Obama’s Empty Words

If you think Israelis doubt the American president's commitment to peace, try talking to some Palestinians.

RAMALLAH, West Bank — As a general strike paralyzes the West Bank, President Barack Obama's recent visit to the region is a distant memory. "Since Obama left, nothing has changed except for the worse. Settlements have continued to grow, and today we buried another Palestinian," said Issa Amro, a Hebron-based leader of an activism group called Youth Against Settlements.

In Ramallah, Obama told Palestinians that they "deserve an end to occupation and the daily indignities that come with it." But in the wake of the American president's departure, the Israeli crackdown has only worsened. The strike was called to protest the death of Maysara Abu Hamdiyeh, a cancer-stricken Palestinian who died in an Israeli jail cell on April 2. In the ensuing protests over Abu Hamdiyeh's death, Israeli soldiers shot dead two Palestinian youths in the West Bank.

The disparity between Obama's words and the reality on the ground is not lost on Palestinians. While the president's Middle East trip may still be hailed as a diplomatic success in Washington, it is viewed in the West Bank with a mixture of apathy, skepticism, and outright hostility. In Ramallah, the de facto administrative capital of the West Bank, posters of the American president were doused with black paint prior to his arrival. In Bethlehem, some of the U.S. flags hung the night before he visited the Church of the Nativity were burned.

Four years ago in Cairo, Obama made a promise to the Arab and Muslim worlds that he would implement a drastic change in their relations with the United States -- and Palestinians listened carefully. "I thought that a black president, whose ancestors suffered under the reigns of slavery, would come to understand our pain," Amro said. "He did not address our suffering and it became obvious soon enough that the object of his visit was to lend support to the Israelis."

Amro's views are widely held among the Palestinian public. According to a new poll by the Palestinian Center for Policy and Survey Research, Obama's trip actually harmed his reputation among Palestinians: Twenty-nine percent of respondents said their feelings for the president changed for the worse, while only 8 percent said they had a more positive view of the president. The survey also found widespread pessimism about the peace process, with 55 percent of respondents saying they believed the United States would fail at reviving the stalled talks.

Such gloom is the product of decades of dashed hopes. The 20-year long peace process has only delivered Palestinians an autonomous governance structure in the Palestinian Authority (PA), which further entrenched the Israeli occupation of the West Bank and the Gaza Strip. Settlements still haunt the political and geographic landscape, with the number of approvals for new units skyrocketing in 2012 by 300 percent compared with the previous two years, according to the Israeli settlement watchdog Peace Now. Palestinians have watched as construction continued almost unabated ever since Obama took office, with pro forma international condemnations doing very little to put an end to Israel's gradual takeover of West Bank land.

Meanwhile, the economy in the occupied territories continues to limp along, dependent upon dwindling international aid and tax monies withheld by Israel. Political stagnation and financial setbacks led to the largest domestic protests ever seen in the West Bank and Gaza Strip, which at times were beaten back by U.S.-trained Palestinian security forces.

Obama's trip was punctuated by the usual stops a state visit to Israel entails -- Yad Vashem, Mount Herzl, and an Iron Dome missile battery. But his remarks regarding the peace process were anything but ordinary. "Let's not put the cart before the horse," said the U.S. president during his visit's first press event. "If the only way to even begin the conversations is that we get everything right at the outset ... then we're never going to get to the broader issue."

Many Palestinians took that comment to be a reversal of Obama's earlier position.

"When Obama was first elected, he made it clear that settlement building had to stop before we can go back to the negotiating table with the Israelis," said Tami Rafidi, a Fatah member who ran in the most recent local elections. "During his trip he basically told us to forget that position and to go back to talks even as settlements destroyed whatever is left of the two-state solution."

It is this bleak political atmosphere that set the tone for Obama's visit to the West Bank. The day before Air Force One touched down at Ben Gurion Airport, young Palestinians took to the streets of Ramallah, moving toward the presidential compound where Obama was due to meet Abbas the next day. They carried posters that played on his campaign slogans: "Obama: You promised hope and change, you gave us colonies and apartheid."

Looking to capitalize on the president's African-American heritage, Palestinians made various nods to the civil rights movement during demonstrations. In the West Bank city of Hebron, a handful of Palestinians, including Amro, donned masks bearing the faces of Obama and Martin Luther King Jr. while they marched towards Shuhada Street, a segregated area of the city that has been off-limits to Palestinians since 1994, after a settler killed Palestinian worshippers at the nearby Ibrahimi Mosque. The protesters, who were clad in T-shirts bearing King's famous words, "I have a dream," were eventually arrested by Israeli security forces.

