Altering the state of expectations

back to issue

AFTER a decade of 5.5% growth, a rising fiscal deficit, falling foreign exchange reserves, mounting external debt and double-digit inflation, the government of Prime Minister P.V. Narasimha Rao and Union Finance Minister Manmohan Singh left the country with half a decade of 7.0% growth, a lower fiscal deficit and external debt, rising forex reserves, a stable rupee and declining rates of inflation. What did the trick? Manmohan Singh altered the state of expectations.

Expectations matter in market economies. In the old world of planning, policy makers tried to shape expectations by intervening directly in economic decision-making at the macro and the firm level. With governments fiscally constrained, with many public sector enterprises becoming bankrupt and/or incapable of making large greenfield investments, policy makers have to rely increasingly on policy signals to shape expectations in the private sector and thereby augment new investment.

In a world where so many policy makers send out such varied signals, market participants invest a considerable amount of their time and energy deciphering policy signals. Few Indian politicians understand this. If they did, they’d be cleverer shaping expectations about the future. Look at the Chinese!

Investor expectations are shaped by signals other than policy interventions – investment decisions of other investors, consumer choices, political and social developments and so on. In a world where economic growth is driven by investment decisions which in turn are shaped by expectations, forecasting the future is hazardous. At the best of times economic forecasting is an art, an inexact science. In a world marked by turbulence and the ups and downs of business sentiment, it is more so. But forecasts shape expectations. The two together can also shape policies, even as policies shape them in turn. It’s a two-way dialectical relationship.

How the Indian economy will do over the next five years is, therefore, as much a function of what is done over this period by government, investors, industry and by consumers, as it is of what they expect each other to do. As a consequence of all these interac tions the economy can go up, or down, or just muddle through a middle path.

Think of yourself in 1991. Five years of 5.0% growth, with an artificial blip of 10% growth in 1988-89. Double-digit inflation. Rising budgetary deficit and a worsening balance of payments situation. The Economic Survey, written by chief economic advisor Deepak Nayyar in February 1991 summed up the situation thus:

‘The Indian economy is passing through a very difficult stage due to continued pressures on balance of payments, large budget deficits and double digit inflation. These problems have persisted over the past few years. The situation had been aggravated by the Gulf crisis as well as the uncertain domestic political situation during 1990-91. Due to the shortage of foreign exchange, government had to impose certain restrictions on imports of capital goods, raw materials and components to the industry. There were also constraints on transport and other infrastructural facilities due to a shortage of petroleum products during 1990-91. The current economic situation is indeed very difficult.

‘Effective measures are needed to correct fiscal imbalances and to contain the balance of payments deficit within manageable limits. The short term correctives have to be viewed in a medium term setting. Credible structural reforms designed to improve the efficiency and productivity of resource use are an inescapable necessity, if the unavoidable fiscal adjustment is not to lead to stagflation but becomes an occasion to impart a new element of dynamism to the growth process. One should not underestimate the enormity of the task. But the people of India have shown more than once in the past that faced with a crisis their response can fully match the requirements of the situation.’

A fair assessment of the situation at the time. The politicians of the day demurred. Elections arrived, the crisis deepened. A new government had no option but to pursue fiscal stabilisation and structural adjustment. To begin with there was stagflation, but a mix of trade liberalisation, currency devaluation and moderated fiscal adjustment helped revive growth and for five years thereafter there was 7.0% growth. It was a forecaster’s nightmare.

Consider the current moment. The external profile of the Indian economy is robust. No one worries about a balance of payments crisis and the Gulf War of the day has passed off leaving the prospect of stable and moderate oil prices. More good news for the external sector. The rupee is stable, even appreciating, and foreign exchange reserves are rising. Exports have touched a new mark of $50 billion and industrial growth is reviving. If the rain gods smile, the year could end with 6.0% growth.

Against this comforting economic background, there is political uncertainty. The prime minister has taken a bold step towards befriending Pakistan once again and if a breakthrough is achieved the environment for economic growth in the region can improve. However, the Vishwa Hindu Parishad is turning on the communal heat and wants to do a Gujarat in the states that go to polls later this year. If Vajpayee’s strategy is to tone down the communal rhetoric by securing a détente with Pakistan, the Togadias of the Sangh Parivar want to spill blood. What kind of economic performance India can deliver over the next five years will depend to a considerable extent on which argument wins.

