it is meant to be more of a call
to action than anything else. More in depth analyses are needed to
adequately identify how specific policies impact children. Through such a
comprehensive analysis, development practitioners will know which groups are
most at-risk and policy-makers will better understand the long-term impacts of
their economic plans. Creative policies can then be established to help
establish a vibrant child and a vibrant economy.
The positive correlation between economic growth and human development is well
documented. Nearly every indicator that could be used to measure a
child’s “right to life, survival and development” (Article 6 of the
Convention on the Rights of the Child) shows that countries with higher per
capita income have greater child welfare than poor countries. The
causation, of course, goes in both directions: higher incomes are good for
children and healthy, educated children are good for economic development.
What must be realized, however, is that economic growth is far from enough.
There are numerous examples of countries with similar per capita incomes, but
extremely divergent child development. Cuba, for example, has an
under-five mortality rate (U5MR) of just 10 deaths per 1,000 live births, which
is less than half of the U5MR of Mauritius (23/1000). This is the case
even though Cuba’s per capita GDP ($3,100) is less than a quarter of
Mauritius’ GDP per capita ($13,294). Per capita income in and of
itself means little; solid human development depends on an equitable
distribution of income, access and information.
The rhetoric of the Palestinian Development Plan 1999-2003 (PDP) is good.
The authors recognize the importance of considering human development when
devising economic strategies. In fact, the report stresses that “human
resource development is not merely a goal to be achieved, rather it is the
principle driving force for the realization of development.” The
methods outlined to achieve this ‘human resource development,’ however, are
potentially problematic. First, the PDP takes a limited perspective on
what human resource development actually is. While the report mentions the
importance of health care and education, there is no deep understanding of the
impact their planned policies will have on children. A main section of the
PDP, for example, conjectures three development scenarios along which Palestine
may develop. These scenarios are differentiated by political conditions
and economic constraints, but do not consider how various shifts in economic
policy will affect child growth and development. Although political
conditions will undoubtedly shape Palestine’s development future, sound
investments in children will have just great, if not greater, impacts on
A second concern derives from the PDP’s statement that, “there is an
international consensus with regard to the type of economic and social policies
which need to be implemented if high rates of growth and development are to be
achieved.” Presumably, this statement refers to the neoliberal
structural adjustment policies that have swept across the developing world over
the past two decades. The “international consensus” that the PDP
refers, however, is not ubiquitously in favor of structural adjustment. In
fact, 72 percent of the countries that implemented structural adjustment
programs (SAPs) from 1978-1995 suffered a rise in unemployment. More often
than not, countries that implemented these SAPs saw real wages fall, income
inequality worsen, food production decline, debt burdens increase, and
substantial poverty remain. Reducing internal and external deficits,
decreasing government expenditures, and bolstering the private sector, policies
these SAPs dictated, can improve a nation’s economy, but policy makers must be
aware of the potential human costs that can accompany these potentially austere
If the PDP’s rhetoric of human resource development is to become reality, the
rights of children highlighted in the CRC must be incorporated into Palestinian
fiscal planning. The CRC guidelines for child focused development stress
that budgetary analyses need to be carried out to determine the linkages between
economic policy and child welfare. In its analysis of other countries
going through economic transitions, the CRC found “that groups of children in
both poor and rich countries have been victimized by sweeping measures to curb
inflation and encourage economic growth.” In order to prevent a
similar degradation of child capabilities, Palestine must both incorporate
children into development strategies and examine, line by line, the effects of
the yearly budget on child welfare. If such policies are not
undertaken, development strategies aimed at growth and human development may
actually hinder the economic and human potential of Palestine.
The PDP plan for foreign investment, for example, is cause for alarm. The
PDP states that Palestine must work to provide “investment guarantees against
all kinds of risk” for foreign investors (italics added). Although the
need for foreign investment is important and Palestine’s desire to open its
borders understandable, such a laissez-faire investment policy can lead to
serious social and economic problems. The East-Asian economic contagion
proved that foreign capital is fickle and may flee at any point. The
countries that were least affected by the East Asian meltdown were those with
capital controls. Foreign investment in these countries was not able to
flee with ease, buffering the country from economic dangers. Even more
troublesome, is the potential societal degradation that can accompany such an
open environment. A focus of Thailand’s development program, for
example, was increased tourism (a policy also espoused by the PDP), but this
opening of borders led to serious social problems. Rural areas were left
undeveloped and the disparity in income between the countryside and the city led
to increased sexual exploitation of children, greater corruption and higher and
higher rates of AIDS. Quick growth schemes (e.g. casinos) can have serious
The Palestinian potential for development is high. Various estimates place
the assets of the Palestinian Diaspora between $40 and $80 billion. Bank
deposits, moreover, have consistently increased over the past five years.
