Talking to the enemy

A deeply hidden diplomatic relationship between Israel and Jordan underpins the history of the searc

The conflict with the Arabs has cast a long shadow over Israel's history. In the Declaration of Independence in Tel Aviv, on 14 May 1948, the founding fathers extended their hand in peace to all the neighbouring states and their peoples. Today, Israel is still at war with Syria and Lebanon and locked into a bitter conflict with the Palestinians of Gaza and the West Bank. The explanation that Israelis usually give for the failure to achieve peace in the Middle East can be summed up in two words: Arab intransigence. Israel's image of itself is that of a decent, rational, peace-loving nation that resorts to military power in self-defence only. The image of the Arabs, on the other hand, is that of a fanatical, hostile enemy that understands only the language of force. The reality is more complex.

The general picture that emerges of Israeli statecraft in the first 60 years of statehood is one of routine, often unthinking reliance on military force and a reluctance to engage in meaningful diplomacy to resolve the conflict with its neighbours. Another trait, common to Labour and Likud leaders alike, is a blind spot when it comes to the Palestinian people and a desire to bypass them by concluding bilateral deals with the rulers of the neighbouring Arab states.

Of all Israel's bilateral relationships, the most far-reaching in its consequences and the most endlessly fascinating is the one with the Hashemite rulers of Jordan. Jordan and Israel have been aptly described as "the best of enemies". Twenty years ago I published a book that established my credentials as a "new" or revisionist Israeli historian: Collusion Across the Jordan. I challenged many of the myths that have come to surround the birth of the State of Israel and the First Arab- Israeli War, most notably that Arab intransigence was alone responsible for the political deadlock that persisted for three decades. In contrast to the conventional view of the Arab- Israeli conflict as a simple bipolar affair, I dwelt on the special relationship between King Abdullah I of Jordan (grandfather of King Hussein and great-grandfather of King Abdullah II) and the Zionist movement, and on the interest that the Hashemites and the Zionists shared in containing Palestinian nationalism. The central thesis is that, in November 1947, the Hashemite ruler of Transjordan and the Jewish Agency reached a tacit agreement to divide up mandatory Palestine between themselves and that this agreement laid the foundations not only for mutual restraint during the war but for continuing collaboration in its aftermath - until Abdullah I's assassination by a Palestinian nationalist in 1951.

Abdullah left behind a legacy of moderation and realism that continues to inform Jordanian foreign policy down to the present day. Hussein bin Talal, like his grandfather, was the king of realism. Israel, for its part, sought lines of communication to the "plucky little king", who was at odds with the radical Palestinians and with the Arab nationalists led by Gamal Abdel Nasser. In September 1963, the young king took the initiative in starting his own secret dialogue across the battle lines. He had a realistic assessment of the military balance, he knew that the Arabs had no chance of defeating Israel on the battlefield, and he wanted to meet the enemy face-to-face to find a path to peaceful coexistence. His secret contacts with the enemy continued right up until the conclusion of the peace treaty between Jordan and Israel in October 1994.

The June 1967 war marked the lowest ever point in Jordanian-Israeli relations. Hussein made the mistake of his life by jumping on Nasser's bandwagon and the price he paid was the loss of half of his kingdom, including the jewel in the crown - the Old City of Jerusalem. He spent the rest of his life in a tireless effort to recover the occupied Arab territories. Secret diplomacy was resumed and intensified after the war. The list of prominent Israeli politicians who met secretly with Hussein included Golda Meir, Yigal Allon, Moshe Dayan, Abba Eban, Shimon Peres, Yitzhak Rabin and Yitzhak Shamir.

Thick veil of secrecy

While researching my biography of Hussein, and with the help of official Israeli documents and interviews with some of the principal participants, including the king himself, I tried to reconstruct the parleys that were held behind a thick veil of secrecy. The list of the secret meetings, with dates, names of participants and venues, reveals that most took place in St John's Wood in London at the home of Dr Emanuel Herbert, the king's Jewish physician. But there were also meetings in Paris, Strasbourg, Eilat, Coral Island, the royal yacht in the Gulf of Aqaba, an air-conditioned caravan in Wadi Araba, and one meeting at the Mossad headquarters north of Tel Aviv. My list is probably incomplete but it conveys the scope and intensity of the covert relationship between the ostensible enemies.

Jordan accepted UN Resolution 242 of November 1967 and the principle of land for peace. This resolution became the cornerstone of Jordan's postwar diplomacy. At a deeper level, however, Hussein understood the importance of giving Israel the sense of security needed to make concessions for the sake of peace. Hussein's terms never changed. From the beginning he offered his Israeli interlocutors full, contractual peace in exchange for the occupied territories, with only minor border modifications. His aim was not a separate peace with Israel, but a comprehensive peace in the Middle East. Nor was he alone in striving for peace on the Arab side. Nasser knew and approved of Hussein's secret talks provided they did not lead to a separate peace. Despite Nasser's tacit support, it took great courage on Hussein's part to pursue this solo diplomacy, as it violated the greatest Arab taboo.

