Milton Friedman’s 1969 commentary on the West Bank

“Much to my surprise, there was almost no sign of a military presence…I had no feeling whatsoever of being in occupied territory…This wise policy [of the Israelis] involved almost literal laissez-faire in the economic sphere…To a casual observer, the area appears to be prospering.”

That is from Friedman’s “Invisible Occupation.” Newsweek column, May 5, 1969, reprinted in There’s No Such Thing as a Free Lunch: Essays on Public Policy. La Salle, Illinois: Open Court Press, 1975, pp.298-99.

That is cited in an old paper of mine on the economics of international conflict, with reference to the Middle East.  See my related earlier post, “Why Don’t People Have More Sex?


Of course 2013 is somewhat different from 1969.

Ah yes, 1972 Munich. UN 1974. It didn't take long to change.

Was effectively a free trade zone between Israel and territories after '67 war. Palestinian Territories had some of highest growth in world after the war.

There was little military presence until the major wave of terror after the Oslo Accords.

Tyler's post is going to drive some people bonkers.

1967 was largely before Palestinians took to the habit of strapping C4 to their chests before hopping on a bus or going to a pizza parlor. File the difference between then and now as the economic returns to terrorism, or really any armed "struggle." Fighting against "foreign oppressors" almost always leads to awful outcomes for everyone involved. With the exception of a tiny sliver of a manipulative native elite who reap the benefits of money, power and international prestige while using their countrymen as cannon fodder. Tens of billion in foreign aid lining Swiss bank accounts and a Nobel later, Gaza and the West Bank are some of the worst hell holes on Earth.

Can anyone seriously argue that if the Palestinians had become Mennonites, read Dale Carnegie, and learned how to smile while saying "Yes, massa" that their lot today wouldn't be far better off?

The problem was precisely the growth: it created a new aspirational middle class in Palestine, who found themselves blocked from climbing the ladders of Israeli society.

Interesting point. Hadn't thought about that before. It certainly seems to fit into most historical progressions of revolutions (both successful and attempted). It's pretty rare for a genuine peasant class to rise up, most of the time revolutionary fervor follows a period of upward mobility for some set of those previously on the lower-rung.

You went pretty quickly from Arabs as a race love terrorism and blowing up pizza parlors to Oh, structural reasons for change? Interesting!

When did I ever say anything about "Arabs as a race." In fact I bluntly made a universal statement about the futility of armed struggle. Almost everywhere and always violent resistance against a much stronger power leads to far worse outcomes for the people involved. This is just as true for Tamils as it is for Arabs.

I think you're reading context that doesn't exist into what I said based on your personal mood affiliation.

"Almost everywhere and always violent resistance against a much stronger power leads to far worse outcomes for the people involved."

That doesn't seem to have happened for the Kosovar Albanians, the Timorese, the Libyans post-Q,the Poles post-WW1, or even the American colonists in 1776. I don't think one can make the blanket statement that "resistance against a stronger power"...almost...always leads to worst outcomes. It only does so, if you don't win, and if the power you are overthrowing was oppressive (economically or otherwise).

Of course, in most of the examples I gave above, the decider of success was the intervention of an even stronger power in their favor. But, sometimes that is the objective of the resistance. And sometimes it's luck.

In nine years? IIRC, revanchist candidates prevailed generally in municipal elections held in 1972 and swept the board in 1976.

Actually, nationalism works pretty well, on the whole, or at least better than imperialism. The world now has 200 separate countries, and it is more peaceful and prosperous than ever.

LOL nationalism works well. The theories that nuclear powers will not go to war (popular in the Cold War), nor countries that trade with each other (popular before WWI) nor will democracies go to war (a rule promulgated by a Hawaiian academic R.J. Rummel) are backward looking, back-data tested rules that may have no predictive power going forward. Witness the nuclear sabre rattling by North Korea and sometimes India-Pakistan, the fishing wars between democracies over cod, the near 'soccer war' and the tussle between various countries over the South China Sea, the Mediterranean (Turkey/Greece over border disputes) and the Falklands conflict over worthless rocks. Even when both countries have much to gain from trade, like in the Middle East, there is still war, despite Coase's theorem as TC's paper says.

