A History of Money in Palestine


A Review of A History of Money in Palestine: From the 1900s to the Present, by Sreemati Mitter.

Sreemati Mitter’s groundbreaking dissertation treating the economic history of the Palestinians–or more properly, the history of Palestinian banking–begins with a story out of a bestselling thriller.  After Hamas’s surprise victory during the 2006 elections for the Palestinian Authority (PA) parliament, Israel, in concert with the United States, the European Union and Canada, acted to ban the movement of cash into and out of the West Bank and the Gaza Strip.  Operating under the statute of the Patriot Act, the United States threatened to bar from its lucrative financial markets any bank that flouted its prohibition and to freeze their assets.  Even the Palestinian-founded bank holding the PA’s primary account, the Arab Bank, capitulated, and the Palestinian Authority quickly descended into economic crisis, shedding close to two-thirds of its revenues within a matter of months.  Into the breach stepped Mahmoud al-Zahar, a major figure in Hamas and the Foreign Minister of the Palestinians’ newly elected government.  Struggling to prop up his besieged administration, the intrepid al-Zahar resorted to smuggling in a sizable injection of cash, at least $30 million and perhaps, aided by colleagues, as much as four times that, in briefcases, or even as one version of the story went, in candy tins.  With this perhaps unlikely cloak-and-dagger story at its outset, the reader is plunged into Mitter’s subject: the economic life of a stateless people and the travails and absurdities that characterize that condition.

A History of Money in Palestine brings together strands of social, economic, and legal history to investigate the economic agency of the Palestinians across diverse regimes and conditions, from the late Ottoman era to the rise of Israel.  Mitter joins a small number of scholars who have focused on the Palestinian middle classes, and among them she is the first to explore what banking institutions and practices have to tell us about Palestinian society and history.  In doing so, her dissertation adumbrates our understanding of Palestinian modernity, in particular shining a spotlight on the growing sophistication and complexity of Palestinian financial life in the twentieth century, as well on the economic ramifications of statelessness.  The sources mobilized for this tour of financial history include not only usual suspects like the British Foreign Office records, but also those of Barclays Bank (a major institution in the Palestinian banking scene), the files and papers of a longtime Palestinian law firm (A.F. and R. Shehadeh), collections related to banks and attorneys at the Israel State Archive, and a host of interviews.

The dissertation’s twinned themes of Palestinian agency and external/colonial constraint are illustrated and examined most vividly with respect to the period of British rule (1917-48) and the traumas of the 1948 war and its aftermath.  Regarding the latter, Mitter unearths hitherto unknown aspects of the Palestinians’ national dispossession in 1948, when they lost not only their lands and homes, but a good deal of their national savings as well, which was seized as the state of Israel extended its sovereignty over the banking sector.  The loss of their homeland, and with it the architecture of their financial life, foisted a new degree of economic precarity upon the Palestinians.  But as Mitter underscores throughout the work, Palestinians have ceaselessly striven to take charge of their own economic affairs and to overcome the impediments and difficulties they have encountered, and, in the case of their usurped national savings, their dogged efforts and some legal ingenuity paid off, winning them back a portion of their frozen assets after several years of legal battles.

Chapter 1 takes aim at the conceit that the Palestinians were economic simpletons who were incapable of comprehending modern banking and finance, let alone of fostering economic growth and development.  This was a favorite old chestnut of the British, who never tired of portraying the Palestinians as a rabble of witless spendthrifts ruled over by vulgar usurers and religious pedants, even when the reality of growing prosperity was obvious and openly acknowledged, as it was after the Crimean War, for example.  Mitter deconstructs the diminutive assumptions promoted by British Orientalism by introducing her readers to the economic landscape of the late Ottoman and British Mandate periods, and to the place of banking within it.  In the process we variously meet representatives of the new middle classes in the form of two feisty clerks at the Ottoman Bank (a Franco-British enterprise, in spite of the name) that refused to take pay cuts after the British conquered Palestine and its currency changed; Palestinian peasants that turned to use the Ottoman Agricultural Bank as an alternative to local moneylenders in the final decades of the Ottoman era; and Abdul Hameed Shoman, the enterprising creator of the aforementioned Arab Bank, which he intended to serve the cause of Arab nationalism as well as the financial needs of Palestinian depositors.

Chapter 2 develops the portrait of Arab Palestine’s increasingly complex economic terrain further by zooming in on the affairs of the Arab Bank, the first Palestinian-owned banking institution.  Both the bank’s history in the 1930s, around which the chapter rotates, and its founder, are remarkable.  Shoman began as an illiterate villager from Beit Hanina (in Jeruaslem’s suburbs) who traveled to the United States to make his fortune.  He returned to Palestine in the late 1920s a wealthy man and founded the Arab Bank in 1933.  Far from resolving or consolidating the Palestinians’ economic position under the British, however, or serving to promote Arab or Palestinian nationalism, the bank became a center of controversy.  After failing to turn a profit, it called in all of its capital only a few years after opening its doors.  This precipitated a lawsuit that Mitter tracks in great, patient detail through the chapter, which itself was just one of many by Palestinians against the banks operating in the country at the time.  The case amply reveals the potential and actual contradictions between nationalism and banking and the degree to which Arab social life was inflected by, yet not reducible to national concerns.