The quest for a land-for-peace deal was frustrated more by Israeli than by Arab intransigence. By its actions, the victor showed that it preferred land to peace with its neighbours. Soon after the end of the war Israel began to build settlements in the occupied territories. Building civilian settlements on occupied territory was not just illegal under international law, but a major obstacle to peace. There were some early signs of flexibility on the part of the Israeli cabinet in relation to the Sinai Peninsula and the Golan Heights but none towards the West Bank. All the major parties in the 1967-70 national unity government were united in their determination to keep at least a substantial part of the West Bank, permanently.

There were proponents of the "Jordanian option" and proponents of the "Palestinian option", but in practical terms the debate was between those who did not want to return the West Bank to Jordan and those who did not want to return it to the Palestinians who lived there. Despite Hussein's best efforts the diplomatic deadlock persisted for another decade, until Anwar Sadat's visit to Jerusalem in 1977. Sadat did what Hussein had studiously avoided, namely, a bilateral deal with Israel that left the Palestinian problem unresolved. The two countries changed places: Egypt was drummed out of the Arab League while Jordan joined the Arab mainstream.

There was only one leader in Israel's history with the courage to grasp the nettle and negotiate directly with the Palestinians about their rights and status in Palestine, and that was Yitzhak Rabin. Secret negotiations in the Norwegian capital culminated in the signing of the Oslo Accords on 13 September 1993. For all their shortcomings, the Oslo Accords represented a historic breakthrough in the hundred-year-old conflict between Jews and Arabs in Palestine. The PLO recognised Israel; Israel recognised the PLO as the representative of the Palestinian people; and the two sides agreed to resolve all their outstanding differences by peaceful means. The historic compromise was clinched on the White House lawn. For his courage, Rabin paid with his life - two years later, he was assassinated by a Jewish fanatic. The assassination achieved its objective: it derailed the Oslo peace process.

Contrary to the widely held view in Israel, the Oslo Accords were not doomed to failure from the start. The Oslo peace process broke down because Rabin's hardline Likud successors reneged on their country's side of the original deal. They not only continued but intensified the building of settlements in the occupied territories. Settlement expansion continues even as these lines are being written. It is tantamount to stealing the land and the water resources that belong to another people. Occupation is the opposite of peace. It is oppression; it is the abuse of human rights; it is in-your-face violence. There can be no genuine or viable peace between Israel and the Palestinians without an end to the occupation. Peace-making and land-grabbing simply do not go together. Consequently, 40 years after its spectacular victory in the Six-Day War, Israel still faces the same fundamental choice: it can have land or it can have peace; it cannot have both.

Avi Shlaim is a professor of international relations at the University of Oxford and the author of "Lion of Jordan: the Life of King Hussein in War and Peace" (Allen Lane, the Penguin Press, £30)

60 years of struggle

  • 14 May 1948 State of Israel established
  • May 1964 PLO founded, declaring Israel "illegal, null and void"
  • June 1967 Israel launches Six-Day War against Egypt, Jordan and Syria
  • 6 October 1973 Yom Kippur (Day of Atonement): Egypt and Syria declare war on Israel
  • 1977-1979 Egypt and Israel negotiate peace deal
  • 17 September 1978 Camp David Accords are signed
  • June 1982 Israel invades Lebanon
  • 13 September 1993 Oslo Accords signed
  • 4 November 1995 Yitzhak Rabin, Israel's PM, is assassinated
  • August 2005 Israel disengages from Gaza
  • 12 July 2006 Lebanon invaded after Israeli soldier abducted
  • 27 November 2007 Annapolis peace summit articulates two-state solution for Israel-Palestine

Research by Katie Wake

This article first appeared in the 19 May 2008 issue of the New Statesman, Secret Israel

MILES COLE
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The new Brexit economics

George Osborne’s austerity plan – now abandoned by the Tories – was the most costly macroeconomic policy mistake since the 1930s.

George Osborne is no longer chancellor, sacked by the post-Brexit Prime Minister, Theresa May. Philip Hammond, the new Chancellor, has yet to announce detailed plans but he has indicated that the real economy rather than the deficit is his priority. The senior Conservatives Sajid Javid and Stephen Crabb have advocated substantial increases in public-sector infrastructure investment, noting how cheap it is for the government to borrow. The argument that Osborne and the Conservatives had been making since 2010 – that the priority for macroeconomic policy had to be to reduce the government’s budget deficit – seems to have been brushed aside.

