Israel has been receiving African asylum seekers and migrants since 2006. There are currently around 43,000 African asylum seekers/refugees living in Israel who have fled genocide, tyrannical governments and civil wars. Despite the fact that Israel attended the 1951 Refugee Convention and signed its 1967 Protocol, Israeli government has not codified these treaties as domestic law. Instead, its response towards the refugee situation has been deportation, incarceration in detention centers, or the introduction of policies that prevent the border crossings. Furthermore, as a result of ambiguous criteria for visas, the refugee community is facing difficulties finding a decent work or engaging in legal self-employment all of which results in high levels of poverty.  

The hidden economy

During my internship at Microfy in the South of Tel Aviv, I had the chance to work with the African refugee and asylum-seeker community, where I noticed an interesting phenomenon, unique to this community. Beyond the general conditions, what caught my attention was the local economic dynamic. Apparently, there is a micro-economy that exclusively supports the needs of its own community, has its own goods and services, and remains separate from the Israeli macro economy. 

It is clear that the African refugee community brought a different culture including language, food, clothes, personal care, hobbies, holidays and much more. All these different components are reflected in the products they regularly consume. Therefore, except for the rent (collected by Israeli property owners) the remainder of the household spending occurs within the community. Furthermore, most businesses are strongly supported by and support the community. Successful businesses are able to provide loans and financial support to community members, and the community as a whole supports businesses in their struggles. This consumption, together with the local loan system (unofficial according to the Israeli law), and the entry of money through employment outside of the communityIt became clear to me that there is generates a parallel economic system within the refugee community. 

Economically, this development fits the “Leaky Bucket” theory and the concept of the “Multiplier effect”. Moreover, it seems that this system has a strong multiplier effect.  The multiplier effect is an economic concept that =refers to the potential impact money circulating in a community can have. relationship between the injections of new demands into the circular flow and the overall income of the general community. When one Shekel, for instance, is earned by a community member, and then spent in a local shop, and later the shop owner spends it in a local hair dresser, the value of this Shekel to the community has increased threefold. The more units of currency circulate in a local economy, the more general wealth it creates, and in South Tel Aviv, it is possible to assume that the demand of the refugee community for their own local goods, and the fact that they mostly use their own community service providers, allows them to generate more income within their community. keeps the external income flow of money from employment in Israeli businesses or loans, and within the community, thus creating more income for the general population.    

This is strongly linked to the “Leaky Bucket” theory and strategy. Briefly, the theory behind Plugging the Leaks explains local economic development; famously presented in 2002 by the New Economics Foundation (NEF). Its main hypothesis is that the problem in low-income communities is not so much about "pouring" money into it. Rather, it is the linkages that investment can make with local firms and local people that determine whether or not local people are, in fact any, better off. This theory utilizes the analogy of a local economy as a leaky bucket.  The holes in the bucket are channels in which the money pouring in the economy is leaving it, and does not benefit the community in the long run. For instance, these holes are external service providers who take away their income.  When holes and leaks are plugged, i.e. for instance local grocery shops are open instead of an external supermarket chain, this enables the community to keep the resources within.  

Socially speaking, it became evident to me that consuming in local shops and restaurants became a social activity, where people join, talk and socialize. It should be noted than that this strategy for community development that developed spontaneously among the refugee community in South Tel Aviv also support the community feel and relations among its members. 

Between theory and reality

Thinking more and more of the phenomenon that I was observing, I was reminded of the “Plugging the Leaks” theory and its strategy for local development, and the local economic system of the African refugee community in the South of Tel Aviv. Briefly, the theory behind Plugging the Leaks explains local economic development; famously presented in 2002 by the New Economics Foundation (NEF). Its main hypothesis is that the problem in low-income communities is not so much about "pouring" money into it. Rather, it is the linkages that investment can make with local firms and local people that determine whether or not local people are, in fact any, better off. This theory utilizes the analogy of a local economy as a leaky bucket.  The holes in the bucket are channels in which the money pouring in the economy is leaving it, and does not benefit the community in the long run. For instance, these holes are external service providers who take away their income.  When holes and leaks are plugged, i.e. for instance local grocery shops are open instead of an external supermarket chain, this enables the community to keep the resources within.  

The similarities I found between this theory and the local economic system of the refugee community can be summarized this way: i) The prioritization of the community for local enterprises. Local businesses respond to the unmet demand of the community; ii) The local economic activities have strong multiplier effects. The owners of these businesses also spend their money inside the community; iii) The cash flow generates an increase in demand for local goods, accompanied by the opening of new businesses, which in turn, generates new jobs, an increased demand for local goods again, and a local economy is ultimately in an expansionary cycle.

Interestingly, it should be remembered that the strategy for “Plugging the Leaks” has been advocated to be taken by practitioners, local governments and civil society when working with marginalized communities. However, the case of the refugee community in South Tel Aviv demonstrates that this strategy was adopted spontaneously, and without previous planning, by the community itself, even against very negative environment created by the government and only indirect support given by the NGOs. 

Some questions from the field:  

From my brief experience with this community, it is clear to me that it largely helps itself without outside support.Specifically,  Tthe role of the government has a negative effect on the local development. Denial ofgovernment has denied work and businesses permits for refugees, forced relocation to detention centers, etc.; all of which has,  reinforced the communities’ vulnerability. Looking at the neighborhood, the local Israeli population is not open to supporting the refugee community. In fact, they perform advocacy campaigns against refugees. The NGOs are almost the only positive actor. While their direct economic impact on the refugee community is low, they create indirect economic impact through different services that improve the quality of life of this community, particularly education, labor rights, health, food programs, etc.

In light of these limitations, I wonder how a process of economic growth and development can take place in such a hostile environment? How can a refugee community that came to a new environment with little money, starting their lives from scratch, and treated as infiltrators, can overcome their situation and actually generate growth? While Plugging the Leaks theory proposes an alternative instrument for local policy for economic development, and not an explanation to it, it can help us to analyze this phenomenon. Yet, a lot of research is necessary in this case in the local economic development field and in the refugee arena at large. This is true especially today, where we are witnessing the refugee crisis, and the responses to it must take into account the economic livelihood of refugees.  

References 

Escobar, A. 1997, ‘The making and unmaking of the Third World though development’, in Rahnema, M. and Bawtree, V. (eds) The Post-Development Reader. Zed Books: London.

Heideman, L. 2011, Municipal Local Economic Development and the power of the local multiplier effect: piloting a community enterprise identification method in South Africa and Namibia. LED Expert P3 Project: Partnership – Participation – Progress. SALGA, BALA, ALAN, SALAR.

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