Now that Israel has withdrawn from Gaza, leaving Arab governments and their intellectual apologists in the West without a scapegoat, attention is finally turning to the real problems that are plaguing the Palestinian Territories. A consensus is emerging that the next step toward solving problems like Gaza’s 50% unemployment rate would be to open the borders into Israel, a view voiced recently both by the Secretary of State, Condoleezza Rice, and the Quartet’s chief representative, James Wolfensohn. But they, and like-minded diplomats, are missing the point. The chief impediment to Palestinian economic development is not Israel or its border policy. A central barrier undercutting Palestinian development is misguided U.N. policy encouraging dependency over self-sufficiency and a culture of victimization over one of responsibility.

The tendency of the United Nations and Western governments to throw money at the Palestinians does little good if the money ends up in the wrong place. In recent years, Washington has disbursed $100 million a year to the United Nations Relief and Works Agency for Palestinian Refugees, known in the U.N. alphabet soup as UNRWA. Last month, the agency issued an emergency call for yet more money. “The emergency programs which UNRWA is delivering in the West Bank and Gaza are directed at the most basic requirement of allowing people to subsist today in hope of a brighter future tomorrow,” it said.

This request provides a golden opportunity for the White House to re-evaluate its strategy. The international community has long relied on UNRWA to help cure the ills of Palestinian refugees. But writing a check to UNRWA has never accomplished much; the agency has little to show for its budget. It has bungled development efforts even as it has expanded its mandate. Founded in 1948 as a temporary agency to settle Palestinian refugees, it has morphed into the United Nations’ largest refugee operation – even greater than the U.N. High Commissioner for Refugees. UNRWA is the largest U.N. agency in the Middle East.

Rather than solve the refugee problem, UNRWA has exacerbated it. While a refugee is usually defined as a person who lives outside his or her country of residence, UNRWA has embraced a far more expansive definition: any descendant of a person whose “normal place of residence was Palestine” in the two years before Israel’s independence.

Any Palestinian in Gaza or the West Bank would not be a refugee according to the traditional definition, but to UNRWA it is irrelevant that most Palestinians either live in historical Palestine or have become citizens of Jordan. Not even the grandparents of many UNRWA “refugees” lived in the towns to which the agency still promises their return. As a result, UNRWA’s count of refugees has ballooned from roughly 800,000 in 1953 to more than four million today. It counts three-quarters of Gaza’s residents as refugees. Rather than promote settlement, self-sufficiency, and industry, UNRWA embraces welfare and dependency, subverting prosperity along the way.

UNRWA is a liability for other reasons. By granting its employees U.N. immunity status, it undercuts their accountability. Too many UNRWA workers have abused their diplomatic privilege to engage in or encourage terrorism. Television crews have filmed UNRWA employees escorting armed Palestinian fighters in U.N. vehicles. Agency-operated – and, by extension, America-funded – schools decorate their classrooms with flags and banners celebrating terrorist groups. In 2002, the Israeli army uprooted a terrorist network that operated within and around UNRWA facilities. Not only did UNRWA employees fail to report the co-option of their facilities, but three years later the agency has still not held the administrators in question to account.

Israel’s disengagement from Gaza has provided new momentum for peace. Whatever one’s opinion of the efficacy of unilateral disengagement, Israeli Prime Minister Sharon’s actions unilaterally undercut status quo diplomacy. The White House should make a similar clean break with tradition. In June 2002, President Bush declared that “a Palestinian state will require a vibrant economy, where honest enterprise is encouraged by honest government.” If he is serious about bringing “liberty [to] the rocky soil of the West Bank and Gaza,” he should unilaterally disengage from UNRWA. The agency does not have a record to justify its requested 30% budget increase this year, nor does its record justify its existence.

The funds that the United States disburses to UNRWA would be better spent promoting independent Palestinian organizations and private-sector growth. There is no need for an UNRWA middle man. It is time for the president to realize his vision instead of subcontracting it those who stand against it.

This piece ran in the New York Sun on November 14th, 2005