Is there a good economic reason why Brexit in particular should require abandoning austerity economics? I would argue that the Tory obsession with the budget deficit has had very little to do with economics for the past four or five years. Instead, it has been a political ruse with two intentions: to help win elections and to reduce the size of the state. That Britain’s macroeconomic policy was dictated by politics rather than economics was a precursor for the Brexit vote. However, austerity had already begun to reach its political sell-by date, and Brexit marks its end.

To understand why austerity today is opposed by nearly all economists, and to grasp the partial nature of any Conservative rethink, it is important to know why it began and how it evolved. By 2010 the biggest recession since the Second World War had led to rapid increases in government budget deficits around the world. It is inevitable that deficits (the difference between government spending and tax receipts) increase in a recession, because taxes fall as incomes fall, but government spending rises further because benefit payments increase with rising unemployment. We experienced record deficits in 2010 simply because the recession was unusually severe.

In 2009 governments had raised spending and cut taxes in an effort to moderate the recession. This was done because the macroeconomic stabilisation tool of choice, nominal short-term interest rates, had become impotent once these rates hit their lower bound near zero. Keynes described the same situation in the 1930s as a liquidity trap, but most economists today use a more straightforward description: the problem of the zero lower bound (ZLB). Cutting rates below this lower bound might not stimulate demand because people could avoid them by holding cash. The textbook response to the problem is to use fiscal policy to stimulate the economy, which involves raising spending and cutting taxes. Most studies suggest that the recession would have been even worse without this expansionary fiscal policy in 2009.

Fiscal stimulus changed to fiscal contraction, more popularly known as austerity, in most of the major economies in 2010, but the reasons for this change varied from country to country. George Osborne used three different arguments to justify substantial spending cuts and tax increases before and after the coalition government was formed. The first was that unconventional monetary policy (quantitative easing, or QE) could replace the role of lower interest rates in stimulating the economy. As QE was completely untested, this was wishful thinking: the Bank of England was bound to act cautiously, because it had no idea what impact QE would have. The second was that a fiscal policy contraction would in fact expand the economy because it would inspire consumer and business confidence. This idea, disputed by most economists at the time, has now lost all credibility.

***

The third reason for trying to cut the deficit was that the financial markets would not buy government debt without it. At first, this rationale seemed to be confirmed by events as the eurozone crisis developed, and so it became the main justification for the policy. However, by 2012 it was becoming clear to many economists that the debt crisis in Ireland, Portugal and Spain was peculiar to the eurozone, and in particular to the failure of the European Central Bank (ECB) to act as a lender of last resort, buying government debt when the market failed to.

In September 2012 the ECB changed its policy and the eurozone crisis beyond Greece came to an end. This was the main reason why renewed problems in Greece last year did not lead to any contagion in the markets. Yet it is not something that the ECB will admit, because it places responsibility for the crisis at its door.

By 2012 two other things had also become clear to economists. First, governments outside the eurozone were having no problems selling their debt, as interest rates on this reached record lows. There was an obvious reason why this should be so: with central banks buying large quantities of government debt as a result of QE, there was absolutely no chance that governments would default. Nor have I ever seen any evidence that there was any likelihood of a UK debt funding crisis in 2010, beyond the irrelevant warnings of those “close to the markets”. Second, the austerity policy had done considerable harm. In macroeconomic terms the recovery from recession had been derailed. With the help of analysis from the Office for Budget Responsibility, I calculated that the GDP lost as a result of austerity implied an average cost for each UK household of at least £4,000.

Following these events, the number of academic economists who supported austerity became very small (they had always been a minority). How much of the UK deficit was cyclical or structural was irrelevant: at the ZLB, fiscal policy should stimulate, and the deficit should be dealt with once the recession was over.

Yet you would not know this from the public debate. Osborne continued to insist that deficit reduction be a priority, and his belief seemed to have become hard-wired into nearly all media discussion. So perverse was this for standard macroeconomics that I christened it “mediamacro”: the reduction of macroeconomics to the logic of household finance. Even parts of the Labour Party seemed to be succumbing to a mediamacro view, until the fiscal credibility rule introduced in March by the shadow chancellor, John McDonnell. (This included an explicit knockout from the deficit target if interest rates hit the ZLB, allowing fiscal policy to focus on recovering from recession.)

It is obvious why a focus on the deficit was politically attractive for Osborne. After 2010 the coalition government adopted the mantra that the deficit had been caused by the previous Labour government’s profligacy, even though it was almost entirely a consequence of the recession. The Tories were “clearing up the mess Labour left”, and so austerity could be blamed on their predecessors. Labour foolishly decided not to challenge this myth, and so it became what could be termed a “politicised truth”. It allowed the media to say that Osborne was more competent at running the economy than his predecessors. Much of the public, hearing only mediamacro, agreed.