Vajpayee’s politics can deliver at least 6.0% growth, Togadia’s will bring the word ‘crisis’ back into our discussions of the economy. The economics of growth cannot be constructed on the politics of divisiveness and a constant reference to the threat to national security, both internal and external. Political concerns about the future shape investors’ expectations. Even so, it is possible to suggest that the underlying trend in the Indian economy can deliver an average of 6.0% growth over the next decade. It is a further acceleration to 8.0% and above that requires concerted and strategic policy intervention.

Only six per cent? That kind of crystal gazing is not hazardous. I am willing to bet that even Vajpayee is capable of delivering an average of 6.0% over the next five years, even though he has delivered only an average growth rate of 5.0% over the past five years. That additional one per cent will come from a variety of sources: the turn of the cycle, the fact that the service sector has attained critical mass to be globally competitive in certain areas, the economic take-off in new regions like eastern India and central India, and such like.

There is also the long view of history that I favour. The Indian economy grew at around zero rate of growth between 1900 and 1950; at 3.5% rate of growth between 1950 and 1980; at a 5.5% rate between 1980 and 2000. In 1992-97 it did record an annual average rate of growth of close to 7.0%, but this slipped to 5.0% in 1998-2003. The system has made its corrections and in the next five years it can deliver anywhere between 5.5% and 6.0%. Only a Togadia can stop that. Sensible politics will ensure this baseline scenario. Question is, what will it take to go beyond? If doing nothing can deliver 5.0% growth, and doing something helps rake in 6.0% growth. What does it take to move up to 7.0% and beyond? That is the challenge for the next five years.

As the first step, alter the state of expectations, once again. The Atal Behari Vajpayee government has been a government of security and foreign policy – nuclear tests, terrorism, India-Pakistan, India-United States, India-China. Historic initiatives have been taken on the external front. Timidity has marked the domestic front. Reforms have been there, but have not altered the state of expectations. The government has done a lot on paper, on the ground there isn’t enough new investment in place, domestic or foreign. The intent is good, the effort is palpable, but the overall impact on the state of expectations has been marginal.

The first step for any government that wants to step up the rate of growth of the economy is to alter the state of expectations. Why did the rate of growth of the Indian economy slip from an average of 7.0% in the first half of the last decade to an average of 5.0% thereafter. Start with the big picture. The external economic environment deteriorated. First the Asian financial crisis, then the global economic slowdown and finally the spurt in oil prices. To make matters worse, there were the sanctions following Indian’s nuclear tests in 1998 and then in 2001 the aftermath of 9/11, especially in this part of the world.

Despite this difficult external environment, India’s external profile improved. The current account embarrassingly logged a surplus, the rupee started appreciating and we not only started prepaying external debt but let some donors know that we can do without their aid.

Of course, it can be argued that with an even more hospitable external environment we could have done better and retained the 7.0% record of the early 1990s. But the art of political management lies in beating external constraints. China did that when it defied the global slowdown and kept the engine of growth working in top gear. It not only helped bail some Asian economies out of a crisis, but also helped keep world trade flows up and, in part, contributed to the resurgence of India’s export growth!

So the external alibi is a weak one to explain what went wrong the last five years. My bet is on internal gaps. First, inadequate investment, public and private, domestic and foreign. Second, the state of expectations.

In the ancien regime expectations could be countered with public money. When markets sagged, the government could step in and boost investment as well as investor sentiment. China did some of that between 2000 and 2003. India tried too. But the fisc was a constraint. The stubbornly low tax revenues to national income ratio, the dissaving of the public sector and the slow pace of getting public sector projects off the ground meant that public investment could not play the role it was capable of in boosting investment and sentiment.

The fiscal constraint on public investment was only one part of the problem. The other was a combination of an ideological inhibition against public investment in some quarters, and the sheer inability of the government to get projects off the ground in others. If industrial growth has revived this year it is in part because public investment has picked up. So the prognosis for the future presents itself. Part of the mechanism of pushing growth from 5.0% to 7.0% will relate to finding the resources for and getting them into public investment – roads, railways, ports, irrigation, schools and hospitals, the works.

