Economies that are driven purely by consumption are simply unsustainable. In Europe and the US we are seeing what happens to credit driven societies. Another prime example of an unsustainable economy can be found along the West Bank where Palestinians have reached levels of record debt. Rueters reports on the coming collapse of the Palestinians’ debt based society:
Government spending and living on credit at all levels of Palestinian society is rampant and, as the euro zone crisis has shown, may prove to be the economy’s undoing.
Bank lending for personal consumption in the Palestinian territories has risen five-fold in the last two years to $417 million. Total credit for cars alone accounts for a further $119 million, according to the Palestinian Monetary Authority.
Salaries for a swollen public sector again cannot be paid in full this month. The productive base for the economy is shriveling while unemployment climbs along with poverty.
An economic crisis has deepened – growth is down from a peak of 9 percent in 2010 after the lows of the Intifada to 5.4 percent in the first quarter of 2012 from the same 2011 period.
Poverty and joblessness have increased in the West Bank in 2012, both hovering at around a fifth of the population of 2.6 million.
“The government focuses on growth regardless of how it is achieved so that it will get some compliments abroad,” Nasser Abdul Kareem, an economic analyst, told Reuters.
“Unfortunately, too much of it depends on government spending, which is neutral, and doesn’t distribute wealth among people and geography,” he said.