Now that Arafat is dead, it’s at least possible that Israel and the Palestinians will recommence negotiations. One important question is how the US can best try to encourage peace. During the election campaign, both Kerry and Bush tried to make clear their unconditional support for Israel. However, on one reasonable reading of the situation in the Middle East, promises of unconditional support may not be in Israel’s best interests.
It’s quite clear that there is profound distrust between Israel and the Palestinian Authority – neither is prepared to believe promises that the other makes, given their previous behaviour, and clearly conflicting interests. While there is a deal out there in which both sides would be better off than in the _status quo_, both Israel and the Palestinians would prefer maximalist solutions in which, respectively, Israel won completely, or the Palestinians won completely. In political science jargon, this means that the two sides have enormous difficulty in making credible commitments to each other. It’s hard for one side to make promises that the other side will believe, given their clashing interests over how the problem should be settled.
However, according to basic economic theory an actor which has difficulty in making credible commitments can solve this dilemma by delegating authority to another actor, which doesn’t have the same interests.[1] In other words, problems of distrust can be overcome if there is a genuine honest broker, who can either take the key decisions itself, or else act to punish the other actors if they don’t behave honestly. If the Israel-Palestine problem is a problem of this sort (and this surely is at the least, part of it), then US signals of unconditional support for Israel may actually not be in Israel’s best interests. Israel would be better able to make a bargaining offer that would be accepted if the US was credibly prepared to sanction it for breaking any future commitments. That way, the Palestinians could put their trust in whatever commitments the Israeli government made, helping facilitate a deal. Of course, this would only solve half the problem – the Palestinians don’t have any obvious equivalent to the US (an actor who is potentially able to underpin their commitments). Nor is it likely that the US will be willing or able to play this role credibly anytime soon. Still, it should give some pause for thought to those who think that unequivocal US support for Israel’s position regarding the Palestinians (regardless of whether that position actually makes sense or not) is necessarily a good thing for Israel.
fn1. Thus, for example, if you are a government trying credibly to commit to financial markets that you won’t have high inflation despite your incentive to prime the pumps in order to get re-elected, it makes sense to delegate decision making authority to an independent central bank with relatively straightforward monetary targets.