In other news: Americans have 77T in net worth, announced yesterday, while there is 60T in net debt says So we have a 17T/77T = 20% cushion, for now, not bad.

You're double-counting household debt of (according to the debt clock) $16T, so the cushion is nearly double what you claim. Household net worth is already deducting that debt and it's included in the $60T total.

And yet the countries with the most nationalist fervor historically have done the worst. Haiti, the first Caribbean island to revolt against colonialism, is a blistering hell hole. Jamaica and others riding the wave of 1960s anti-colonial nationalism are okay but crappy. British boot-licking Bahamas, Caymans and Bermuda are the richest in the Caribbean. Japan grew like a powerhouse once it gave up its nationalist ambitions and became essentially an American colony. Far-longer colonized Macau and Hong Kong are still way economically ahead of mainland China, plus they never suffered massive genocides. Radical nationalist fervor led to Sub-Saharran Africa turning into a basket case, with the exception of Botswana. A single-party state De Beers puppet state made up of a bunch of what are basically the African equivalent of Uncle Tom Black Republicans. Nationalism in the Balkans led to impoverishment and war, while post-Soviet states that embraced Euro-centrism like the Czech Republic, Poland, Slovenia and the Baltic states got rich.

A lot has happened in the past 100 years besides the transition from imperialism to nationalism. You can't just say, well things are better now, so decolonization worked. Higher prosperity is trivial, since we have microprocessors, jet aircraft and refrigeration. Given the technology if the world didn't have higher prosperity then there'd have to be something seriously institutionally wrong.

As for peace, that's driven by the fact that the major world powers got so good at annihilating human being that they're too afraid to even go to war. The world is more peaceful now than in the 19th century because France and Germany aren't going to war every two decades. The first world powers were always traditionally much more efficient at mass killing than the tribal backwaters. Africa couldn't pull off a grand orchestrated slaughter like World War I even if it tried. Almost all the traditional colonized zones saw a substantial increase in violence following de-colonization. This is true whether you're talking about Hutus hacking up Tutsis, Hindus and Muslims massacring each other, or Indochinese peasants bashing other peasants for being insufficiently Communist.

Japan is still nationalistic. Macau and Hong Kong are port cities, not countries. And China never suffered a "massive genocide." The Great Leap Forward involved a famine within the same nationality. The highest estimates of deaths from the famine are 6% to 7% of the population. And it had no real impact on the size of the population. That's not a "genocide", "massive" or otherwise. By contrast, the Irish Potato Famine resulted in something like 13% (and possibly higher) of Ireland's population being wiped out, it involved one nationality being under the imperial rule of another nationality (remember the British were still importing food from Ireland during the famine), and it had a real impact on Ireland's population. Ireland's population has not recovered to its pre-famine levels in 150 years.

Alas, yes, even Milton Friedman can have lapses of judgement. Or he had too much to drink. He failed to notice that the entire Israeli state was built by Socialist Kibbutzim?

eh Mike - ever heard of the Intifadah? No military presence?

The occupied territories in 1969 were like how the British made a fortune off imperializing India for a long time because the Indians didn't have all that much sense of nationalism to organize resistance, so the British only needed a small occupying army to viciously crush rebels about once a century.

But, eventually, human beings wake up to how they need to get themselves organized politically to resist their foreign rulers, and then they start making things expensive for the imperialists.The British got out of India, the Boers made a deal with the blacks, the U.S. pays giant tax subsidies to the Puerto Rican ruling class, and so forth and so on.

Modern-day China easily controls Tibet with only a pittance of military effort. This despite the fact that the Tibetans probably have a stronger overall sense of national identity than maybe any other group of people on Earth. The difference between then and now isn't that the colonized discovered nationalism. There was plenty of that in Victorian times, if anything the Zulu kingdom had a far stronger national identity than the mis-mash of tribes making up most modern African nations. It's that the colonizers, i.e. westerners, went soft. A greater sense of universalist sympathies combined with ubiquitous news coverage meant that the occasional massacre necessary to keep the colonies in line became increasingly politically unpalatable.

