Palestinian Mohammad Maadi, 49, sits on the side of the street as his wife Hanan, 44, looks from the house door in the Shati refugee camp in Gaza City on Thursday (AP photo by Khalil Hamra)
GAZA CITY, Gaza Strip --Three out of four factories in Gaza have closed because they can't import or export. Legitimate businesses have been replaced by a Hamas-controlled black market economy. Millions of gallons of sewage are pumped into the sea every day because a lack of spare parts holds up infrastructure repairs.
Three years after Israel and Egypt sealed Gaza in hopes of squeezing the territory's Islamic militant Hamas rulers, those suffering most are ordinary Gazans.
They include tens of thousands who lost their jobs, among them 49-year-old Mohammed Maadi, whose family of 15 scrapes by on U.N. rations and whose teenage sons risked their lives digging smuggling tunnels to help put food on the table.
Even if the blockade were to be lifted soon -- as many demanded after last week's deadly Israeli raid on a blockade-busting flotilla -- recovery could take years. Production lines have fallen into disrepair. Entrepreneurs have moved investments abroad. Men forced into idleness have lost their place in society.
Gaza was "working poor" before, but economists say the blockade closed off any chance of development.
"We have been transformed from a productive society into one dependent on handouts," said economist Mohsin Abu Ramadan.
Israel says economic sanctions are a legitimate tool against the Iranian-backed Hamas, branded a terror group by the West and responsible for years of rocket fire on Israeli border towns. Hamas critics note that the Islamists could instantly open Gaza's borders if they renounce violence and recognize Israel.
Instead, Hamas has clung to its militant positions, and the standoff seemed intractable -- until last week, when Israel's sea raid trained world attention on Gaza's plight.
President Barack Obama said this week that Gaza's situation is unsustainable and suggested that everything except weapons should be let in.
For now, Israel only allows in a few dozen types of goods, such as potato chips, frozen meats and medicines, but bans raw materials, including construction supplies, and virtually all exports.
As a result, more than 70 percent of Gaza's 3,900 factories are closed or operating at minimal capacity. Eighty percent of Gazans receive humanitarian aid, up from 63 percent in 2006, the U.N. says.
Some 300,000 have no income at all, a threefold increase over the course of a year.
Delays in bringing in spare parts have held up repairs of a dilapidated, overburdened infrastructure. Electricity is cut for hours a day in rolling blackouts, and millions of gallons of untreated or partially treated sewage have to be pumped into the Mediterranean every day.
Gaza's health service is overwhelmed and advanced care, including cancer treatment, is not available, forcing thousands every year to seek treatment abroad, including in Israel.
Israel issues special permits for patients, but some are turned down and others face delays. Infant Mohammed Hajaj, born with congenital heart disease, died March 5, two days after his appointment with a Jerusalem specialist and two days before his Israeli entry permit arrived, said Mahmoud Daher of the World Health Organization.
Israel allows in medical equipment, but delivery is slow, said Chris Gunness, a spokesman for Gaza's main U.N. aid agency. Hundreds of items, including CT scanners, X-ray machines and spare parts for lab equipment have been waiting to get into Gaza for up to a year, he said.
Almost every household seems to have been touched by the blockade.
Maadi, the jobless father of 13, said Israel stripped him of his work permit in January 2006 when Hamas won parliamentary elections in the West Bank and Gaza. Hamas' ascent to power -- starting with that election victory and continuing with the capture of an Israeli soldier by Gaza militants later that year -- marked the start of increasingly tighter restrictions, leading to a full closure after the Islamists seized the territory in 2007.
Maadi was one of tens of thousands of Gazan day laborers in Israel and used to make $40 a day as a construction worker, enough to provide for his family. Now the Maadis barely survive on U.N. food rations of flour, rice, oil, sugar and powdered milk, supplemented by occasional gifts from relatives.
Maadi's wife, Hannan, 44, said she is worried her children aren't getting enough nutrients. Four are anemic, she said, listing each child's hemoglobin level.
Fruits, vegetables, canned goods and other foods are plentiful in Gaza shops, coming either from Israel or through the hundreds of smuggling tunnels under the border with Egypt.
Israel argues that full shelves show there is no humanitarian crisis. However, more Gazans, like the Maadis, can no longer afford to buy even the basics.
In a bid to help the family, two of the Maadi boys, 18-year-old Mahmoud and 19-year-old Hussam, briefly worked in the tunnels. Hussam was terrified, but overcame his fear of his damp, dark workplace because he and his brother each made $25 a day.
A month into the job, Hussam's tunnel collapsed, burying him to his neck before he was rescued. The Maadis told their sons to quit, saying the money wasn't worth the risk of losing them. Dozens have died in tunnel collapses, and Israel also bombs the tunnels from time to time to try to disrupt weapons smuggling.
Gaza's unemployment was around 39 percent at the end of 2009, but dropped by about five percentage points in the first quarter of 2010, apparently because Hamas hired thousands more civil servants.
The Hamas government employs 32,000 people, while about 20,000 work in tunnels, said economist Mohammed Skeik. More than 70,000 former civil servants, who quit after the Hamas takeover, continue to draw salaries from Hamas' rival, Palestinian President Mahmoud Abbas. In its Gaza takeover, Hamas defeated forces loyal to Abbas, who since formed a rival government in the West Bank.
The Maadis' unemployed neighbor, 55-year-old Mohammed Kahlout, depends on the Hamas police salaries of his two sons.
Kahlout's sewing workshop used to employ more than 40 people sewing jeans for an Israeli company, but he was forced to close over Israeli trade restrictions in 2006. If the factory was open, his sons would be working for him, not Hamas, said Kahlout.
The Hamada clan had to close four factories, including a tomato cannery that could no longer import empty cans from Israel. Israel says the metal could be used to build weapons.
"It's my feeling that Israel wants to create terrorists," said Alam Hamada, 31, a member of the once powerful family. "Imagine you ... lose everything you have, your income, your car, all that you hold dear, you'll be a different person."
With many traditional businesses wiped out, an alternative Hamas-controlled economy has sprung up.
The Hamas government raises 90 percent of its revenue abroad, including aid from Iran and donations from the Muslim world.
But taxes imposed on smuggled goods -- from cars to calves and cigarettes -- are an important source of income. Trader Ibrahim al-Awawda says he pays 30 percent tax on smuggled bikes that range in price from $900 to $1,100.
Despite a cash crunch earlier this year, the Hamas government manages to stay afloat, even as ordinary Gazans lose hope.
Kahlout, taking visitors through his dusty, cluttered sewing workshop, said being without work makes him feel like a nobody. The sudden attention being paid to Gaza has given him a little boost, he said, but hopes it isn't a fluke.
"I hope no one will forget Gaza, and the people who live here," he said.
Hadid reported from Jerusalem. Associated Press Writer Ibrahim Barzak in Gaza City, Gaza Strip, contributed to this report.