Compensation estimates are only meaningful within the overall context of the empowerment of refugees and the preservation of their options and choices. Not all aspects of the loss of a homeland can be measured in monetary terms. The argument here is that acceptable monetary value may be assigned as fair compensation for property losses. For Palestinians, compensation would be a partial payment, at best, for the enormous losses and suffering endured for more than 53 years.

Finding a Formula:

There are several precedents delineating compensational losses and the financial values assigned them. The documentation used by Jews in their submissions for compensation to Germany for the crimes of the Nazis is part of the basis for the values and estimating procedures used here.

The Palestinian economy, which Israel replaced, was a viable one with a significant flow of output and income that sustained a growing population of approximately two million people in 1948. In 1944, national income at market prices was estimated at £P123 million ($496 million dollars). Although inflation in the 1940s was high, it does not account for the full increase in national income between 1939 and 1944. Given the prevailing real interest rate at the time (4 percent), it is legitimate to claim that the total wealth in Palestine in 1944 was around £P3.075 billion ($12.4 billion). The Palestinian share of this wealth was roughly 51.2 percent, given the estimate of Palestinian net domestic product of £P63 million ($256 million) in 1944. This translates into £P1.575 billion ($6.4 billion).

Since non-property income then constituted about 50 percent of total income, the value of “human capital” of the refugees given that they represented 55 percent of the Arab population of Palestine would be £P433 million (or $1.745 billion) in 1944 prices. Indeed, this is a maximum figure, because part of the human wealth was carried with the refugees. A good part of it was also lost because of the disappearance of complementary inputs. Most of the refugees were engaged in farming, so when they were deprived of their land, their human capital was lost. Refugees who were not farmers lost their value as labor through unemployment. They were confined to camps by the sheer economic force of being excess labor in labor-saturated economies.

Since prices and quantities in 1948 were higher than in 1944, an upward adjustment of the 1944 figures is needed. If real growth is 4 percent per year—a modest figure in historical perspective—and if prices are assumed to rise at the modest inflation rate of the United States, the refugees’ loss in human wealth at 2000 prices would total $102 billion. If these losses are adjusted for inflation only, they total $13.2 billion. An alternative accounting method considering the full range of assets at their 1944-1948 market values estimates full compensation for Palestinian material losses at £P743 million ($2.994 billion) in 1948 prices. In 2000 prices (adjusting for inflation between 1948 and 2000) they total $22.5 billion. The inclusion of human capital losses raises compensation to $35.7 billion. If a modest real rate of growth of 4 percent is included, these numbers rise to $173 billion and $275 billion, respectively. Indeed, the inclusion of compensation for psychological damage and pain, following German compensation schemes, would raise this total to $327 billion.

Payment Schemes:

Designing a fair and affordable compensation regime that refugees may be willing to accept and funders willing to pay is not a simple matter. The most difficult issues are the following: (1) Equity—Should all refugees receive the same amount? (2) Universality—Should all refugees be compensated? (3) Sustainability—Should refugees receive a lump sum in cash or shares in an investment fund? (4) Host-country concerns—Should payments to refugees be invested in the host country where they are welcomed and where they choose to stay?

Different compensation regimes will emerge depending on the answers to these questions. There are two equity perspectives: horizontal equity stipulates that people in the same situation should receive similar treatment, but vertical equity stipulates that people in different circumstances be treated differently. The per capita compensation approach provides refugees with a wide degree of flexibility, is easy to administer, requires little documentation, and militates against the undesirable consequences of re-creating the property and gender inequities of the past. Alternatively, it may not take full account of the dynamic circumstances that different people face. Compensating a single-parent family in the same manner as a two-parent family is perhaps not equitable. Moreover, Palestinian refugees in Lebanon have typically faced different circumstances, constraints, and costs than those in Jordan, Syria, and the West Bank and Gaza and thus feel they should be compensated differently than their counterparts in these areas. While per capita payments can be adjusted to take differences into account, it is also possible to preserve the principle that all Palestinian refugees suffered equally the pains of separation from their homes and land, so compensation must be universal and include all of them. Also, separating compensation packages from property and physical claims liberates these claims from being contested by counterclaims for which the refugees bear no responsibility.