Abbas himself even presented Obama with an awkward portrait of the American president with Abraham Lincoln, hoping the analogy between the abolition of slavery and the Palestinians' current plight would sink in.

Though Obama paid lip service to the Israeli-Palestinian dispute, the trip's focus seemed to be on other pressing issues: Syria, Iran, and Turkey. From the outset, Palestinians had no illusions as to why -- out of 50 hours spent between Israel and the West Bank -- less than four were allocated to talking and interacting with Palestinians.

"Obama's trip was merely a PR stunt to put him squarely in the Israel supporters camp," said Sam Bahour, a notable Palestinian-American entrepreneur. "Some might say he was trying to position himself to make a bold step towards peace in the future; I don't buy it. I think the U.S. took sides on this conflict a long time ago, 11 minutes after Israel was created, to be exact. Why would this president change that?"

However, Obama's repeated demands for Palestinians to "recognize that Israel will be a Jewish state" still cause consternation in this community. Such a step would mean shredding the Palestinian right of return to their ancestral homes across the Green Line. Obama is well aware that so far, no Palestinian leader has had enough political clout to do this -- though in official negotiating documents leaked in 2011, it was revealed that PLO negotiators acknowledged Israel as a Jewish state and largely disregarded Palestinian claims to the right of return. Abbas himself came close to going public about forgoing this right in an interview with Israel's Channel 2 late last year, but quickly backtracked after sparking an uproar.

Even if Obama does manage to get the Palestinians and Israelis back to the negotiating table, don't expect the skepticism in the West Bank to dissipate overnight.

"Talking the talk is great, but it doesn't move reality to a better place," Bahour said. "It's high time we recognized that maybe we are looking [for an interlocutor] in the wrong place."

As spring descends upon the Palestinian territories, Obama's tour did little to soothe the Palestinian public's unease. Instead, his time spent attempting to rally the old cast of characters behind one more ill-fated attempt at peace only worked to deepen the sense of frustration -- and perhaps resignation -- reigning over the West Bank today.

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Change We Can’t Believe In

For those still confused: No, Kim Jong Un is probably not a reformist after all.

At an early April meeting of the Supreme People's Assembly, North Korea's version of a legislature, the leadership promoted Pak Pong Ju to the position of premier, once again stirring speculation that it is pondering much-needed economic reforms. Some pundits have speculated that Pak is the Korean face of reform; he was indeed premier during a period of modest economic policy changes in the early 2000s, before reform went into reverse and he was purged. And just like before, Pak heads the cabinet, the political body with the most immediate interest in economic policy.

But Pak's appointment raises a series of questions. Can a country issuing nuclear threats and aggressively pursuing a missile program hang out a shingle that says "open for business"? Can North Korea suspend access to Kaesong, an industrial park run jointly with South Korea, and still claim to seek foreign investment? Will either domestic or foreign firms find any new policy measures Pak might institute credible? For the answer to any of these questions to be yes, the world will be looking for deeds, not just speculation.

The domestic political challenges to reform are the most fundamental issue, and unfortunately the least understood by outsiders. North Korea remains desperately poor; its per capita income is roughly on par with Pakistan's or the Ivory Coast's. The World Food Program estimates that nearly a third of the country is vulnerable to malnutrition. There is a lot of work to do. To succeed, new economic policy measures must ultimately reallocate resources from the bloated military sector to more productive forms of investment, and increase household consumption.

This is no easy task, in part because the military is deeply intertwined with the party and state as a result of Kim Jong Il's "military first" policy. Kim Jong Un and his backers have purged high-ranking military officers. But since succeeding his father in December 2011, the younger Kim has also promoted hundreds of officers, and brought dozens into the Politburo, Party Secretariat, National Defense Commission, and other key institutions. It's unlikely Kim will be able to convince the military to launch reforms that weaken its influence. The military and security apparatus not only influence important policy decisions, but also run businesses that enrich high-ranking officers and their networks. In late March, Kim was shown visiting a military unit that made playground equipment and musical instruments. Are these units going to give up their businesses and operate in a more competitive environment?