If public investment is so stimulated, private investment will kick in. There is enough empirical research demonstrating this link – that public investment does not ‘crowd out’ private investment but can in fact help ‘crowd in’ private investment. The ‘crowding in’ aspect of public investment is inadequately explored in recent years, even though the finance ministry’s Economic Survey 2002-03 tells us that it was public investment in infrastructure that helped stimulate growth last year. ‘The demand generated by enhanced public investment in physical infrastructure has been a key stimulant behind industrial recovery,’ the Survey says, noting the role of the highways programme in particular. This deserves closer scrutiny and the appropriate lessons drawn for an agenda of 7.0% growth in the next half decade. To stimulate public investment the government must raise resources. The fiscal empowerment of the government, at the Centre and in the states, is a necessary precondition to non-inflationary stimulus of growth-augmenting public investment.

While fiscal empowerment and improving the efficiency of government can help step up public investment, in turn stimulating private investment, there is another way in which private investment can be stimulated. This is by altering the state of expectations. The most important macroeconomic lesson that the Indian political class, with rare exceptions, is yet to learn and comprehend is the role of expectations.

Private investment in a market economy characterised by uncertainty and risk is a function of expectations. As long as growth was a function of public investment in a closed economy, expectations played a secondary role. But when most new investment is to be undertaken by the private sector expectations shape investment decisions. Few political leaders across the country have understood as yet how their politics shapes investors’ expectations. Gujarat’s Chief Minister Narendra Modi, for example, is on a investment seeking spree across the country imploring investors to come and invest in his state. Patriotism and love for one’s home state apart, what will tempt private investors to bring money in to a state so riven by communal tension?

Terrorism hurt Punjab’s investment climate as much in the 1980s and 1990s as gangland wars and communal tension have hurt Maharashtra since. Given a choice between socially stable regions and regions marked by violence and unrest, where would one expect investors to go? Expectations about political and social stability matter. Forecasting investment trends in the next five years does not require clairvoyance to suggest that regions marred by social and political instability and tension are less likely to attract more investment. This argument will also apply at the national level.

In a globalised world with investment opportunities available at home and abroad we can expect investment to flow out of the country to safer regions if investors are unsure about their own homeland. No one was surprised last year when Indian companies began investing in China. It was as much a testimony to the competitiveness and animal spirits of Indian enterprise as it was a vote of a lack of confidence at home. Hence the idea of linking ‘peace’ with ‘prosperity’, as suggested by Prime Minister Vajpayee when he made his peace overtures to Pakistan in April 2003, has an economic relevance for the region.

Shaping the positive expectations of hope is the primary political challenge for those in government at the Centre and in the states. The difference between 5.0% growth and 7.0% growth hinges critically on this psychological factor because this kind of acceleration of economic growth cannot happen unless there is a huge increase in new investment. New investment in the private sector will be forthcoming only when investors feel confident about the future. Economists have not yet offered a convincing explanation for the slowdown in economic growth in the period 1998-2003 compared to 1992-1997 from an average of close to 7.0% to an average of around 5.0%. It is possible to suggest that one important reason was the change in the state of expectations owing to greater political uncertainty and social instability. The continued focus of policy attention on terrorism in the region could well have deterred investors contributing to the decline in gross capital formation in the latter period.

The central economic challenge for India in the next five years is to steeply increase the rate of investment. This requires meeting other related challenges, going beyond the fiscal empowerment of the government required to step up public investment, and the altering of the state of expectations required to step up private investment. These are in the realm of agricultural productivity and rural employment, investment in human capabilities, creating a more competitive and integrated home market and, reducing the transactions cost of doing business.

This is the so-called ‘agenda of the states’. There is only that much that the central government can do. Where states are more focused, the results are positive. Where state governments fritter away their mandate, the record is there to see.

Much time need not, therefore, be spent on spelling out new agendas for reform. A ‘mission-based’ approach like what Rajiv Gandhi adopted in the 1980s with respect to oilseeds and computers can deliver the goods. The Vajpayee government adopted such a ‘mission-based’ approach to national highways, but more recent news reports suggest that the results are not as impressive as earlier claimed. Without such a focused approach, with deadlines and time limits, it is not possible to step up the average rate of growth by two percentage points.

Increasing rural incomes and generating employment in non-farm activities is critical to expanding the home market for accelerated investment and industrial growth. Investment in infrastructure development in agriculture can come both from the public and private sectors – corporate, cooperative and household. Where such investment is forthcoming it has been possible to register higher rates of income growth.