But make no mistake, if anything modern day surveillance and military technology makes the job of suppressing colonized people far easier. If America chose to show as much respect for the human rights of Iraqis as Victorian Brits did to Indians, Afghanistan would be pacified in about a week. Simply slap ankle monitoring bracelets on all Afghan men, women and children. Impose the death penalty for tampering with it, and any would-be roadside bombers can easily be found using geo-location databases. Persistently resistant clans or towns can be wiped using tactical nukes. Cooperative towns and clans would earn the privilege of being given dictatorial powers, backed up by death drones.

Am I saying that this is the right thing to do? No, but I am saying that given today's technology, the Victorians would do this in a heartbeat. And probably far worse. So the fall of colonialism has nothing to do with the spontaneous awakening of the colonized, but the choice of the colonizers to stop playing the game.

Tibet, Population: 3 million (2011)
China, Population: 1,351 million (2012)

Puerto Rico (your example) also has about 3 million people. It's not quite 1351:3 but its 300:3 which is on the same order of magnitude. Your argument was that Puerto Rico is expensive for the US to own because the Puerto Ricans have organized along national identity lines, not that they make up a substantial population relative to the US (which they don't). If China can colonize Tibet at a profit (which it almost certainly does), then there's no fundamental reason that America can't colonize Puerto Rico at a profit.

The difference again comes down to what the colonizers are willing to do, not how fiercely the colonized resist. China has will that the modern West does not. To pull out another example there's little historical doubt that the Wehrmacht could have indefinitely held onto France, Poland, Norway, the Czech Republic, the Netherlands and many other countries that already had hundreds of years of nationalist traditions. The resistance movements had next to no effect on German control of these territories. Modern US soldiers are every bit as good as their Wehrmacht counterparts (much better if you count modern technology), but the difference is that the modern-day US military is far far gentler with its enemies. The IDF is somewhere in between the two.

Late Nineteenth Century imperialism was a stupid, money-losing idea that Disraeli, a master showman, made seem glamorous for a few decades. The outdoor adventure aspect appealed to overgrown boys like Teddy Roosevelt and Winston Churchill, but the English-speakers already had most of the places worth imperializing (California, Australia, India, Gibraltar, Singapore, etc.) before Disraeli and the subsequent Scramble for Africa.

That's correct, Steve Sailer. It was a money-losing enterprise for the imperial countries overall and for the majority of the imperial country's population. It ultimately benefited very narrow financial interests of the imperial countries. Even worse, it made the imperial countries vulnerable to the reverse colonization we see happening today, with people from former colonies flooding into the former imperial countries and displacing the natives.

China does not colonize Tibet at a profit. Tibet is an expense. It controls Tibet for defensive purposes. Tibet is the ultimate "high ground" on China's border, and an anti-Chinese regime in Tibet would make China vulnerable.

Late Nineteenth Century imperialism was a stupid, money-losing idea that Disraeli, a master showman, made seem glamorous for a few decades.

Benjamin Disraeli died in 1881. During Disraeli's 30-odd years on the front benches, British acquisitions consisted of the the Gold Coast, Aden, several bits and pieces among the Malay states, and some territory on the northwesterly frontier of British India.

Sailer is correct about Disraeli. Disraeli glamorized and romanticized imperialism as a great project for the British. During his premiership, he fashioned the critical supportive coalition for the imperialist program that continued after his death.

Disraeli's 'coalition' was otherwise known as the "Conservative Party". Disraeli was responsible for some organizational innovations (conjoining local membership associations to parliamentary caucuses), but it is not as if he was the founder of British toryism.

Your thesis is that British imperialism is the handiwork of Benjamin Disraeli, even though Britain acquired only bits and fragments of coastal and frontier settlement during the entire time he was a prominent politician and even though Britain acquired large inventories in India prior to 1850 and large inventories in Africa after 1885. I think you need a new thesis.

I think you need to read more history instead of arguing against strawmen.

Sailer is right regarding Disraeli, and he didn't even say anything controversial. It's a conventional, consensus view among historians that Disraeli played a prominent role in initiating the "new imperialism" of the late 19th century and early 20th century.

I am not arguing against strawmen. I am pointing out the obvious: that the historical sequence does not support the thesis.

