As President Barack Obama's special Middle East envoy, former United States Senator George Mitchell, learned during his visit to the region, America's efforts at Israeli-Palestinian peace-making are running up against three major obstacles. They will, no doubt, also arise in Obama's upcoming meetings with the region's leaders.

The first obstacle - indeed, the issue that stands front and center today - is the ongoing Palestinian civil war, with Hamas controlling the Gaza Strip in defiance of Palestinian President Mahmoud Abbas' Fatah-led Palestinian Authority. The Palestinians' basic failure at nation-building makes any meaningful peace talks with Israel - let alone an agreement - almost impossible at the moment. With Palestinians unable to agree among themselves on the principles to reach a minimal national consensus, how can peace be established between them and Israel?

Second, with Likud's Benjamin Netanyahu as prime minister, Israel now has a government which is far less likely to be willing - or able - to make major concessions and evacuate hundreds of thousands of Israeli settlers from the occupied West Bank.

Third, and most significantly, the 1993 Oslo Accord between Israel and the Palestinian Liberation organization has until now failed to achieve its aim. Attempts to revive the post-Oslo peace process - the "road map" and the Annapolis process - have similarly failed to achieve more than vacuous declarations and hollow photo opportunities. The causes of these 15 years of failure should be considered, so that Mitchell's mission does not become another stillborn effort.

Both the Palestinians and Israel can easily and rightly be blamed for the failure of the Oslo process. But there is a more fundamental cause at stake, and it should not be overlooked.

The Oslo process tried to build a Palestinian state from the top down: create a Palestinian national authority, hand over territory to it, give it increasing power, arm and finance it, hold elections, all of which would permit a Palestinian state to emerge. Instead, the consequence was a corrupt, militarized Palestinian Authority, with competing security services that proved incapable of providing security. Nor could this authority conduct credible negotiations with Israel or deliver necessary services to ordinary Palestinians.

Two reasons for this failure stand out: the institutional weakness of Palestinian civil society, which lacks the infrastructure necessary for nation-building; and the impossibility of simultaneously engaging in nation-building and peace-making. There is no precedent anywhere in the world that suggests that such a two-tier process can succeed.

A fundamental change of paradigm is needed: the effort should shift to building a Palestinian state from the bottom up, for which there are encouraging signs, even in the midst of the failure of the top-down process.

In the last two years, former British Prime Minister Tony Blair and US General Keith Dayton have succeeded in effective institution-building in three West Bank districts - Jenin, Bethlehem, and Hebron - turning them into the most peaceful areas in the West Bank, with a minimal Israeli military presence. Local authorities were supplied with adequate funding and advice; independent chambers of commerce became the backbone of a local commercial middle class, which is interested in keeping the region peaceful, even absent an overall agreement; local police were trained (in Jordan), and now function effectively as police forces, not armed militias; and business relations with adjacent Israeli regions have been renewed.

This empowerment of an effective local leadership was done with much persistence - and little fanfare. But these nuts-and-bolts projects created - for the first time - the building blocks necessary for effective Palestinian nation-building.

Admittedly, this process will take time and patience. But, until now, it has been the only approach proven to succeed, while everything else has failed. As Blair recently put it, such a bottom-up process may even go hand-in-hand with Netanyahu's goal of an "economic peace," though it would eventually have to go beyond it. That such an approach would have to include a total halt to Israeli settlement activities goes without saying. If carefully crafted, it may even be implicitly accepted, albeit without much enthusiasm, by the Israeli government.

The Oslo process has failed; an attempt to revive it - say, by way of the Arab Peace Initiative - will merely bring into the open all of the existing disagreements between the two sides, and will not overcome the Palestinian failure at nation-building. After all the breakdowns in efforts to create a Palestinian state from the top down, only the old-fashioned way - from the bottom up - remains viable.