There will be very little foreign direct investment in the rural sector. However, foreign investment can play an important, if not significant, role in stepping up the rate of investment in the infrastructure sector. The acceleration of growth from 6.0% to 8.0% can be made easier if the country learns to draw more productively on foreign savings. Large foreign funded infrastructure projects can have a positive effect on the state of expectations at home and abroad, as demonstrated by China’s experience. The surge in FDI in infrastructure in China helped bring in additional foreign private investment in a range of sectors by altering the state of investor expectations.

Policy makers in India must, therefore, acquire a more mature understanding of how expectations are generated and shaped. Policy statements alone matter for little. Thus a ‘Vision 2020’ or a Five Year Plan that targets 8.0% growth per annum may not be taken very seriously by investors if such statements are not matched by action on the ground and pragmatism in policy making and implementation. Consider the manner in which investors have discounted Prime Minister Vajpayee’s growth target of 8.0% for the Tenth Plan period. Based on a hard-headed assessment of actual political capabilities and intentions, most investors place the Tenth Plan growth rate around 6.0%. The optimists may peg it marginally higher and the pessimists a bit lower.

Once investors are convinced that 6.0% is a realistic prospect they will make investment decisions accordingly. I believe most decisions are being made with this average rate of growth in mind for the medium term. To get investors to peg their sights higher, at 7.0% to 8.0%, the government of the day will have to bring the focus of policy attention back to the economy, push through difficult policy reforms, ensure implementation of legislation already passed, and bring in public investment to keep a minimum level of investment going.

The agenda for such reform has been widely written about and practical ideas can be found in a range of essays and government reports, including the last report of the prime minister’s Economic Advisory Council. Such action on the ground can alter the state of expectations and accelerate growth. Where there is political will and determination and, more importantly, a modern perception of how the economy works and what drives investment, the right kind of policies will be delivered.

The government must also have a social and political agenda for high growth. The politics of inclusiveness and redistribution is essential to promote the economics of growth in a poor democracy. Social instability and tension, communal and caste divisions, cannot over a period of time contribute to the kind of environment that can foster positive expectations. The economic slowdown in Maharashtra and Gujarat in the 1990s could very well have been due to the kind of politics that these two states came to be identified with through most of the decade. A change in the language of politics is essential to change the pace of economic growth.

Sanjaya Baru


Reserved futures

DESPITE howls of anguish and a plethora of editorials, not many were surprised by the treatment meted out to the Women’s Reservation Bill in Parliament. In a depressingly familiar re-play, expected ‘villains’ sabotaged the introduction of the Bill, created a commotion and forced its deferment to an indefinite future. Even if this sounds cynical, one suspects it came as a welcome relief to all concerned.

Those in the forefront for a legislative reservation for women in state assemblies and Parliament will explain this failure as reflecting a deep seated patriarchal bias and argue how ‘irrelevant’ issues of a quota within a quota are raised to scuttle what they claim is a progressive and representative initiative. And yet, even within those political formations which claim that women’s reservation is a non-negotiable part of their political project, little has been done to advance fresh arguments and win over even a few erstwhile dissidents onto their side.

For instance, years after it was first mooted, no convincing rationale has been advanced about the proposed extent of reservation – 33 per cent. We are still not clear how constituencies will be earmarked, nor about the mode governing rotation of reserved constituencies. Nor, despite considerable experience of political reservation for schedule castes and tribes, are we clear how such interventions impact on political representativeness and accountability. As many have pointed out, rotation of reserved constituencies can contribute to their political neglect, since no incumbent parliamentarian will lavish attention on a constituency he/she is likely to be divested of.

It is also intriguing why the alternative proposal promoting reservation for women by ‘forcing’ political parties to put up a specified proportion of women candidates, first mooted by the Manushi Trust and subsequently backed by the former CEC, M.S. Gill, has not merited any discussion in Parliament. Surely, the protagonists of this move could have attempted to introduce it as a private member’s bill. Or is it that, despite the generally positive experience of reservations for women in panchayats and municipalities, the males of our political class are unwilling to shed any further power?

