Dear Prudence

In the week before Christmas, a festive whip-round, organised in part by Tony Blair in his role as Middle East peace envoy, raised over $7 billion for the Palestinian Authority. It is a measure of Blair's continued standing in the international community that this exceeded the $5.6 billion that Salam Fayyad, the Palestinian prime minister dared ask for. It may also be a symptom of frustration on behalf of Europe and the US that November's Annapolis summit failed to produce the positive headlines intended.

With sums of aid this large, there is much to be concerned about. French foreign minister Bernard Kouchner is a shrewd enough operator to have tackled the first objection immediately: 'Usually in the past we wrote a cheque and we didn't know where it was spent'. Not so this time - the World Bank and the IMF are to issue tri-monthly reports following the cash trail. More pressing is the statistic that Palestinians have received more money in aid per head than any other group in the world ($10 billion in the last ten years), yet the economy, particularly in Gaza, is a wreck.

Oxfam has likened the situation to trying to fill a bucket with water, only the bucket is full of holes. The charity argues it is better to plug the holes than pour faster. The European Commission has claimed it loses 40 per cent of Palestinian aid to transportation costs. The World Bank added that $200m of development projects have been shelved due to the Israeli and Egyptian blockades.* These are pretty significant holes in the bucket, yet the donors, fed up with hole-plugging, are now resorting to the easier option of turning the tap on harder.

The crux of the matter is that under current conditions, Gaza will not receive any of the profits of Blair's bucket-shaking. The money is intended to shore up Fatah in the West Bank, and further isolate Hamas in Gaza, with the implication that this will show that Islamism doesn't pay. It's an infantilising approach, especially when one considers that the population of Gaza isn't a handful of militants, but 1.4 million people from a spectrum of political and religious backgrounds slowly starving to death. For the majority, the extremist lesson does not need to be learned.

It is imperative that the donors acknowledge that economic aid is only a useful tool when political conditions are favourable to its deployment. Now that the promise of huge sums to rebuild the Palestinian economy is in place, Israel must be encouraged to reconsider its checkpoints and blockades, if the fundraising is to have any true value at all.

*Indeed, poor transportation and poor transportation links in neighbouring countries were among the key factors isolated by Paul Collier in his groundbreaking study The Bottom Billion (OUP, 2007), noted for the caution he advises when propping up ruined economies with foreign aid.