The mirage of state building

by Rima Merriman

In occupied Palestine, you hear the mantra of "capacity building" over and over again, wherever you go. There is high unemployment, but there is also a rising demand for skilled workers, and those workers are in short supply.

Palestinians have always put a high premium on education. However, the economic vagaries imposed on them by the occupation before the second Intifada made it very attractive for young men to quit school and cross over to Israel as labourers. Compared to what teachers, engineers, doctors, lawyers and other professionals in the West Bank and Gaza earned (if they were employed at all), a labourer working in Israel made a handsome wage.

This arrangement is now over and the talk is all about state building. One piece of the puzzle of state building is "capacity building" - capacity in terms of human resources and in terms of institutions. Many people in the West Bank and Gaza are working on projects funded by the European Union or USAID. These funds come with conditions that are meant to transfer knowledge about institutional construction and reform and thereby to create local demand for institutions.

Will this conditionality work? According to Francis Fukuyama, in his latest book "State Building: Governance and World Order in the 21st Century", not only is the chance of this conditionality working slim at best, it actually produces the opposite effect: "The international community is not simply limited in the amount of capacity it can build, it is actually complicit in the destruction of institutional capacity in many developing countries."

Marginalising the capacity of local governments happens as a result of the donors' contradictory objectives - to increase capacity on the one hand, and to provide the services themselves on the other, with the latter objective almost always winning, because working through the local structures (and so increasing administrative capacity) is inefficient, slow and prone to corruption.

Historically, the way state building occurs is after "sufficient" local demand for institutional reform has been created and the brief window for reform has been seized. It could happen after an external shock, such as Sept. 11 for the US, which prompted the formation of the Department of Homeland Security - the first new Cabinet-level department to be established in the US since the 1970s. Or it could happen through war, as it did for Germany and Japan after their defeat in World War II and after their occupation by the US - but only because both countries had strong preexisting bureaucracies that were not completely purged.

Successful state building could happen if developing countries import and adapt foreign models out of whole cloth, as Turkey did in the 19th century and South Korea and Taiwan in the 1960s.

But even if "sufficient" local demand for institutions is created, "territories" under occupation like the West Bank and Gaza do not have the wherewithal to seize that brief window for reform. Imposed conditions by Israel and by international donors meant to create institutions and also meant to make sure that no funds reached the hands of "terrorists" have simply resulted in the withholding of aid where it was sorely needed. A people under occupation have little leverage. Yasser Arafat's sovereignty was a limited and curtailed "authority". He saw the limited power and the bureaucratic structures he constructed with their severe problems of internal governance as a liberation movement that could not afford democracy. He understood that every new institutional arrangement produces winners and losers and that the losers never fail to fight in order to protect their interests.

True, the occupied territories now have a duly elected president (as was Arafat). He has a Cabinet and ministries with nice stone facades built with donor money for donors to visit, but there is yet no state over which this machinery has sovereignty.

It's all very strange. Pull the curtain away and you will find the Wizard of Oz. Worse than that, even if a state is eventually created on the patches of land that Israel is willing to relinquish here and there, it would take a miracle to make it sustainable. Israel is making sure that Arab Jerusalem and its Palestinian environs will be gone from the equation, so the miracle will have to manifest itself in Abu Dis, rather than Jerusalem, and in outlaying areas dotted by hundreds of Israeli settlements turned into industrial zones for the benefit of Israelis. Some of these Palestinian areas and their people (sitting patsies) are already completely walled in. What a travesty!

Without a miracle, the odds are completely against the successful emergence of a Palestinian state with strong state institutions. Economists no longer believe, as they did in the early 90s, that markets are self-organising.

Transitional or emerging markets badly need strong and efficient state institutions with the administrative capacity not only to increase economic well-being but also to take care of the country's social welfare. That means clearly defined positions and conditions of employment in the state bureaucracy, increased managerial autonomy to permit flexibility and creativity and a system of accountability. More than that, it means internalising these lessons and truly implementing them. Institutional reform must not be a lip-service response to a conditionality imposed from outside.

A million here, a million there, "projects" funded by donors are in the works on the West Bank and Gaza. Very few of them, if any, are run by local government, because local government has a long, long way to go and everybody is in a hurry. The window for "peace" is the size of the space between the concrete slabs of the wall Israel has erected in its land grab - very narrow. The window for reform is just as narrow. NGOs are going around in circles, busily writing logical frameworks, tabulating outputs and verifiable indicators. But no one really has any idea how to promote governance.

As Fukuyama put it: "Since we do not in fact know how to transfer institutional capacity in a hurry, we are setting ourselves and our supposed beneficiaries up for large disappointments."

This article was published in the Thursday, March 24, 2005 edition of the Jordan Times. It is used here with permission.