Equally intriguing is the fact that the recent reservations for ‘depressed classes’ in the lower judiciary by the Mayawati government in U.P. has not elicited any meaningful engagement, barring the muted reaction that the judiciary should be kept out of the purview of reservations. Why? Is it that even votaries of reservation feel that introduction of group quotas damages principles of merit and equality? If so, why should the same process be acceptable elsewhere?

More than five decades after we first accepted the principle of reservations/quotas in education, employment and the political sphere, the debate on affirmative action policies, both to correct historical and structural injustice to specified groups as also to increase the representativeness of our public sphere, continues to tread old ground. Possibly one could make a valid case for social engineering from above through creating quotas by legislative fiat. One cannot indefinitely wait for the demand for reform to be created from below.

But as both debate and experience elsewhere, in particular the U.S., so clearly indicates, it is easier to win public approval for forward-looking affirmative action strategies that seek to improve societies in ways that benefit practically everyone rather than advance backward-looking claims to remedy past injustices. Equally, that quota regimes have to be self-limiting if they are not to produce new distortions. Even more, the policy package must move beyond a quota fixation to facilitate fair competition between strata and individuals otherwise placed inequitously.

The case related to race as a criterion for admissions in the University of Michigan, currently being argued before the U.S. Supreme Court, has lessons for us. Among those arguing for a continuation of race-linked affirmative action are the U.S. Army and major corporations on grounds that increased representativeness enhances efficiency. Any similar proposal for our private sector would inevitably generate howls of protest.

It is time we realised that affirmative action policies, including quotas, are essentially a matter of design to win greater social acceptance. Elevating any proposal to a non-negotiable principle only hardens attitudes and creates a stalemate as the turbulence over the Mandal proposals made abundantly clear.

Fortunately, the repeated stalling of the Women’s Reservation Bill is now forcing its advocates to rethink their strategies and premises for action as both Shabana Azmi and Jaya Jaitly, two strong votaries from differing political persuasions, recently admitted. Possibly, working for change within political parties may be a preferable route to increasing the presence of women in the political sphere. Otherwise, as before, the battle will be lost before it is joined.

Harsh Sethi


The reek of injustice

LIVING in Jerusalem for the past two and a half years has meant living Israeli fear: the fear of taking children to school and hearing a suicide bomber detonate himself outside the school gates; of not wanting to go to a restaurant or bar or coffee shop for fear of being blown up; of hesitating to call Israeli friends for fear that one of their children had been killed in the latest Palestinian terrorist atrocity.

Living in Jerusalem also means seeing the suffering imposed on three million Palestinians because of these fears. The realities are ugly, difficult to talk about, difficult to believe: the brutality, the injustice, the silencing, the denial, the racism above all, the Occupation.

Most Israelis never go to East Jerusalem; most Palestinians avoid the West. Jerusalem is desperate, beautiful and divided – so clearly divided that you could put up a wall along the seam. Indeed Israel is putting up a wall, but not along the seam. It doesn’t so much divide Israelis from Palestinians as Palestinians from each other, and Palestinians from Israeli settlers, grabbing yet more land in the process; all part of the extremists’ plan to make any future Palestinian state unworkable by expanding the network of colonies, intersecting roads and industrial developments, leaving the Palestinians living between the mesh, in ghettoes.

Unhappy word, ghetto; but there is no other word for the enclosures being built around Palestinian towns. Qalqilya, a once thriving market town of 45,000 people, is now shut off from the world by a fence and wall of concrete 24 feet high. There is one exit, guarded by the Israeli Defence Forces (IDF), who determine whether the occupants, their produce, their food and medicines may or may not pass. The word ‘ghetto’ comes from mediaeval Venice. It described the walled-off quarter in which Jews were obliged to live: a barbarous, discriminatory policy.

But they were allowed out of the ghetto when they wanted. And even in the worst days of P.W. Botha, the Bantustans were nothing like as restrictive as life in some of the West Bank cities or Gaza – surrounded by a massive barrier, with armed guards at the only entrance that allows through selected foreigners and a handful of Palestinians with special permits. It is hard to describe the pricking alarm you feel when approaching the giant wall and its concrete watchtowers, manned by IDF soldiers who, for whatever reason, sometimes fire in the direction of the children within. I can say this from experience; it happened to my children, who are six and nine, when I took them to the local zoo.

