Palestinian Studies

2014 Workshop

Mtanes Shihadeh

Program Coordinator of Israeli Studies and Senior Researcher at Mada El-Carmel

The Israeli Policy Toward “Arab Economy”

This paper aims to examine Israeli economic policy toward the Palestinian in Israel (Arabs Economy), and to reassess the question of integration/exclusion of the Palestinian Arab minority in the Israeli economy, in light of the adoption of liberal economic policies in Israel, and the need of the Israeli economy to development the Arabs economy, while preserving the superiority of Israel's Jewish economy. More precisely the paper will explores: (a) the changes that have taken place in the state's economic ideology and policy, in light of its transition to a liberal economic system since the mid 1990s, which have negatively adversely affected the economic situation of Palestinians; (b) how, especially since 2000, the economic situation of the Palestinian population has begun to be viewed as a barrier to further Israeli economic development, and indeed has the potential to harm strategic Israeli economic interests; and (c) how current government policy ostensibly aimed at tackling Palestinian economic adversity serves principally to maintain domination of the exclusively Jewish capitalist economy of Israel.

Over the years since 1948, the Israeli national economy, dominated by its Jewish private and public sectors, has alternatively included or excluded “its” Arab sector in its development path, depending on the overriding prerequisites of, and constraints upon, Jewish development in different periods. Indeed, like many newly industrialized economies, the Jewish “developmental state” nurtured the economic growth of Israel since its inception. Even before the state’s establishment, a self-sustained, exclusive Jewish economy (agricultural, then industrial and services) was always the dynamo of a broader Zionist program of ensuring Jewish colonization, settlement, and prosperity throughout Palestine. Since 1948, a range of policies was adopted to contain, circumvent, and prevent Palestinian Arabs from developing autonomous economic strength or benefit from the state’s development programs and achievements. State funding of social services and economic activity was charged with promoting Jewish “national” priorities. By definition, this meant that less attention, if any, was paid to Arab development, which lagged far behind that of the Jewish majority and was subordinated to the growth imperatives of the colonial settlement program. This Arab exclusion from the fruits of Israeli economic growth has created a stark structural development gap that endures (Bäuml 2002; Khalidi 1988).

The Arab economy within the state has hence become an appendage of the Israeli economy, effectively mortgaged to it, dependent upon it and with limited productive capacity, consumption power or autonomous market potential. Over the years, as priorities of consolidating the state’s sovereignty and economic growth evolved, different measures were deployed to address the needs of a growing Arab population or to respond to discontent about denial of collective and individual rights in a self-declared democratic system. Since the 1960s, government investment plans and other programs were launched, ostensibly to bridge the development gap between the Arab and Jewish “sectors” in Israel through “integration” of the former into the latter. Many of these initiatives were declamatory more than substantive; some were abandoned, and others were simply misguided and ineffective.

In any case, the socioeconomic conditions of the Arab areas in Israel have only slowly improved in 60 years, while poverty has spread and the attrition of Arab resources has proceeded apace. While gaps between the two populations have narrowed in some areas, and conspicuous individual wealth is not rare in Arab communities, collectively, the 150-odd Arab towns and villages in Israel are a world apart from the neighboring Jewish cities and settlements that have arisen in their midst.

Since 2000, government policy has renewed efforts to accelerate the integration of the Arab economy into national markets and tap its potential beyond its mass consumption power through “market-based” programs. It continues to be widely accepted in liberal Israeli thinking and even among some Palestinian Arab citizens of Israel that state policy actually has an “integrative” motivation towards the Arab population, or at least is as neoliberal and capitalist as it is Zionist. In challenging that claim, the paper aims to establish whether recent initiatives are really new, and whether they are sufficient to ensure the development of the Arab economy, reduce its dependency on Israeli state welfare, and end its exclusion from mainstream Israeli economic growth. Specifically, examine the extent to which these initiatives herald a broader renewal and structural transformation of the Arab economy or will go down in history as the most recent episodes in a series of aborted efforts that were, in a strategic sense, destined to fail.


  • 2006: present : Ph.D. Student for Political Science at The Hebrew University.
  • 2005: MA- Political Science from Haifa University.
  • 1995: BA- Economics and International Relations from the Hebrew University.
  • 2003- present: Program coordinator of Israeli studies, and Senior Researcher: Political Behavior and Voting, Political Economy of and Discrimination Towards the Arab Minority in Israel. Mada El-Carmel – The Arab Center for Applied Social Research (Haifa).


  • Khalidi, Raja and Mtanes Shihadeh. forthcoming. Impeded Development: The Political Economy of the Palestinian Arabs inside Israel. Routledge, UK: Kinion Institution.
  • Raja Khalidi and Mtanes Shihadeh. forthcoming. Israel’s “Arab Economy”: New Politics, Old Policies.
  • 2006. "Impeded Development: Israel's Economic Policy toward the Arab Minority". Mada El-Carmel. (Book)
  • 2006. Israel and the Palestinian Minority
  • 2005. Mada El-Carmel. (Book) Israel and the Palestinian Minority
  • 2004. Unemployment and Exclusion. Mada El-Carmel.

Research Papers:

  • 2006: The Palestinian Civil Society in Israel. Mada El-Carmel.
  • 2005: Poverty among the Arabs in Israel. Mada El-Carmel.
  • 2009-2010: Israel and the Palestinian Minority: Political Monitoring Bio-monthly Report.

Book Chapters:

  • Nadim N. Rouhana; Mtanes Shihadeh; Areej Sabbagh-Khoury. Turning points in Palestinian Politics in Israel: The 2009 Elections. in: Asher Arian and Michal Shamir (eds.), The 2009 Israeli Elections. Jerusalem: The Israel Democracy Institute. (Forthcoming).
  • 2010. Mtanes Shihadeh. The Palestinian Minority in Israel during the year 2009. In Honaida Ghanim (ed.) Madar's (The Palestinian Center for Israel Studies) Third Annual Strategic Report on Israel during the year 2006. Al-ayyam Publications, Ramallah.
  • 2009. Mtanes Shihadeh. The Palestinian Minority in Israel during the year 2008. In Honaida Ghanim (ed) Madar's Third Annual Strategic Report on Israel during the year 2006. Al-ayyam Publications, Ramallah.