How Gaza went from desperately poor to even poorer – and why that’s important to the current war
The story we’re currently seeing unfolding in Israel and Gaza at present doesn’t seem to have much to do with economics. It’s about murders, terrorism and missile attacks.
But the economics lurks behind the scenes. It can’t explain all of what’s happening in the Middle East. It certainly can’t justify the horrendous attacks on Israel on 7 October – the worst massacre of Jewish people since the Holocaust.
Nor can it explain the intensity of the Israeli response, which has, according to Palestinian representatives, claimed more lives than were lost in the Hamas attack.
But, alongside religion, history, democracy – and the lack of it – economics is nonetheless an important part of the background story to the instability in this region.
Trustworthy data on the Palestinian Territories is hard to come by, but earlier today UNCTAD, the economic wing of the United Nations, published its annual stock-take of the Palestinian economy – perhaps the most reliable assessment of the situation on the ground. And that situation is stark.
It shows that as of last year, in other words before the recent attacks, the economy of Gaza was, by some measures, the most benighted in the world.
Gross domestic product per capita – the broadest measure of living standards – was a whopping 46% below its 1994 levels.
In other words, in the space of a generation, even as most other countries around the world saw their living standards rise sharply, Gaza’s people have become dramatically poorer.
What’s particularly striking when you look through the data is the divergence between Gaza and the West Bank, the other main part of the Palestinian Territories.
The two regions’ economies had roughly similar GDP per capita up until around 2007, when Hamas seized control of the Gaza Strip.
But look at what happened next. Economic growth in the West Bank meant that its economy is now considerably bigger and more prosperous than its 2007 levels.
The Gaza Strip, meanwhile, has seen its levels of prosperity crumple in a fashion rarely seen elsewhere in the world.
It’s a similar story if you look at unemployment rates in each of the regions: while they were relatively close up until 2007 (albeit that the Gaza jobless level was always a few percentage points above the West Bank level) in the post-Hamas period, the two lines have diverged dramatically.
The jobs market in the West Bank is (or was, as of 2022) tough. The jobs market in Gaza was hopeless.
Compare the Gaza Strip to other countries and you see just how much of an outlier it is.
While the unemployment rate in Israel is 3.5%, the comparable rate in the Palestinian Territories is 24% and the rate in the Gaza Strip is at 45%.
This is higher than any other country in the world – and note that the number is significantly higher for women and for young people.
There are plenty of explanations for this divergence. After Hamas took control of Gaza, Israel imposed a series of restrictions on the flow of people and trade in and out of the region.
The border is heavily policed. Entry and exit by air and sea is banned and there are only two crossing points towards the West Bank and East Jerusalem.
The majority of residents have been “locked in” for years, making it more like a prison than a fully functioning state.
Look at this chart of exports from Gaza and the West Bank and you get a sense of what this means in practice.
While the West Bank (and for that matter most other economies) have been able to grow their exports each year, as new businesses seek out opportunities to trade with Israel (the trade mostly goes to Israel), Gaza’s exports have essentially flatlined.
Of course, this does not cover the black market, but it’s the best picture we have available.
Israeli authorities say these restrictions are an essential part of policing Hamas and preventing terrorist activity. Trade is monitored and controlled to prevent weapons coming in and leaving.
That goes, too, even for items like fertiliser and steel tubes, since they could be used to make missiles. And they have more than half a point: Hamas social media accounts have gleefully boasted about how productive its home-made ammunition factories have been – despite these restrictions.
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Reality of Palestinians in Gaza City
These restrictions are not the only explanation for the collapse in Gaza’s economy: corruption is rife throughout the territory, with the upshot that much of what enters the country for the purpose of helping civilians is sometimes seized by Hamas leaders.
It is a sorry story, and the upshot is that Gaza has been a failing economy for many years, with levels of deprivation and poverty which have mounted to world-leading levels.
None of the above can explain, let alone justify, the attacks of October 7. In a parallel universe, Gaza could have been blessed with leadership which would turn the lines in the chart around – though that would also have been reliant on Israel lifting its various restrictions.
But numbers like these tend to make people feel desperate.