‘How irresponsible to take your children to such a place!’ I hear the outcry. Blaming the victim is common practice in this conflict. In March, a 23-year-old American student, Rachel Corrie, was crushed to death by an IDF bulldozer. The response: she was ‘irresponsible’ to have been there in the first place. It was an image reminiscent of another brave demonstrator, this time in Tiananmen Square, facing down a tank, except that the driver managed to go round, not over, him.

Corrie was demonstrating against the demolition of Palestinian homes. Apparently it is the Palestinians’ fault when they see their life savings, possessions, memories – their homes – crushed under the military earth-movers. They shouldn’t build without a permit. But wait; permits are given to Israelis to build illegal settlements on occupied land, yet not to Palestinians to build on their own land.

Injustice: the place reeks of it. Drive along the apartheid settler roads. Look at the watered settlement lawns and just beyond to the dusty Palestinian towns where water is rationed. Listen to Palestinian joy at a shower of rain, not because it is good for the crops (or the lawn), but because they might be permitted a little more drinking water. Daily, the caged-in Palestinians watch the settlements bloom across the West Bank, riveting the Occupation into what remains of their small share (22 per cent) of Palestine.

The start of the Intifada set the scene: before a single Palestinian shot was fired, the world was shocked to see ‘riot control’ that consisted not of baton charges and water-cannon, but of shooting dead scores of stone-throwers and bystanders. After that, the massively disproportionate response to Palestinian provocation, and the disregard for justice and international law, became commonplace. Unless it was bizarre, or directed at foreigners such as Ian Hook, a senior British UN official killed in his office by an IDF sniper, it was rarely considered newsworthy.

Almost all studies of violence in the occupied territories have found countless cases of Israelis firing on children, onlookers, old women; of pregnant women dying at IDF checkpoints because they are not allowed through; of hundreds of schools closed, tens of thousands of olive trees uprooted, thousands of houses bulldozed into rubble, entire quarters of historic Palestinian towns razed to the ground.

Earlier this year the Israeli daily Ha’aretz reported that the IDF fired internationally banned fléchette shells (designed to explode into thousands of razor-sharp darts) at a children’s soccer field in Gaza while boys were playing. Nine were hit. Israel’s Supreme Court has rejected an appeal by Physicians for Human Rights, an Israeli advocacy group, asking the court to ban their use.

Most stories of the daily brutality against Palestinians, unlike those of brutalities against Israelis, are not reported by international witnesses. But some slip through. Chris Hedges of The New York Times witnessed an IDF unit in Gaza taunting children over loudspeakers, in Arabic, to come out and throw stones:

‘ "Come on, dogs. Come! Son of a whore! Your mother’s cunt!" whereupon the soldiers shot them with silencers.’ Hedges commented that he had seen children shot in several other conflicts, ‘but I have never before watched soldiers entice children like mice into a trap and murder them for sport.’

The statistics speak of an Occupation unhindered by international or humanitarian conventions, that keeps thousands in administrative detention, imprisons hundreds of children, and has only recently abolished the official use of torture. B’Tselem, the Israeli human-rights organisation, numbers 102 planned assassinations by the IDF, in which 50 bystanders were also killed. There have been 231 incidents of Palestinian ambulances coming under fire.

There is an unspoken consensus among the international community in Jerusalem, at least among those who have any exposure at all to Palestinians, on two points: the enormity of the injustice, and the difficulty of being able to report it fairly. It is the same with diplomatic cables, published UN reports, news stories and articles: you meet the authors, hear their outrage at what they have seen, and then bemoan the reality that their products are unfailingly censored somewhere along the line (often by themselves in order to avoid the ubiquitous charges of anti-Israel bias by chancelleries, lobbies, editors, proprietors and advertisers).

There is almost universal admiration for the courage of Israelis who speak out: journalists such as Gideon Levy and Amira Hass who report graphically on the horrors of the Occupation; activists such as Jeff Halper, who takes matters into his own hands (literally) by rebuilding demolished Palestinian houses; Israeli groups who try to protect Palestinian farmers from marauding settlers; the refuseniks who decline to be party to the Occupation, risking prison and ostracism in a society built on military service; and the many Israelis who demonstrate, refusing to succumb to the mass denial that holds the majority in its thrall.