You are arguing against strawmen. And the "historical sequence" is certainly consistent with the mainstream, conventional historical view and consensus that Disraeli played a prominent role in initiating the “new imperialism” of the late 19th century and early 20th century.


Is there a theme behind all your comments here? What is it that you are really trying to say?

"What is it that you are really trying to say?"

Ahh, yes, my SECRET agenda! As Rahul can just tell, my 5 or 10 million words of public writings make up just a small part of the vast corpus of my thought.

In 1969 the indigenous inhabitants of the West Bank didn't fully realize that the Israelis were going to spend the next 44 years shipping in settlers to colonize the West Bank.

Resentment tends to build up over time.

Sorry, Steve, but the population was manifestly revanchist in 1972 and 1976 before there were anything but security settlements in lightly populated areas. The political organizations formed prior to the occupation were also revanchist.

Israel withdrew unilaterally from Gaza and the disposition of the population and the political class there is as troublesome as ever. You look at what election results there have been there in recent years and about 40% of the population casts ballots for a criminal mafia with a long history of double-dealing, 45% cast ballots for an islamist party which makes its political disposition quite clear, and about 7% cast ballots for a complex of communist and fascist parties that are no more willing to deal than the islamists.

Its the same deal with public opinion polls. About 30% of the population is willing to sign a peace agreement. North of a third think a peace agreement has too dissolution of the Jewish state. Another thirty percent fancy such an agreement must extend a franchise to a fuzzily defined set of Arabs to immigrate to Israel at their own discretion. Its as if they have concluded that justice demands they be able to dictate a peace to the Jews and if they cannot, they just pretend.

There is no one for Israel to deal with, without regard to whether they put settlers on the West Bank or not.

With some of these recent posts this blog has begun to feel like Israeli occupied territory.

Unfortunately, the same can increasingly be said about America in general.

Time magazine had a graphic in the latest issue with the deer on the cover that used networking theory depicting lines of cooperation mapped for Congress over the last twenty years. The more blue and red 'mixing' in the center of two overlapping spheres the greater the cooperation between the two parties. What is showed graphically is that the two circles of Red/Blue gradually have separated over the last 20 years, until now they are almost not overlapping at all, consistent with people's intuition that the Republicans and Democrats have polarized politics. Perhaps the "Contract with America" Republicans of the early-1990s started this, witness the impeachment hearings which was shocking even for a Libertarian like me. BTW, Mandela lives! A great man as acknowledged even and especially by Newt Gingrich.

And yet somehow, these two parties - who have never in our lifetimes diverged as sharply ideologically as they do today - and who seem to find no agreement on questions of entitlements, taxes, federalism, and foreign policy - manage to find a common ground on Israel. Both parties will applaud Netanyahu, the proliferation of Israeli Jewish settlements, and the Jewish state in general.

Cui bono? Who benefits?

The same people who benefit from the de facto racial quota system in America's elite universities which favor Jewish whites over gentile whites, when holding academic achievement and other factors constant.

Frankly, we can see that Tyler Cowen benefits. I have no doubt that were the situation in Israel/Palestine transplanted to Latin America, Southeast Asia, or Sub-Saharan Africa that he would take a more ethical position. But he knows who holds power in America and Europe today, so he goes along with the narrative.

Surprisingly I bet the two parties also almost unanimously side with South Korea over North Korea. You're taking the lack of a partisan dispute on Israel as evidence of some sort of conspiracy. Occam's razor would suggest that the answer lies in the fact that Israel is a highly-developed, technologically advanced, free and pro-American country. Whereas Palestine is ruled by fundamentalist, mafioso terrorists. Who developed an economy that's primarily dependent on extorting their own people's suffering to juice the foreign aid slush funds. Their general opinion of America falls along the spectrum of either we should all die to we should all live as their infidel jizya serfs.

AIPAC would be irate to hear you assert that their power in Washington is just a "conspiracy theory." AIPAC works hard for their clout and they want everybody to know about how much they have:

"Israel is a highly-developed, technologically advanced, free and pro-American country."

You got that backwards, chief. America is a pro-Israeli country, which is why Israel is "highly-developed" and "technologically advanced" in the first place.

They don't win those wars without American military endowments.