Gaza was already desperately poor before Hamas won its election and seized power. It has become significantly poorer, and significantly more desperate, in the years since.
Ghislaine Maxwell has filed a petition asking a US federal judge to overturn her sex trafficking conviction and free her from prison, claiming “substantial new evidence”.
The disgraced British socialite and ex-girlfriend of the convicted paedophile Jeffrey Epstein is serving a 20-year sentence for sex trafficking.
In the petition, Maxwell’s lawyers argue that information which would have resulted in her exoneration at her 2021 trial was withheld, and that false testimony was presented to the jury.
They say the cumulative effect is a “complete miscarriage of justice.”
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Maxwell was jailed in 2022 for sex trafficking after recruiting young girls for Epstein during the 1990s and early 2000s.
Her latest legal bid for freedom came on Wednesday, two days ahead of the deadline for the release of the Epstein files – which include all material related to civil and criminal cases involving Epstein, who took his own life while awaiting trial on sex trafficking charges in 2019.
Ghislaine Maxwell said she would petition her conviction since August. File pic: PA/US Department of Justice
Maxwell’s lawyers have claimed that releasing the files – required after US President Donald Trump signed the Epstein Transparency Act – would harm her bid for a retrial.
The argument came in a letter from her legal team to a New York judge, which Sky News saw at the start of December. The lawyers argued the release of “grand jury materials from her case, which contain untested and unproven allegations” would “foreclose the possibility of a fair retrial”.
The letter also reveals the plan for the habeas corpus petition, filed this week.
The petition, filed in a Manhattan federal court, argues: “Since the conclusion of [Maxwell’s] trial, substantial new evidence has emerged from related civil actions, government disclosures, investigative reports, and documents demonstrating constitutional violations that undermined the fairness of her proceeding.
“In the light of the full evidentiary record, no reasonable juror would have convicted her.”
It is unclear what new material the lawyers are referring to.
In October, the US Supreme Court rejected Maxwell’s attempts to appeal against her sentence, meaning the petition or a presidential pardon from Mr Trump are her only chances at being freed before her projected release date in 2037.
Earlier in December a New York judge gave the go ahead for the US Department of Justice to publish material from Maxwell’s sex trafficking case, as part of the Epstein files release.
Democrats have released dozens of Epstein images
Several dozen photos related to Epstein have already been released by Democrats in the US, ahead of this week’s deadline for the release of the full files which are expected to include thousands of pages of material.
As it happened: Trump ‘knows nothing about’ images released
Last Friday, images of Mr Trump, Steve Bannon, former President Bill Clinton, Andrew Mountbatten-Windsor, and others were shared by the Democrats on social media.
There was no suggestion that the pictures implied any wrongdoing. The US president, Mr Bannon, Mr Clinton and the former prince have all denied any wrongdoing in relation to Epstein.
Other images included sex toys and condoms with Mr Trump’s likeness.
China is to tax contraception for the first time in more than three decades in a move aligned with efforts to get more families to have children.
Contraceptive drugs and products such as condoms will no longer be exempt from China’s 13% value added tax from January 1, the country’s newest tax laws have revealed.
The move comes as the country’s birth rate declines. In 2024, 9.5 million babies were born in China, about one-third fewer than the 14.7 million born in 2019, according to the National Bureau of Statistics.
China has moved on from the decades when it used a one child policy in an attempt to curb a massive population boom. Pic: Reuters.
As deaths have outpaced births in China, India overtook it as the world’s most populous country in 2023.
But the tax change has been ridiculed on on Chinese social media by people who have joked that they would be fools not to know that raising a child is more expensive than using condoms, even if they are taxed.
“That’s a really ruthless move,” said Hu Lingling, mother of a 5-year-old who said she is determined not to have another child. She said she would “lead the way in abstinence” as a rebel.
“It is also hilarious, especially compared to forced abortions during the family planning era,” she said.
More seriously, experts are raising concerns over potential increases in unplanned pregnancies and sexually transmitted diseases due to higher costs for contraceptives.
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In previous decades China’s huge population growth prompted the ruling Communist Party to ban couples from having more than one child in a rule that enforced from about 1980 until 2015, through fines and other penalties.
