Dear Abu Mazen: End This Farce

An open letter to the Palestinian leader.

Mahmoud Abbas
President, Palestinian Authority
Muqata, Ramallah

I admit that I never believed the moment would come when I would have to write these words. I am doing so because U.S. President Barack Obama has convinced you not to announce, at this point in time, the dismantling of the Palestinian Authority's institutions and the "return of the keys" of authority for the Palestinian territories to Israel. Because there have never been serious negotiations with the government of Prime Minister Benjamin Netanyahu over the last three years, and because you did not want to perpetuate the myth that a meaningful dialogue existed, you have been sorely tempted to declare the death of the "peace process" -- but the American president urged you to maintain the status quo. It is a mistake to agree to Obama's request, and you can rectify this.

The Oslo Accords were a tremendous victory for the peace camps on both sides. And this agreement did not fail. It was thwarted. The assassination of Prime Minister Yitzhak Rabin, Palestinian terrorism, and the political victories of the opponents of the agreement -- both on the Palestinian side and on the Israeli side -- have turned the agreement into a device that has allowed the parties to block a two-state solution.

Oslo's opponents, on both sides, were initially startled by a process that promised to lead to a partition of the land in a few years. They later turned Oslo into a tool to prevent partition by prolonging the interim agreement, claiming that, as long as it is not replaced by a permanent agreement, it must continue and be binding to both sides. Oslo's adversaries have turned the interim agreement, which was supposed to last not more than six years and serve only as a pathway to a final solution, into an arena where they can continue to build settlements or spin their dreams of an Islamic empire, without the world putting serious pressure on them to put an end to the conflict.

The extremists' gutting of the Oslo agreement has been complete. They have uprooted the permanent-status negotiations -- where the two sides pledged to tackle core issues such as the status of Jerusalem, the fate of Palestinian refugees, and the future of Israeli settlements -- from the peace process. They have succeeded in preventing the creation of a Palestinian state based on the 1967 lines with land swaps, the establishment of two capitals in the current area of Jerusalem, the formulation of appropriate security arrangements, and a fitting symbolic and economic resolution to the problem of the Palestinian refugees -- as was proposed in the Geneva Accord, in which you were involved in all of the details. Their aim is to perpetuate the interim process indefinitely, and every single day that passes plays into their hands.

One simply cannot continue with an interim arrangement for almost 20 years. This was not the intention when we spearheaded the Oslo process in late 1992 -- you from Tunis and I from Jerusalem -- or when we assiduously worked on what subsequently became known as the "Beilin-Abu Mazen Agreement" between 1993 and 1995.

You and I both understand that the current situation is a ticking time bomb. From my point of view, what is at stake is the loss of Israel as a Jewish and democratic state. From yours, it is the loss of the chance for an independent Palestinian state. And from both of our points of view, the failure of the two-state solution risks a renewal of terrible violence.

Anyone who believes these things must take action. You can do it, and for this step you do not need a partner. A declaration of the end of the Oslo process -- justified by the fact that the path to a permanent-status agreement is blocked -- is the most reasonable, nonviolent option for putting the subject back on the world's agenda, with the aim of renewing genuine efforts to reach a conclusive solution.

Dissolving the Palestinian Authority and returning daily control to Israel would be an action nobody could ignore. It is not at all similar to a demonstration in front of the Municipality of Ramallah, nor is it similar to appealing to the United Nations for member-state status. This is a step that only you can take, and a step that will demand a response.

I know how difficult it is. I know how many tens of thousands of people depend on the Palestinian Authority for their livelihoods. I am able to appreciate all that you and Prime Minister Salam Fayyad have accomplished -- establishing Palestinian institutions, growing an economy in impossible conditions, and fostering security in the West Bank.

After all these endeavors, however, you still need to beg the government of Israel to release your money from customs, you still need to beg the Republicans in the U.S. Congress to transfer funds to the Palestinian Authority, and you still need to stand, day after day, before your Palestinian critics and explain why your political efforts are failing. Please don't let this be the way you end your political mission -- a mission that seeks to achieve Palestinian independence without the use of violence.

Do not hesitate for a moment! Do not accept the request of President Obama, who merely wants to be left undisturbed before election day. Do not let Prime Minister Netanyahu hide behind the fig leaf of the Palestinian Authority -- impose upon him, once again, the responsibility for the fate of 4 million Palestinians. Remain as the head of the Palestine Liberation Organization, which will give you the authority to lead the political negotiations if and when they resume.

But for the sake of your own people, and for the sake of peace, you cannot let this farce continue.

It is possible, of course, that Oslo's demise will not be followed by the birth of more substantive peace talks. But if that occurs, then at least it will not be you -- the man who stood beside the cradle of the Oslo process -- who is responsible for failing to prevent the complete and utter distortion of that process by its Palestinian and Israeli opponents.

Mario Tama/Getty Images

Democracy Lab

Decoupling: Ties That No Longer Bind

Emerging market economies have protected themselves from global economic downturns.

Everybody knows that the global economy is becoming more tightly integrated -- that factors ranging from the collapse of ocean shipping costs, to the rise of multinational manufacturing, to the growth of truly international securities markets, have bound national economies to each other as never before. This, of course, must mean we're now all in it together. Booms and busts in rich countries will reverberate ever more strongly through developing and emerging market economies. Right?

