We are paying for this

Here is Part I of a fascinating analysis of what passes for the economy of the Palestinian lands, the only place in the world where per head disposable income is higher than per head GDP. How does this amazing economic miracle happen? Could you not guess?

The Palestinian economy is the only place in the world where the per capita GDP is less than half the disposable income per capita. This is the result of three factors:

1. The Palestinians barely produce anything. Most of their GDP comes from government expenditures by the PA itself.

2. The Palestinians receive immense sums donated by the world.

3. Tax collection is almost unheard of, aside from the taxes collected (for Fayyad) by the Israeli government, which provides the PA with NIS 450 million (roughly $120 million) monthly; this comprises about 40% of the PA's budget.

The result is clear: Low GDP, but high disposable income. Indeed, it's an economic miracle.

Meanwhile, the situation is even more extreme in the Gaza Strip, where the PA spends 57% of its budget. Fayyad hands over salaries and allowances to 150,000 people, yet tens of thousands of them don't work, while others receive two salaries: One from Fayyad and another from Hamas. This is why the only industries active in Gaza are imports through smuggling tunnels and real estate – the surplus of cash in Gaza's banks prompts them to offer mortgages, and this results in a rise in real estate prices.

There is also a constant supply of spare cash for explosives and rockets.

The effect on real estate, particularly the most valuable sites on the beachfront, is also curious.

The former finance minister in Fayyad's government expressed it vividly in an interview with Le Monde: He said the Europeans are unaware that their money funds Hamas. Hamas doesn't know what to do with all the money in its pockets so it buys real estate. As result, the price of upscale beachfront real estate in Gaza increased by 300%. The money from the EU and from the taxes collected by Israel ultimately reaches Hamas, he said.

Read the whole piece.