Denial makes the continuing brutality and injustice possible; most Israelis are ‘unconscious’ of what is being done in their name. It is impossible to believe that any Israelis who visit the Occupied Territories and see the pitiful state of the lives of Palestinians – screwed down under curfew, humiliated at checkpoints, forced, despite their degrees and skills and dreams, into penury and desperation – would not choke in revulsion.

But they are not allowed to go. Nor do they want to. In February, Gershon Baskin described Tel Aviv as teeming with young people enjoying the sunny afternoon, as they should be. ‘But just a few miles away hundreds of thousands of people are living under curfew, locked in their homes and towns. Army jeeps parading the streets screaming "Curfew, curfew – get back into your house"; those who refuse the orders are threatened at gunpoint. This is the reality on both sides.’

One has to imagine what this means. Under curfew, you are in prison but have to fend for yourself, forced to remain indoors for up to eight days at a time, a brief release for an hour or two, and then several days curfew again. In the grinding heat of the Middle Eastern summer, a family of 14 people in two rooms, with no running water and no air-conditioning. You run out of baby milk because the Israelis didn’t tell you how long the curfew would be, and anyway you have no money as you haven’t been allowed to work for months. And if you step out you are shot on sight, and sometimes if you just go near a window you will be shot. If someone is ill, you have no medicine, and have to risk breaking the curfew to get help. And all the time the children scream because they are hungry and bored and beg to be allowed to go to school or just outside.

More than 700 Israelis and 2,000 Palestinians have been killed in this Intifada. That sentence is a problematic one, referring to the deaths of both peoples in the same sentence in order to be even-handed. Israelis call this ‘moral equivalence’ shocking. Many genuinely feel that to compare the intentional, random and innocent deaths caused by suicide bombings to those carried out by the IDF – always ‘with regret’, ‘in self-defence’ or as a ‘preventive measure against more terrorism’ – is an abomination.

But there is another way to look at moral equivalence: as the violence of a people who have struggled for 36 years to free their land from foreign military rule, as opposed to the violence of a massively strong army fighting to maintain and tighten that rule – in contravention of far more UN Security Council resolutions than Iraq has ever been. One should be ‘even-handed’, but what is less acceptable is equivalence between the resistance of the occupied and the repression by the illegal occupier.

Even-handed is what most members of the international press sincerely try to be, despite the reams of contrary accusations. There is always talk of suffering on both sides, as if they are somehow equal. Justice apart, and even numbers of casualties apart, one has to look at this suffering. It is true that the Israeli economy has declined by 5 per cent, that Israelis are demoralised, that people feel uneasy going to discotheques and shopping centres. But what about the other side? They don’t feel nervous about going to cinemas; they are forcibly prevented from going anywhere at all. Their economy has not declined; it no longer exists.

Israelis justify all their actions on the basis of ‘security’, which cannot be compared with Palestinian ‘terror’. For a country whose intelligentsia has more of a conscience than any other in the world, how can so many be so unreflective when it comes to the Palestinians, especially given the security and economic millstone that the settlements represent for Israel?

It doesn’t get more racist than this: critics silenced because of the ethnicities involved. I will be accused of racism – racism against the occupiers. There will be letters that accuse me of anti-Semitism; of not acknowledging that this is all in self-defence; that the occupiers don’t like doing this to their victims; that it’s the Palestinians who ‘make’ them do it.

After two and a half years of watching the realities of this conflict, travelling and working in the Occupied Territories, getting to know many Israelis and Palestinians, I am left with a sense of the tragic waste of two peoples, their lives and their futures. Of course the Palestinians are guilty of atrocity and injustice, of silencing and racism. Theirs is a brutalised, sometimes brutal society. Many feel they have nothing to lose but their lives, and are ready to commit despicable acts in the process.

On the other side, a majority of Israelis feel they have no choice but to trust a government that has brought them nothing but more insecurity and economic difficulty, which appears to have little intention of ending the Occupation, and some of whose members openly advocate ethnic cleansing.

Talk of international ‘road-maps’ out of the conflict are to be welcomed, but when the political map proposing reason, hope and peaceful co-existence bears no resemblance to the geographical map, whose reality is an ever-expanding colonisation of steel, concrete and extremist ideology, which map is likely to prevail? And at what cost to Israel’s future?

Emma Williams

* Reprinted courtesy The Spectator and The Asian Age.