A Confederation of Palestine and Israel
A Palestinian state is inevitable, and it is also impossible for it to exist without an association with Israel.
February 1, 2008
Fred Foldvary, Ph.D.

A Palestinian state is inevitable, and it is also impossible for it to exist without an association with Israel. Thus a confederation of Israel and Palestine is logical and unavoidable.

However, as Israel celebrates its 60th year of independence, this year 2008 also marks six decades of failure to make peace between the Arabs and the Israelis. Both sides have made it difficult for the other to make peace. The Palestinian Arabs have inflicted violence and terror on the Jews of Israel, while the Israelis have been arrogant in grabbing Arab land for settlement expansion and, according to many accounts, for overly harsh treatment of Palestinian Arabs.

One problem is that both sides are stuck in the “who goes first” trap. Israelis say, first stop the rocket attacks, bombings, and terror. The Palestinians say, first release the prisoners, stop the checkpoints, and end the occupation. Israelis point to the fact that after they removed their settlements in Gaza and left the whole territory to the Arabs, the Palestinians responded with continuous rocket attacks on Israel, and the Palestinians have chosen a government that refuses to accept the presence of Israel regardless of its boundaries.

Now that the facts in the ground are that Arab Palestine has become split into a hostile Gaza and a West Bank authority that is willing to negotiate, a peace negotiation process has started. A confederation of Palestine and Israel should be at the center of the talks. The confederation could solve the problem of the territorial separation of Gaza and the West Bank, since a corridor linking them could be confederate land rather than exclusively in Israel or Palestine.

I have written several articles on an Israeli-Palestinian confederation. The idea of two states, Israel and Palestine, under a joint confederate government, has been promoted and written about for decades. Now there is a new organization, founded by Josef Avesar, that has a promising approach: just do it.

The IPC (Israeli-Palestinian Confederation) plan is to hold private elections for a private Confederate assembly. If the Israeli and Palestinian governmental authorities are unwilling to include a confederation in their plans, the people can do it independently. The IPC proposal is to raise $35 million to pay for elections in Israel and Palestine to a Confederate parliament. The election would also generate publicity for the idea of confederation.

It would be difficult to hold such an election in Gaza, as the organizers there would probably be murdered. But it is feasible for the West Bank. The confederate assembly would then act as a parallel government, especially if it is welcomed by the US and European government chiefs. The Confederate assembly could voluntarily raise funds both internally and from grants, and provide social services while the Israeli and Palestinian governmental authorities continue their dance of delay.

What is missing in the IPC proposals is a solution to the land problem. Confederacy offers equal self-government, but government applies to territory as well as people. The IPC founder says that once the Confederation is established, then it would facilitate a decision on the boundaries of Israel and Palestine. However, there would be little incentive for Israelis to change the status-quo of the Jewish settlements in the West Bank.

Therefore, as I have argued previously, any plan for Confederation must confront the land question. Ideally, all landholders in Israel and Palestine should pay rent for the lands they use, and the rent would be the public revenue of the confederate government. But as a step towards resolving the issue of the Jewish settlements in the West Bank, the settlers would pay the economic rent of the lands they hold to the Palestinian government.

The West Bank, with the 1948 boundaries, would be recognized as belonging to the state of Palestine, but the Israelis would have a perpetual leasehold on the lands they are currently holding. The Israelis there who chose to continue to be Israeli citizens governed by Israel would pay the economic rent of that land to the Palestinian government.

The payment of land rent would compensate the Palestinians for the use of that land, and acknowledge that it is Palestinian territory. The rent would also create a cost for the Israeli holding of land. They would decide if it is worth the expense to hold all that land. This would not satisfy the maximalists of both sides, but under the circumstance, it is the golden mean between the extremes.

The rent should be paid directly to the Palestinians. When a Palestinian family receives $1000 per year from the Israeli tenants, they would feel like landlords, and given their current poverty, it would be a valuable supplement to their income. The American and European governments should cease providing welfare aid to the Palestinians and instead give that money to the Israeli settlers on the condition that they in pay this along with their own funds as rent to the Palestinians. That would start the rent-paying process. The Palestinian would then see that if the Israeli settlements were evacuated, they would lose their rental income.

Confederation with Rent. That is the key to peace among the Arabs and Israelis.

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Fred Foldvary, Ph.D.

FRED E. FOLDVARY, Ph.D., (May 11, 1946 — June 5, 2021) was an economist who wrote weekly editorials for Progress.org since 1997. Foldvary’s commentaries are well respected for their currency, sound logic, wit, and consistent devotion to human freedom. He received his B.A. in economics from the University of California at Berkeley, and his M.A. and Ph.D. in economics from George Mason University. He taught economics at Virginia Tech, John F. Kennedy University, Santa Clara University, and San Jose State University.

Foldvary is the author of The Soul of LibertyPublic Goods and Private Communities, and Dictionary of Free Market Economics. He edited and contributed to Beyond Neoclassical Economics and, with Dan Klein, The Half-Life of Policy Rationales. Foldvary’s areas of research included public finance, governance, ethical philosophy, and land economics.

Foldvary is notably known for going on record in the American Journal of Economics and Sociology in 1997 to predict the exact timing of the 2008 economic depression—eleven years before the event occurred. He was able to do so due to his extensive knowledge of the real-estate cycle.