In order for this income to be fully utilized via loans and investment, the
political environment will have to improve. In the meantime, however,
Palestine can further develop its human and social capital by focusing on the
rights, health, and needs of children. It is this group that will provide
the foundation for Palestine’s future economic growth and human development.
What Palestinian policy-makers must realize is that there is no fast and easy
way to develop. Healthy economies and populations take time to nurture and
support. To become a strong economic player in the global economy takes a
strong domestic sector and population. Simply put, Palestine must rely
mainly on itself. By increasing investment in children, Palestine can
begin the sustainable and socially responsible development path toward future
With a real GDP growth rate of –2.4 percent, a trade imbalance of 2.8
billion dollars (40% of GDP), and declining private investment rates, there is
clearly a need to stimulate the Palestinian economy. The economic goals of
PDP are to lessen unemployment, generate enough savings to finance investment,
and produce enough exports to pay for imports. Children will benefit from
these policies, but only if they are undertaken carefully. Projections and
models of how particular fiscal and structural policies affect the well being of
the child are in urgent need. These projections must not concentrate only
on institutions, but also the processes that guide those institutions. It
is not enough to say, for example, that more schools are needed. The
analysis must examine the processes that will make that school a catalyst for
healthy child development (e.g. quality of the teaching and creativity and
availability of the curriculum).
Economic decisions, moreover, cannot occur in a vacuum. The hierarchy of
decision-making must be elucidated so academics, NGOs, and child rights
advocates can contribute to policy discussions. Without such a broad
developmental dialogue, misguided policies that seek only short run growth (or
even just personal gain) will be more common.
Dependency on Israel.
Due to their close geographic location and their isolation post-1967, the
Israeli and Palestinian economies are closely tied in terms of employment,
markets, and monetary supply. However, this is far from an equal
relationship; more than any other factor, Israeli policies have hindered
Palestinian economic and human development. If examined against other
nations, the level of Palestine’s human development (literacy, health, level
of poverty) should translate into a per capita GDP that is five times greater .
Israeli restrictions on the interflow of labor and goods have had dramatic
repercussions on the Palestinian economy. From 1993 to 1997, for example,
the Israeli border was closed for a total of 307 days, costing the Palestinian
economy nearly $3 billion. Despite the fact the Israel agreed to
employ at least 100,000 Palestinians during the Economic Protocol, these
closures have decreased the number of Palestinians working in Israel from
116,000 in 1992 to just 28,000 in 1996. In percentage terms, 26 percent of
the Palestinian labor force was working in Israel in1993, but this fell to just
10 percent in 1997. With Palestine unable to absorb this influx of
laborers, the closures increased Palestinian unemployment, weakened social
capital, and lowered the demand for labor - decreasing wages. Moreover, by
increasing the levels of poverty, the closures constrained social spending and
forced donor support to concentrate on short-term poverty alleviation programs,
instead of long-term capital development.
Clearly, children are seriously harmed by these conditions. Child
poverty increases, as does the potential for societal violence. The
long-term social and mental consequences of these policies have not been
sufficiently researched, but it is clear that policy-makers must devise means to
buffer the Palestinian economy and society from such troublesome structural
shocks. One possible tool to alleviate the shock of closure is for the PNA
to establish a limited unemployment insurance program that targets workers who
had been employed in Israel.
Cycle of Poverty.
The most troubling economic and demographic problem in Palestine is the
number of poor and vulnerable. In 1997, 38.2 percent of Gaza and 15.6
percent of the West Bank lived in poverty. Children are especially
vulnerable to poverty; 54 percent of all of the Palestinian poor are under the
age of eighteen. The most troubling finding from these statistics is the
clear cycle of poverty within Palestine: poverty breeds poverty.
Uneducated families with large numbers of children are the most likely to be
poor. This vicious cycle of the most marginalized population producing the
greatest number of children has serious social and economic consequences.