Who will be compensated?:

The universality principle suggests that all should be compensated for the standard pains of losing their homeland, even when they appear that they do not need it. Otherwise, pitting the interest of those to be compensated against those who will not receive compensation will create tension and diminish the acceptability and efficacy of the program. There is considerable evidence that universal programs (e.g., Canadian medical insurance) create a sense of common ownership and buy-ins for society at large. This explains perhaps the tenacity with which different people hold to these programs even when some of them appear not to need them and can easily do without them.

How should compensation be paid? While Israel is fully responsible for the restitution of the property of the refugees and for compensating them for all their material losses and psychological pain, it is practical and highly likely that other parties may be willing to pay or help in raising funds for compensation. A lump sum cash payment for each refugee may be the easiest and cheapest way to administer the program. Yet there are serious concerns about the sustainability of such programs and the possibility that payments will be wasted or quickly consumed. Privatization programs in many transition economies have shown that the establishment of investment funds to oversee the management of these payments may generate the income flows targeted by the compensation regime. Equally important is the fact that these investment funds can be organized to invest the compensation monies in Palestine and host countries, whose interest in cooperating or accommodating the refugees’ choices may be raised by the investment of these funds in the countries’ economies.

An ideal compensation package is not a reasonable expectation and compromises must be made. Nonetheless, the more equitable, universal, and sustainable a program is, the more durable and acceptable it is likely to be.

Creating Conflicting Interests:

Prior to and during the conference, influential friends of Israel lobbied African countries to drop the Palestinian issue in the official and NGO WCAR, offering to help them raise the question of repatriation, hence creating a conflict of interest between the two issues. Certain African states, including the South African government, were enticed by the offer, especially when considering the alternative: torpedoing the conference all together.

The trick worked in some limited circles, and was adopted by the media. The high profile of the Palestinian issue was erroneously considered a net loss to African issues and other important topics. In the NGO forum no such hierarchy of issues was tolerated. But the media coverage insisted on a conflict of interest, and the U.S. exasperated the issue when it walked out on the third day of the official conference claiming “offensive language” regarding Israel. One wonders why it does not walk out of the UN when similar language is commonly used to accurately describe Israel’s colonialist practices.

Palestine and International Civil Society:

As of 6 September, Mary Robinson, UN High Commissioner for Human Rights, was refusing to receive and endorse the NGO Forum Declaration and Program of Action in order to transmit it to WCAR. She has been critical of language used to characterize Israel. But while some delegates preferred other terms than “genocide” and a more careful language in the final document, they did not want to distance themselves from the all-encompassing historical document. Nor should Robinson reject the result of a democratic and transparent process in the NGO forum.

The success of the NGO conference in Durban is primarily a victory for international civil society. Bonding together in South Africa, this is only the first step toward a new international agenda coming from civil society organizations and popular movements in an interdependent world where the global is increasingly imposing itself on the local. Durban has refocused the attention on this emerging reality and connecting local causes of discrimination and racism within a new international movement of struggling for a better world.

If the Palestinian cause is to gain momentum and gain international support, it must continue from where Durban has left off, by relocating from the back door of the White House into the center of the American and international solidarity and human rights movement. Already, preparations are underway to strategize with the Dalits, the anti-apartheid, the civil rights, and the human rights movements. Only popular international pressure could urge the U.S. to put an end to Israel’s impunity and allow for a just solution to the Palestinian-Israeli conflict. The Palestinians do not have to reinvent the wheel on this one.

Atif A. Kubursi is Professor of Economics at McMaster University. The above text may be used without permission but with proper attribution to the author and to the Palestine Center. This Information Brief does not necessarily reflect the views of the Center for Policy Analysis on Palestine or The Jerusalem Fund.

This information first appeared in Information Brief No. 81, 3 August 2001.