In some cases women underwent forced abortions and children born over the one child limit were deprived of an identification number, effectively making them non-citizens.
The government raised the birth limit to two children in 2015. Then, as China’s population began to peak and then fall, it was lifted to three children in 2021. Contraception has previously been actively encouraged and easily accessed, sometimes for free.
The limit was lifted to three children in 2021 under President Xi Jinping. Pic: AP
Director of the University of Virginia’s Demographics Research Group, Qian Cai said: “Higher prices may reduce access to contraceptives among economically disadvantaged populations, potentially leading to increases in unintended pregnancies and sexually transmitted infections. Those outcomes could, in turn, lead to more abortions and higher health-care costs.”
She also said the new taxes would have a “very limited” effect on reproductive decisions.
“For couples who do not want children or do not want additional children, a 13% tax on contraceptives is unlikely to influence their reproductive decisions, especially when weighed against the far higher costs of raising a child,” she said.
But University of Wisconsin-Madison senior scientist Yi Fuxian said imposing the tax was “only logical”.
“They used to control the population, but now they are encouraging people to have more babies; it is a return to normal methods to make these products ordinary commodities,” he said.
EU leaders will meet in Brussels today to try to agree the release of €210bn (£184bn) to help fund Ukraine’s war with Russia.
The money, which comes from Russian assets frozen after Moscow’s full-scale invasion of Ukraine in 2022, is mostly held in the Belgian-headquartered clearing house, Euroclear.
The money is seen as vital to Ukraine’s ability to keep fighting, because the country faces bankruptcy in early 2026 if it doesn’t receive more international assistance. That means Kyiv would no longer be able to pay soldiers, police and civil servants or buy weapons to defend itself.
Volodymyr Zelenskyy, Sir Keir Starmer, French President Emmanuel Macron and German Chancellor Friedrich Merz. Pic: Reuters
Last night, Volodymyr Zelenskyy, who is expected to brief the EU leaders today, wrote on X: “The result Europe produces – must make Russia feel that its desire to continue the war next year is pointless, because Ukraine will have support. This rests entirely with Europe.”
The Belgian government has so far prevented the move amid fears it will expose the small country to Russian legal action in the future.
The EU is racing to find solutions to Belgium‘s concerns, including passing an emergency bill that secures the sanctions against Russia indefinitely, superseding the need to renew them every six months and thereby insulating it from veto votes from Russian-leaning EU member states like Hungary and Slovakia.
Belgium also wants guarantees that all EU members will share any financial cost of Russian action against it.
Why the push to use Russian assets?
The US, which has so far given billions of dollars to Kyiv, is losing interest under Donald Trump and can no longer be relied upon for financial support.
Previously, the EU had been giving the interest generated from the frozen assets to Ukraine, but was worried it might destabilise the Eurozone economy if it touched the assets itself.
That has changed, however, as Ukraine’s need has become more acute and fears over Russia’s wider imperialist ambitions have grown in recent months.
This unlocking of seized Russian assets is also being seen as a way to buy Brussels more leverage in peace negotiations, as well as reducing Kyiv’s dependency on Washington.
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Friedrich Merz. Pic: Reuters
German Chancellor Friedrich Merz, who has been leading the campaign to release the funds, warned that “Europe would be severely damaged for years” if they fail to pass the vote and “this step is not about prolonging the war but about bringing the war to an end as soon as possible”.
In short, the consequences of using the frozen assets are now considered less risky than the consequences of not taking this action.
What’s at stake?
Vladimir Putin is hoping Ukraine’s allies end up divided. Pic: Sputnik/Reuters
Trump wanted the money to be invested in two US investment funds, something the EU rejects. The US president has recently been scathing of European leaders, and the EU sees Thursday’s meeting as an opportunity to show its strength and unity.
In theory, the EU could pass the policy by majority vote, thereby sidelining the Belgian government, but officials are reluctant to go down this path for fear of alienating Belgium and causing a diplomatic rift in the alliance.
Much is riding on the meeting. If the EU fails to pass the vote, its credibility will take a severe blow. It will likely become even more irrelevant in peace talks, and Vladimir Putin might look to take advantage of a divided Europe.
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