These children do not receive adequate health care or schooling and are unable
to find jobs (Palestine’s unemployment rate is over 20 percent). The
lack of services and opportunities for this group increases mental strife,
enhances the possibility of divorce, weakens human and societal capital, and
reinforces a continued cycle of vulnerability. If these cycles of poverty
remain unchecked, societal violence is bound to increase and the possibility of
a civil crisis will grow. These vicious cycles of poverty, however, can be
transformed in virtuous cycles of human development. If the most
marginalized sectors of Palestine are targeted with education, job creation, and
health care (both mental and physical health), they will have fewer children,
find jobs more easily, and the density of social spending will increase.
The alternative is increased growth rates, greater poverty, and potential
Given Palestine’s skewed age distribution and the likely return of Diaspora
Palestinians, a great influx of workers will soon enter the Palestinian economy.
Job creation is vital, but it must be approached with a long-term vision.
Palestine’s greatest natural resource is its people. With increased
human development, Palestine’s relatively cheap labor will encourage foreign
investment. The competition for foreign capital is fierce, but Palestine
can create a comparative advantage by increasing the quality of children’s
education and health care. A healthy, highly skilled, and relatively low
wage labor force will stimulate investment and boost child development.
Given Palestine’s human and societal capital it could become a financial
center (integrating regional stock markets, center for currency trading), an
information-technology hub (off-shore information processing, software
engineering), or a leader in professional services (law, insurance, consulting,
education, specialized medical treatment). Policy-makers should
develop a socially responsible development goal and then provide today’s
children with the inputs they need to serve as a foundation for this goal.
This approach to development and child welfare is socially responsible and
sustainable and will translate into long-term economic growth.
Cost-benefit analyses are needed in order to elucidate further the quid pro quo
of social spending and economic growth.
Donor countries committed $5.2 billion in assistance to Palestine between 1994
and 1998. Although this resource is of vital importance to Palestinian
development, a number of factors limit its beneficial impact. First, there
is no central fund to consolidate, prioritize and coordinate donor support.
Funding arrives through a multiplicity of channels, complicating economic
planning and preventing effective fund targeting. Without Palestinian
prioritization, moreover, these funds often are not directed towards clear
developmental concerns, reflecting instead the priorities and interests of the
donor community. Palestine is also lacking the organizational strength
needed to absorb and efficiently use donor funding. Due to the political
environment, the inefficiency of past donor spending, and limited Palestinian
institutional capacity, institutional donors have only disbursed about half of
their total commitments.
A second concern is that a substantial percentage of this aid comes in the form
of in-kind support and technical assistance, which ends up returnin to the donor
country. Most troubling perhaps, is the current tendency for these funds
to be given as loans. Approximately a quarter of all donor commitments
have come in the form of loans (~ $500 million, not including inflation).
Debt not only burdens future generations, it also opens Palestine to repayment
conditionalities that may not be in the best interest of Palestinian children.
Given these factors, it is not particularly surprising that the Palestinian
Human Development Report found that 76 percent of Palestinians believe
international aid does not benefit all Palestinians equally. Donor support
can potentially help lay the foundation for a long-term, sustainable, and
child-friendly economic plan, but it must be managed more efficiently.
Expanding the capabilities of children takes governmental commitment. The
state must have a forward looking notion of the what it wants to achieve and
must decide the degree of services and support it is willing to commit to this
achievement. Currently, public spending trends are going in a sad
direction. The donor community is increasingly being relied on to provide
services and the growth of public health and education spending is substantially
less than the growth for telecommunications or culture. Current spending
strategies, moreover, do not seek to alleviate and cure social difficulties, but
rather are in place to just maintain the mere survival of the most disadvantaged
groups. The poor population is not a consistent group; it fluctuates by
location and economic circumstance. Although it is vital to help the
poorest of the poor escape poverty, it is also important to support the middle
class, lest they fall into poverty. If the vicious cycles of poverty in
Palestine are to convert to virtuous paths of growth, Palestine must determine
which sectors and regions of the population are most at risk and then create
innovative policies to address their particular concerns.
If we look at the poorest districts of Palestine (Gaza and Jenin), we find that
these districts also have the highest reported deaths under the age of five, the
largest number of students per teacher, and the highest birth rates. The
most disadvantaged are not provided the best services, reinforcing Palestine’s
cycle of vulnerability and poverty.
The disproportion of children in Palestine is not necessarily a negative
trait. If given a suitable environment, the opportunities for these
children are unbound. It is our hope that this paper will
spark the need analyses and debate that will clarify how Palestine can target,
support, and enhance its child population. By focusing on the human
development of the today’s children, policy-makers can establish a
??foundation for a healthy, vibrant, and economically successful society.