An obsession with cutting the deficit was attractive to the Tories, as it helped them to appear competent. It also enabled them to achieve their ideological goal of shrinking the state. I have described this elsewhere as “deficit deceit”: using manufactured fear about the deficit to achieve otherwise unpopular reductions in public spending.

The UK recovery from the 2008/2009 recession was the weakest on record. Although employment showed strong growth from 2013, this may have owed much to an unprecedented decline in real wages and stagnant productivity growth. By the main metrics by which economists judge the success of an economy, the period of the coalition government looked very poor. Many economists tried to point this out during the 2015 election but they were largely ignored. When a survey of macroeconomists showed that most thought austerity had been harmful, the broadcast media found letters from business leaders supporting the Conservative position more newsworthy.

***

In my view, mediamacro and its focus on the deficit played an important role in winning the Conservatives the 2015 general election. I believe Osborne thought so, too, and so he ­decided to try to repeat his success. Although the level of government debt was close to being stabilised, he decided to embark on a further period of fiscal consolidation so that he could achieve a budget surplus.

Osborne’s austerity plans after 2015 were different from what happened in 2010 for a number of reasons. First, while 2010 austerity also occurred in the US and the eurozone, 2015 austerity was largely a UK affair. Second, by 2015 the Bank of England had decided that interest rates could go lower than their current level if need be. We are therefore no longer at the ZLB and, in theory, the impact of fiscal consolidation on demand could be offset by reducing interest rates, as long as no adverse shocks hit the economy. The argument against fiscal consolidation was rather that it increased the vulnerability of the economy if a negative shock occurred. As we have seen, Brexit is just this kind of shock.

In this respect, abandoning Osborne’s surplus target makes sense. However, there were many other strong arguments against going for surplus. The strongest of these was the case for additional public-sector investment at a time when interest rates were extremely low. Osborne loved appearing in the media wearing a hard hat and talked the talk on investment, but in reality his fiscal plans involved a steadily decreasing share of public investment in GDP. Labour’s fiscal rules, like those of the coalition government, have targeted the deficit excluding public investment, precisely so that investment could increase when the circumstances were right. In 2015 the circumstances were as right as they can be. The Organisation for Economic Co-operation and Development, the International Monetary Fund and pretty well every economist agreed.

Brexit only reinforces this argument. Yet Brexit will also almost certainly worsen the deficit. This is why the recent acceptance by the Tories that public-sector investment should rise is significant. They may have ­decided that they have got all they could hope to achieve from deficit deceit, and that now is the time to focus on the real needs of the economy, given the short- and medium-term drag on growth caused by Brexit.

It is also worth noting that although the Conservatives have, in effect, disowned Osborne’s 2015 austerity, they still insist their 2010 policy was correct. This partial change of heart is little comfort to those of us who have been arguing against austerity for the past six years. In 2015 the Conservatives persuaded voters that electing Ed Miliband as prime minister and Ed Balls as chancellor was taking a big risk with the economy. What it would have meant, in fact, is that we would already be getting the public investment the Conservatives are now calling for, and we would have avoided both the uncertainty before the EU referendum and Brexit itself.

Many economists before the 2015 election said the same thing, but they made no impact on mediamacro. The number of economists who supported Osborne’s new fiscal charter was vanishingly small but it seemed to matter not one bit. This suggests that if a leading political party wants to ignore mainstream economics and academic economists in favour of simplistic ideas, it can get away with doing so.

As I wrote in March, the failure of debate made me very concerned about the outcome of the EU referendum. Economists were as united as they ever are that Brexit would involve significant economic costs, and the scale of these costs is probably greater than the average loss due to austerity, simply because they are repeated year after year. Yet our warnings were easily deflected with the slogan “Project Fear”, borrowed from the SNP’s nickname for the No campaign in the 2014 Scottish referendum.

It remains unclear whether economists’ warnings were ignored because they were never heard fully or because they were not trusted, but in either case economics as a profession needs to think seriously about what it can do to make itself more relevant. We do not want economics in the UK to change from being called the dismal science to becoming the “I told you so” science.

Some things will not change following the Brexit vote. Mediamacro will go on obsessing about the deficit, and the Conservatives will go on wanting to cut many parts of government expenditure so that they can cut taxes. But the signs are that deficit deceit, creating an imperative that budget deficits must be cut as a pretext for reducing the size of the state, has come to an end in the UK. It will go down in history as probably the most costly macroeconomic policy mistake since the 1930s, causing a great deal of misery to many people’s lives.

Simon Wren-Lewis is a professor of economic policy at the Blavatnik School of Government, University of Oxford. He blogs at: mainlymacro.blogspot.com

 Simon Wren-Lewis is is Professor of Economic Policy in the Blavatnik School of Government at Oxford University, and a fellow of Merton College. He blogs at mainlymacro.

This article first appeared in the 21 July 2016 issue of the New Statesman, The English Revolt