Chapters 3 through 5 center around Israel’s seizure of Arab bank accounts during the 1948 war and the ensuing struggle of Palestinians to reclaim their assets.  Chapter three focuses on the war era itself.  The chaotic environment that accompanied the 1948 conflict was naturally a menace to banking and the normalcy on which it relies.  The Stern Gang (Lehi) specifically, though perhaps not alone, robbed banks in between terrorizing Palestinian communities.  Meanwhile, the British not only refused to provide security–or even attempt to do so–after their relinquishment of the Mandate and the vote for partition at the UN in November 1947 touched off the war.  In February 1948 they undermined the foundations of Palestine’s economy by ejecting the territory from the sterling area and soon thereafter terminating the convertibility of Palestinian pounds (£P), effectively leaving residents with currency that would no longer be recognizable international tender.  One of the key arguments made in the chapter and evidenced throughout the rest of the dissertation is that the international and British banks that fell under Israel’s jurisdiction yielded to the sovereign will of the new regime, recognizing its legal orders even when they violated the banks’ fiduciary responsibilities to their customers.  So when Israel’s Custodian of Enemy Property ordered all Arab accounts frozen, they complied, rejecting petitions and requests from customers to withdraw their assets and instead leaving them under charge of the Custodian.    

In Chapter 4, Mitter introduces us to a sampling of the Palestinians who had their accounts frozen and to their early efforts at reclaiming them.  It records their voices in various entreaties that show the multiplicity of approaches and rhetorical strategies they deployed, not only with the foreign banks, but also in correspondence with the British and Israeli governments.  To do so it relies on the full gamut of A History of Money in Palestine’s unique source base.

The uniform negative responses received by the Palestinians from all parties led to the development of a new Palestinian strategy in 1951: lawsuits aimed to secure the restitution of their property.  These suits are the subject of the fifth and final chapter.  They began with Abdul Hameed Shoman, whose Arab Bank had a current account with Barclays of over £P580,000 that was frozen along with the thousands of other Palestinian accounts.  When Shoman’s case was rebuffed in Britain, two enterprising Palestinian attorneys, Aziz and Fu’ad Shehadeh, decided to bring suit in Jordan, which took a much dimmer view of the legitimacy of the Israeli state and thus of the binding quality of its legal system’s orders.  There the dispossessed Palestinians scored their first victory in June 1953, besting one of Britain’s star attorneys while winning a verdict against Barclays that ordered it to release the frozen account of the Shehadehs’ client–who had fled to Cyprus at the outset of the 1948 war–and pay arrears of compound interest.  This case and the portent it heralded of a storm of successive suits on the same model sent Barclays and the Ottoman bank, the two principal banks affected, on a nervous journey from London to Tel Aviv and Jerusalem, as they sought to resolve the legal conundrum of being caught between observing Israel’s laws and those of Jordan.  Their solution, ultimately, was to provide Israel an inducement to release the escrowed accounts: a sizeable loan (and foreign exchange) that the cash-strapped young state needed.  After dragging its heels for a number of years Israel finally agreed to the deal and to release a portion of the frozen monies it held after the international banks threatened to pull out of the country.  The payout was less than half of the money originally seized.  In some cases, it appears that Palestinians may have refused to try to reclaim their property, believing that dealings of any kind with Israel legitimized the state that had shattered their society and made them refugees.  Israel also spent a portion of the Custodian of Enemy Property’s Arab accounts paying down mortgages on Arab properties that it controlled which the refugees were simultaneously barred from returning to and reclaiming.  As Mitter points out, this removed (financial) liabilities that could complicate the state’s claim to legal ownership of the lands it captured.  Thus the issue of the frozen accounts that Mitter refers to as the last step in the Palestinians’ dispossession (107) was brought to a bittersweet conclusion.

A History of Money in Palestine is a thoroughly novel work that will no doubt stimulate further attention to the financial and economic dimensions of Palestinian social history.  It stands alongside recent books by Sherene Seikaly and Salim Tamari in illuminating the contours of Palestinian modernity and economic life.  It also reminds us that statelessness, and the vulnerability it has brought the Palestinians, is a condition that not only inflects all aspects of their lives, but is one which has continually incited new forms of Palestinian assertiveness, with sometimes surprising results.

Charles Anderson
Department of History
Western Washington University

Primary Sources

Barclays Bank
A.F. and R. Shehadeh Law Firm (Ramallah)
Israel State Archive
British National Archive, FO

Dissertation Information

Harvard University. 2014. 274pp. Primary Advisor: Roger Owen.

Image: “Government of Palestine” bearer bond. Photo by Author.

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