You got that backwards, chief. America is a pro-Israeli country, which is why Israel is “highly-developed” and “technologically advanced” in the first place.

Rubbish. American aid to Israel was inconsequential prior to 1973. The country was already a high-end middle income country at that time (with a per capita income 43% that of the U.S.), more affluent than any Latin American or Caribbean territory not a dependency of the United States, more affluent than all the Asian tigers bar Japan, and more affluent than several European countries. Israel did have escalating subsidies during the period running from 1973 to 1984. These have been withdrawn in stages since and American subventions now amount to 1.2% of Israel's gdp; they could survive even an abrupt withdrawal. Israel as we speak has a level of affluence comparable to Mediterranean Europe and is demographically buoyant with the highest fertility rate of any affluent country.

You're wrong, Art Deco.

The atmosphere changed almost immediately upon Johnson’s ascendance to the presidency. Johnson–who as Senate Majority Leader in the 1950s had been one of Israel’s strongest backers in Congress–did not share Kennedy’s obsession with the refugee and nuclear issues, and his first budget, for fiscal year 1965, allocated $71 million in aid to Israel–an increase of 75 percent over Kennedy’s final budget. The amount nearly doubled in 1966, to $130 million.

Beyond the numbers, the nature and terms of the aid signaled a dramatic break with past American policy. Development loans and surplus food had constituted the extent of U.S. aid under Eisenhower and Kennedy, and anti-aircraft missiles sold to Israel by the Kennedy administration required a cash payment. Not only did Johnson become the first American president to sell offensive weapons to Israel (the missiles from Kennedy were defensive), he permitted the Israelis to buy American arms with American aid money, which meant no funds would leave Israel’s hard-pressed government coffers.

In the spring of 1967, tied down in Vietnam and wary of Soviet intentions, the administration tried to strike a neutral pose in the buildup to and the initial stages of what would become known as the Six-Day War. But it was no secret–to the Soviets, the Arabs, or anyone else–where Washington’s sympathies lay. When in the course of the war the Israelis attacked a U.S. intelligence ship, killing 34 Americans and wounding nearly 200 others, Johnson accepted Israeli assurances that the assault was a tragic mistake and overruled senior aides–including Clark Clifford, a mainstay in keeping Harry Truman on a pro-Zionist course in 1948–who urged the President to respond with harshly punitive measures.

After the war, Johnson resisted international calls to force Israel into withdrawing from the wide swaths of territory it had just captured.


Whatever else can be said of Lyndon Johnson, he proved to be a true friend of the Jews and Israel. He proved it as a young lawmaker who did everything he could to get as many Jews as possible out of Europe; as one of Israel’s most important backers in Congress during the Jewish state’s early years; and as president by granting Israel then-unprecedented levels of financial and military aid and by refusing, in marked contrast to Eisenhower’s actions after the Suez crisis of 1956, to force unilateral concessions on Israel following the Six-Day War.

No, I am not wrong.

Contextually, American aid to Israel was of scant economic importance. During the period running from 1960 through 1972, grants to Israel by the United States government varied between 0.02% and 0.77% of Israel's gross domestic product. In crude nominal terms, loans to Israel exceeded grants to Israel by a factor of 4. Even so, there were only 5 calendar years between 1948 and 1973 when the nominal value of credits extended exceeded $100 million.

The notion that Israel's economic development was an artifact of American aid is just nonsense.

Yes, you're absolutely wrong about American aid to Israel before 1973 being "inconsequential." American aid, both monetary and non-monetary, to Israel before 1973 was highly consequential, as the article I link to makes abundantly clear.

Learn to do math.

You should learn to do math. $71 million and $130 million were 2% and 3.3% of Israel's GDP in 1965 and 1966, respectively.

You should also learn to read. American aid, both monetary and non-monetary, to Israel before 1973 was highly consequential, as the article I link to makes abundantly clear to anyone who is able to read.

Tyler writes:

"That is cited in an old paper of mine on the economics of international conflict, with reference to the Middle East."

