John Kerry needs to understand day-to-day life in the West Bank is there is to be any hope of peace

The state of roads in the West Bank tells you everything you need to know about the possibility of Middle East peace, writes Nabila Ramdani.

 The state of the roads in the West Bank gives a good idea of where the resumed Palestinian-Israeli talks are heading – and it certainly isn’t in the direction of peace. You can see a number of them from the hilltop town of al-Khader, just outside Bethlehem – from modern highways to rockstrewn dirt tracks. The best are designed for vehicles with registration plates bearing the Israeli flag and the country’s name written in Hebrew. Poor and dispossessed Arabs, whose transport is easily identified by green-numbered plates, have to stick to the back roads.
 
The US secretary of state, John Kerry, who is leading resumed diplomatic efforts in Jerusalem, would certainly be advised to check out the view from the heights of al-Khader. This week I saw constant Israeli army convoys heading off to strengthen Jewish settlements on occupied Palestinian lands. The military will be even busier over the next few months after Tel Aviv approved the building of 3,100 new settler homes, many in East Jerusalem – the very place that Palestinian peacemakers want to be their capital city. On 12 August Kerry said the new Israeli colonies would not halt talks, explaining: “We have known there was going to be a continuation of some building.”
 
In fact, “some building” is by far the biggest stumbling block. Construction on land occupied by the Israelis following the 1967 Six Day War has been condemned by the United Nations and the International Court of Justice; no foreign government in the world officially supports it. 
 
The unbridled expansion of Jewish settlements in the very areas where Palestinians are supposed to have a state will add to the almost 700,000 illegal settlers in about 120 communities in the West Bank, East Jerusalem and the Golan Heights – all in violation of the Fourth Geneva Convention.
 
Beyond the segregated roads – the fast, slick ones for Israelis and the slow, potholed ones for Palestinians – there is barbed wire, machine-gun posts and, most sinister of all, the West Bank Barrier. This is a 430-milelong wall keeping Palestinians out of their lands, which have diminished to less than 20 per cent of historic Palestine. Crossings, many of which I negotiated on foot, are like cattle grids, with only a very few people herded through following stringent security checks.
 
Israel claims that the barrier exists solely to protect civilians from attack, but it is undeniably the concrete symbol of the annexation of Palestinian territory. Attempts to reinforce the wall over the past few months have led to Arab farmland being cut off from al-Khader, leaving the already desperate agricultural workers with no living at all. When they complain, everything from tear gas and batons to live ammunition is used against them.
 
All of this is day-to-day life in the occupied territories. Unless Kerry can appreciate that, the road to peace in the Arab-Israeli conflict will be going nowhere. 
This is our land: peeking at a new settlers' commune in East Jerusalem. Photograph: Lior MIzrahi/Getty Images/

This article first appeared in the 19 August 2013 issue of the New Statesman, Why aren’t young people working

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Labour's investment bank plan could help fix our damaging financial system

The UK should learn from the success of a similar project in Germany.

Labour’s election manifesto has proved controversial, with the Tories and the right-wing media claiming it would take us back to the 1970s. But it contains at least one excellent idea which is certainly not out-dated and which would in fact help to address a key problem in our post-financial-crisis world.

Even setting aside the damage wrought by the 2008 crash, it’s clear the UK’s financial sector is not serving the real economy. The New Economics Foundation recently revealed that fewer than 10% of the total stock of UK bank loans are to non-financial and non-real estate businesses. The majority of their lending goes to other financial sector firms, insurance and pension funds, consumer finance, and commercial real estate.

Labour’s proposed UK Investment Bank would be a welcome antidote to a financial system that is too often damaging or simply useless. There are many successful examples of public development banks in the world’s fastest-growing economies, such as China and Korea. However, the UK can look closer to home for a suitable model: the KfW in Germany (not exactly a country known for ‘disastrous socialist policies’). With assets of over 500bn, the KfW is the world’s largest state-owned development bank when its size is measured as a percentage of GDP, and it is an institution from which the UK can draw much-needed lessons if it wishes to create a financial system more beneficial to the real economy.

Where does the money come from? Although KfW’s initial paid-up capital stems purely from public sources, it currently funds itself mainly through borrowing cheaply on the international capital markets with a federal government guarantee,  AA+ rating, and safe haven status for its public securities. With its own high ratings, the UK could easily follow this model, allowing its bank to borrow very cheaply. These activities would not add to the long-run public debt either: by definition an investment bank would invest in projects that would stimulate growth.

Aside from the obviously countercyclical role KfW played during the financial crisis, ramping up total business volume by over 40 per cent between 2007 and 2011 while UK banks became risk averse and caused a credit crunch, it also plays an important part in financing key sectors of the real economy that would otherwise have trouble accessing funds. This includes investment in research and innovation, and special programs for SMEs. Thanks to KfW, as well as an extensive network of regional and savings banks, fewer German SMEs report access to finance as a major problem than in comparator Euro area countries.

The Conservatives have talked a great deal about the need to rebalance the UK economy towards manufacturing. However, a real industrial policy needs more than just empty rhetoric: it needs finance. The KfW has historically played an important role in promoting German manufacturing, both at home and abroad, and to this day continues to provide finance to encourage the export of high-value-added German products

KfW works by on-lending most of its funds through the private banking system. This means that far from being the equivalent of a nationalisation, a public development bank can coexist without competing with the rest of the financial system. Like the UK, Germany has its share of large investment banks, some of which have caused massive instabilities. It is important to note that the establishment of a public bank would not have a negative effect on existing private banks, because in the short term, the UK will remain heavily dependent on financial services.

The main problem with Labour’s proposal is therefore not that too much of the financial sector will be publicly owned, but too little. Its proposed lending volume of £250bn over 10 years is small compared to the KfW’s total financing commitments of  750 billion over the past 10 years. Although the proposal is better than nothing, in order to be effective a public development bank will need to have sufficient scale.

Finally, although Brexit might make it marginally easier to establish the UK Investment Bank, because the country would no longer be constrained by EU State Aid Rules or the Maastricht criteria, it is worth remembering that KfW’s sizeable range of activities is perfectly legal under current EU rules.

So Europe cannot be blamed for holding back UK financial sector reform to date - the problem is simply a lack of political will in the current government. And with even key architects of 1980s financial liberalisation, such as the IMF and the economist Jeffrey Sachs, rethinking the role of the financial sector, isn’t it time Britain did the same?

Dr Natalya Naqvi is a research fellow at University College and the Blavatnik School of Government, University of Oxford, where she focuses on the role of the state and the financial sector in economic development

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