Sounds reasonable, but that's not what's happened. The big emerging market economies (notably, China, India and Brazil) took only modest hits from the housing finance bubble and subsequent recession in the U.S., Japan and Europe, then went back to growth-as-usual.

Hence the paradox: Emerging-market and developing countries have somehow "decoupled" from the Western business cycle in an era of ever-increasing economic integration. But the experts have yet to agree on why. Here are the two contending explanations:

Changing Trade Patterns

Just a few decades ago, most developing countries depended heavily on commodity exports -- everything from bananas to copper to soybeans to oil. And trade patterns were pretty straightforward: Rich countries supplied industrial goods in return for those commodities. When Europe, Japan and the U.S. went into recession, their demand for commodities fell, dragging supplying countries down with them. Actually, the impact was even worse than you might expect, since commodity suppliers were hit by the double whammy of falling export volume and falling export prices.

The content of trade shifted in the 1980s and 1990s with the movement of industries that used lots of cheap labor to low-wage economies, mostly in Asia. But most of the demand for the exports of poor and emerging market countries came from the U.S., the E.U., and Japan. So when the U.S. burped, Thailand, Mexico and Chile all got indigestion. (Hey, be thankful I found an alternative to the sneeze/caught cold metaphor.)

Many countries -- notably, the oil and mineral producers -- remain one-trick ponies, heavily dependent on commodity exports. But as the major emerging-market economies have grown bigger and more sophisticated, they've diversified their exports and moved up the food chain with higher-tech products. China, not so long ago the global hub for cheap apparel and shoes, now exports (among so many other things) solar panels and medical equipment. India exports pharmaceuticals and software as well as cotton, sugar and home furnishings. Brazil exports weapons and commercial jets along with coffee, soybeans and oranges.

This has set the stage for a radical shift in who trades what, and with whom.  China and India have become voracious importers of commodities from countries that once looked only to the rich industrialized countries for markets. By the same token, emerging market economies are selling a greater proportion of their manufactured exports to other emerging market economies. All told, EME exports to other EMEs has risen from less than 10 percent of their total to close to 40 percent today. As a result of this diversification, both emerging market exporters of manufactures and developing country exporters of commodities have become less sensitive to the ups and downs of rich economies.

The obvious example is the new synergy between China and the major oil exporters. Growing Chinese demand probably prevented a collapse in oil prices during the recession, and is being blamed by the White House for the current spike in fuel prices  But the impact of the shift -- including the political friction it is creating -- can be seen all over the place. India has resisted US-led efforts to embargo trade with Iran because it gets much of its oil from Iran in return for sugar and rice. Mexico and Brazil recently settled a trade dispute in which Brazil sought to keep out Mexican autos that competed with domestic Brazilian production.

Decoupling has been documented more rigorously. A recent statistical study from the Inter-American Development Bank found that the impact of a change in GDP in China on the GDP of Latin America has tripled since the mid-1990s, while the impact of a change in US GDP on Latin America has halved.

Better Policy Making

One reason emerging-market countries managed to skate through the last recession without much damage is that they used fiscal and monetary tools appropriately to offset the impact of falling demand for their exports. Beijing ordered China's provincial and local governments to spend an extra $580 billion (mostly on infrastructure projects) in response to falling exports to the U.S. and Europe. India's central bank, for its part, sharply cut the interest rate at which banks could tap government funds and directly injected funds into financial markets through other means. Brazil's left-center government used a combination of fiscal and monetary stimulus to end its own economic downturn after just two quarters, and managed a stunning 7 percent growth rate in 2010.

So, isn't that what any sensible government would do? Britain and, arguably, the eurozone, have not behaved sensibly, leaving them vulnerable to a "double-dip" recession. The more important point here, though, is that China, India and Brazil were able to act decisively to decouple from the rich countries' recession because they had built credible records in managing budget deficits and containing inflation.

Equally important -- and more surprising -- developing countries that were heavily dependent on commodity exports also managed to buffer the impact of the downturn. Traditionally, these countries have been unable to resist government spending binges in boom times and have lacked the capacity to borrow in lean times to offset the fall in export revenues. Their fiscal policies were thus "pro-cyclical" in the sense that they exacerbated swings in total demand.

But as Jeffrey Frankel of Harvard has shown, most commodity-dependent exporters have managed to get their fiscal acts together, and were thus able to expand demand with "counter-cyclical" stimulus policies during the last recession. Chile has led the way with a remarkably sophisticated law that largely forces the government to build fiscal reserves when the price of Chile's premier export -- copper -- is high, and allows it to spend down the fund when copper declines. More generally, Frankel argues, developing countries are getting better at buffering export price fluctuations because they are building credible government institutions for managing their economies.

There is no real need to choose between these explanations. By virtue of their size and diversification, emerging market economies have now more influence on the economic fortunes of other emerging-market and developing economies. And by virtue of their improving track records as credible inflation-fighters, they have more capacity to use fiscal and monetary stimulus to stay ahead of global recessions.

This is surely good news. But it does leave a big unanswered question. The big emerging market countries are acquiring the will and the way to protect their own interests during global economic crises. We don't know, though, whether they will have sufficiently broad perspective to step up to leadership roles in managing global crises as their economic power converges with that of the rich industrial countries.