I think you are misunderstanding the utility of Middle East confict. Do the Catholics of American demand peace between Notre Dame and USC? Do Alabamans want Auburn and Alabama to negotiate an end to strife? Does Phil Knight use his billions to persuade the U. of Oregon to downscale it's ancient enmity with Oregon State? Does T. Boone Pickens want Oklahoma St. to settle its differences with the U. of Oklahoma at the negotiating table?

No, they want their boys to win.

Perhaps if some billionaire set up Brandeis with a Top Ten football team there might be more hope for peace in the Middle East. But to a lot of rich guys, the conflict over the West Bank is their version of college football.

This is a silly idea. The conflict is not driven by American Jewry.

Israel has effectively annexed the "territories." We should no longer be discussing this matter in the context of occupation but rather as a civil rights matter for Palestinians. Friedman's 1969 comments seem to validate this.

Israel has effectively annexed the “territories.”

No, they have "normalized" the military occupation and made it so that most Israelis come into contact with Palestinians only when they are in the IDF or reserve duty.

Most Israelis never set foot in the territories (I don't mean Jerusalem) except maybe to take a short cut on one of the two highways that traverse the West Bank.

Engineer, You're right to state that there is little or no interaction between the Arabs of the West Bank/Gaza and the rest of Israel but interaction between these two groups is not a necessary condition of annexation. The steady encroachment of settlements, the almost complete dependence of the West Bank and Gaza economies on Israel, the extent of time that has elapsed since the inception of the occupation and the difficulty in creating two states because of the geographic and demographic realities on the ground make it more fitting to dispose of the occupation discussion and address the civil rights of Palestinians.

Here in the United States, to this day we have limited interaction between both various races and members of different economic classes. We don't treat this issue as one where one group is occupying the other rather, more often than not, we look at this through a sociological lens.

I recently was hosting employees from an Israeli high-tech company that employs about 100 people. I asked them if there were any Arabs working for them. "No" was the reply.

If the Arab population would like "civil rights", they need to bargain with their Jewish neighbors about a settlement - i.e. where the border is, who lives where, and what the consequences are for failure to enforce the law re Arab gangs. Problem, two-thirds of the Arab population wants no settlement which does not incorporate either the dissolution of Israel or mass immigration of unproductive and unfriendly UNRWA dole cases into Israel.

The Arabs need a better idea than, "Bend your neck for the axe, kike".

Nice revisionist history.

They've tried diplomacy - they get roach-like settlers while they're trying to negotiate in good faith. Settlers that are internationally decried as thieves, but this is the policy of the Israeli government.

The sticking points are Jerusalem (Arabs want East Jerusalem) and water rights. Israelis will concede neither - so the bend your neck bullshit throwaway line is exactly backwards.

About the “Why Don’t People Have More Sex?", I see sex as a possible indicator of social status. It can be a more indirect indicator, and sex with people lower status can be less easily signaled to society, but it is internally processed as a decrease in status. People only want to have sex with people that won't affect this internal and external status, and it is difficult to find this kind of agreement between two people. Maybe the increasing ease to find information about a possible sex partner makes sex less common, after all.

My first visit to Israel was in 1992 and I frequently travelled back and forth between Israel and the West bank. Often I didn't even notice in which area I was, due to the absence of roadblocks.

My first visit to Israel was in 1992 and I frequently travelled back and forth between Israel and the West bank. Often I didn’t even notice in which area I was, due to the absence of roadblocks.

1992 is pre-Oslo (and pre-suicide bombings). Now there are checkpoints. Even back then however it was usually pretty clear where you were (unless you are talking about Jerusalem).

Tyler cites his old paper on the economics of international conflict wherein he says "Parties to war and conflict are unlikely to be meta-rational. We do not know why, but non-meta-rational behavior tends to be especially prominent in certain areas. For instance, people tend to have especially stubborn and irrational opinions in the areas of religion and politics. Large numbers of people think they are the world's best judges of truth in this area, but few people have comparable opinions about their relative expertise in building bridges, or in thermodynamics."

I claim we *do* know why. In the case of religion, "selfish memes" (Dawkins 1976) play a stubborn role. In the case of politics, genetically influenced personality differences (Haight 2012, Tuschman 2013) play a stubborn role. These factors (memes & genetics) are absent in areas such as bridge building and thermodynamics.

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