Two and a half years ago, a group of Arab leaders decided it was time to try to set aside their political differences and deal with what was ailing their countries: widespread illiteracy, ineffective schools, unemployment, inadequate water and food resources.

So they called for an extraordinary summit meeting to be held in Kuwait City this week. The plan was for the 22 members of the Arab League to agree on concrete ways to improve the lives of their 330 million citizens. Instead, they bickered over how to handle the Gaza crisis.

At nearly every turn, the Palestinian-Israeli conflict remains an obstacle to development in the Middle East. It inflames public emotions, serves as a convenient distraction for leaders unable or unwilling to reform their nations and is a tool in the hands of those seeking to promote their own regional standing, often at the expense of the Palestinians.

“The Arab-Israeli conflict reinforces the puritanical, radical, traditional and also the authoritarian because everyone holds onto what they have and there is no third way,” said Shafeeq Ghabra, a political science professor at Kuwait University. “Basically, this is a region stuck in time, stuck in space and in history and in conflict.”

When the presidents, kings and emirs arrived in Kuwait, they were scheduled to discuss regional cooperation to improve education, ease trade and travel barriers, improve food security and lift their citizens out of poverty. But they were barely talking to one another because of differences over how to deal with Israel’s offensive in Gaza.

“Yes, military occupation is a serious matter that needs to be addressed,” said Amr Moussa, the secretary general of the Arab League. “But backwardness in our societies needs to be taken care of.”

There was a suffocating sense of despair hanging over the Kuwait meeting as the Gaza crisis eclipsed every other issue.

“The Arab ship is sinking,” Mr. Moussa said on the first day of the conference.

The Arab world has been in the same self-defeating fight for decades. In 1975 the Arab League took out an advertisement in The New York Times to celebrate its 30th anniversary. The headline said, “Political, economic and social unity in action.” The text said solving the Palestinian crisis was the group’s “first priority.”

But that headline was as much an illusion then as the headlines declaring that Arab leaders had reconciled their differences after the first day of the conference. The flash point has not always been Israel. But the victim has always been a unified effort to improve regional economic and social development.

Arab leaders certainly have the ability to improve conditions at home, even amid the feuding. In that way, the Palestinian cause can become a useful distraction for authoritarian rulers reluctant to make changes that risk instability, or that might strengthen regional competitors.

The need for regional cooperation rests on data. Prime Minister Fouad Siniora of Lebanon said that the Arab states would need to create 50 million jobs in the next 20 years simply to keep unemployment at current levels. He said Arab universities were collapsing and scientific research was almost nonexistent.

By many measures, the Arab world is slipping further and further behind in its ability to compete globally. Perhaps the single greatest drag on the region, one that afflicts wealthy Persian Gulf states as well as poorer countries like Egypt, is the quality of schools. International trends in math and science among fourth- and eighth-grade students show that in math, for example, among fourth-graders, the bottom four nations out of 36 were Tunisia, Kuwait, Qatar and Yemen. In science, eighth-grade students in Qatar placed second to last.

Since the 1940s, Arab leaders have been promising the creation of an economic union along the lines of what the Europeans have achieved. They have repeatedly said that Arabs should invest in and trade with Arabs first.

They were still talking about that this week.

In Kuwait, there were complaints that the region had failed to coordinate its electric grids, transportation systems and customs regulations. But the Palestinian issue so consumed the meeting they barely had the chance to discuss such matters.

“We have to be aware as Arabs that the absence of an Arab solution to the Palestinian issue also means the absence of continuous progress, major development, sustainable growth and agreement within our Arab world,” Mr. Siniora said at a conference in Kuwait before the summit meeting.

While no one was arguing that the Arab states should stop fighting for a Palestinian homeland, the summit meeting’s participants virtually begged leaders to separate political differences from common economic needs. Many speakers at the conference had said that economic, social and human development could only help bolster the region’s position in its confrontation with Israel. But no one actually offered a compromise on how to overcome those differences.

The sense of urgency in addressing the developmental issues has been compounded by the economic crisis. At the opening of the summit meeting, officials said that Arab countries had so far lost about $2.5 trillion, and that 60 percent of the development projects in the oil-rich gulf had been postponed or canceled.

There is no one who would argue that resolving the Palestinian issue would suddenly produce a united Arab world. But the issue continues to play havoc with agendas and expose hypocrisies.

“We have written many times, ‘If Hezbollah loves the Palestinians so much they want to fight Israel, why can’t they fight to give the Palestinians human rights in Lebanon?’ ” said Mohammad al-Rumaihi, a newspaper editor in Kuwait. But pressure over the issue is relentless.

“The masses,” he said, “their hearts are with the Palestinians.”