For North Korea, the central economic questions center on the relationship between the government, state-owned enterprises, and the private sector. Reform means giving managers more discretion and allowing greater freedom for private actors to invest, hire, and make money. Is the regime OK with an emergent capitalist class? The Chinese lived with it, and if the reforms extend only to their cronies, the regime may be adequately comfortable. Half-baked reforms are better than nothing. But they are also difficult to fix later, as both Russia and China are now learning.

History suggests that North Korean leaders have little tolerance for unleashing market forces. The regime ultimately backpedaled from its 2002 reforms: It opened markets, only to harass and close them when it became uncomfortable with the emergence of potentially powerful private traders. In 2009, in the mother of all policy mistakes, the regime undertook a massive forced currency conversion that wiped out the working capital of major traders (or at least those without inside information). With markets closed, the country experienced hyperinflation as traders and households fled the domestic currency and hoarded commodities.

Surveys Marcus Noland of the Peterson Institute of International Economics and I conducted on Chinese firms doing business in North Korea reveal a pattern that almost certainly also pertains to the domestic market. Two types of Chinese firms succeed in North Korea: those that are large and protected by political connections, and those that are small and can fly under the radar. While this combination is better than having only a sclerotic public sector, the scope for growth is limited at the outset.

In the meetings in early April, the North Korean leadership outlined a new  strategic course: seek to develop nuclear weapons and space technology -- a euphemism for a long-range missile program -- while at the same time focusing on economic reconstruction. But North Korea has a small economy and reforms are unlikely to succeed unless they attract foreign capital, technology, and management.

Who has the nerve to wade into such a setting? The country is now under a complex sanctions regime. The new financial sanctions are only supposed to apply to transactions related to the country's weapons of mass destruction and missile programs. But in an economy where everything is ultimately under government control, it is hard to draw such fine lines and many firms won't risk investing at all.

Potential investors will note that the recent cycle of escalatory rhetoric began in February, while the U.N. Security Council was negotiating a new sanctions resolution. These sanctions will likely be more effective than previous rounds, and the Chinese appear to be putting some restraints on North Korean banks. No matter how well-intentioned North Korean policy statements of economic openness may appear, they are easily reversible. North Korea is -- unsurprisingly -- a difficult place for foreign companies to do business. Even Chinese firms have been embroiled in debilitating investment disputes.

A crucial signal with respect to North Korean intent -- and the likely foreign response -- is the Kaesong Industrial Complex; consider it a leading indicator of North Korean credibility. On Monday Pyongyang said it will recall more than 50,000 workers from Kaesong, and consider closing it permanently. The largest export-processing zone in the country -- raking in about $90 million a year for North Korea--has been turned into a political football. Shutting it down would be a major annoyance for the more than 120 South Korean firms, reliant on cheap labor, that operate there. But for North Korea, the consequences will be much worse. This may explain the regime's caution.

Why should foreign firms bother when so many other locations are welcoming and supportive of foreign investors? Only a few types of firms appear willing to risk it. North Korea's reserves of natural resources are attractive,  and large Chinese firms have signed contracts that are effectively guaranteed by the flow of commodities. A second group of firms are those from countries that are unlikely to take a particularly close look at U.N. sanctions resolutions and lack the complex export and financial control mechanisms (for example, the Egyptian telecommunications firm Orascom, which helped build North Korea's cellular network). Smaller, labor-intensive Chinese firms appear to be doing business, and some South Korean firms have invested in Kaesong, where they are effectively protected by insurance and a kind of mutual hostage game in which both sides are willing to leave the zone open.

But this excludes Japan, Russia, Western Europe, the United States, most South Korean firms, and a large swath of potential investment from other middle-income countries in the region such as Malaysia, Taiwan, or Thailand. The cast of residual characters raises other risks for the North Korean leadership, most notably whether it wants to be an economic colony of China.

In Shakespeare's play Henry IV Part I, a prince claims that he can summon spirits from the "vasty deep," to which a soldier retorts "Why, so can I, or so can any man; but will they come when you do call for them?" Put another way, economic reform and growth are not a function of hortatory statements and proclamations of grandiose intent. Reforms should ultimately elicit investment and effort. There is no evidence of a stampede to North Korea's door.

North Korea does not need to become laissez-faire Hong Kong in order to prosper; it can undertake reforms with its own characteristics, as China did. Indeed, given how distorted the economy is, even modest reforms will yield gains. My fingers remain firmly crossed. But the regime does not seem to appreciate the contradiction in maintaining a huge, threatening military presence while at the same time seeking to assure market actors that the water is fine and they should dive in.

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