Before I arrived in Israel a few weeks ago, I'd read that Israeli President Shimon Peres had likened Salam Fayyad, the prime minister of the Palestinian Authority, to David Ben-Gurion, Israel's George Washington. So I was intrigued when, on my first night in Jerusalem, the conversation at my Israeli friends' Sabbath table was about the impressive speech Fayyad had delivered to the princes of Israel's security establishment at the recent Herzliya conference.

Fayyad, an American-educated economist (MBA, St. Edward's University, Austin, Texas; PhD in economics, University of Texas) who worked at the World Bank for eight years and served as Palestine's representative to the International Monetary Fund, reportedly had declared his government's objective--two states living side by side in peace and security--and then set forth his blueprint for the unilateral creation of a Palestinian state in spite of the Israeli occupation, as a crucial step toward ending it.

With assistance from former British Prime Minister Tony Blair and US General Keith Dayton, Fayyad had already completed more than a thousand community development projects, formed the nucleus of a Central Bank, invested millions in improving infrastructure, schools, roads, clinics, electricity and water systems. Most impressively (to Israelis, at least), thanks to his newly trained Palestinian security forces, law and order had improved so dramatically that Israel had removed many of its roadblocks and checkpoints, which, in turn, had benefited Palestinian trade and tourism, created jobs, stimulated consumer spending and, according to the IMF, yielded a 7 percent increase in economic growth in 2009.

As part of a six-person delegation from Americans for Peace Now, I would be meeting Salam Fayyad at the end of a week's worth of meetings. But between the night at my friends' dinner table and the day I sat at the prime minister's right in a conference room in Ramallah, I would hear a lot more about him from people who knew a lot more about him.

One impressed observer was Yossi Alpher, an Israeli security maven who spent twelve years in the Mossad, ran the Jaffee Center for Strategic Studies at Tel Aviv University, produced "The Alpher Plan," a detailed blueprint for territorial compromise, and now co-edits the online political journal bitterlemons.org with a Palestinian colleague, Ghassan Khatib. Alpher said he had scant hopes for the upcoming "proximity talks," George Mitchell's projected shuttle diplomacy between Prime Minister Benjamin Netanyahu and PA President Mahmoud Abbas (Abu Mazen), but there were three avenues Israel should take to break the impasse on the peace process: Jump-start the Syrian track. Talk to Hamas. And support Salam Fayyad's state-building program.

In the years since the 1993 signing of the Oslo Accords, huge sums of money had been wasted by the Palestinian Authority, said Alpher, "but Fayyad is now delivering on all fronts--security, economic development, a judicial system, prisons, even a bar code system, and he's wrapping it in a comprehensive program.

"If there is no movement in the peace process, Fayyad, who is both the finance minister and prime minister of the PA, has threatened to go straight to the UN and ask for recognition of the Palestinian state. The problem is, he represents the Palestinian Authority, not the PLO, which is the entity with whom we negotiate. If the PA issues a unilateral declaration of independence, it will be seen as canceling the Oslo Accords [which prohibit unilateral action]."

So what did Alpher think should happen now?

"Mitchell should tell Israel how to help Fayyad. For example, Netanyahu could turn over more territory--Area C [where, under the 1995 Oslo II agreement, Israel has both security and administrative control] could become Area B [where Israel has security control and the PA has administrative control], which should have been done ten years ago anyway--and remove more outposts. In return Fayyad could make more security guarantees and create even more economic solidity."

The next day in Ramallah, we met with three former members of the Palestinian cabinet, each of whom had something positive, if cautionary, to say about Fayyad's work--always with the caveat about Israel being the loose cannon on the deck. Given the famously splintered, often contentious, internal politics of the PA, their constructive assessment of Fayyad's plan was an uplifting sign.

Ghassan Khatib, Yossi Alpher's partner in bitterlemons.org, a veteran of Palestinian negotiating teams dating back to the 1991 Madrid conference and a lecturer at Birzeit University, said that under Fayyad's direction, "the Palestinian Authority has made progress in improving security and public order, and insuring the safety of Israelis. We're making economic improvements.... Israel has reduced the number of checkpoints by maybe a half to two-thirds. This has had a good effect on our lives. But other restrictions remain a problem. Outside of Area A [where the PA has both security and administrative control], anything we want to do--water projects, schools, roads--requires an Israeli permit. Unpredictable delays and some refusals by Israel have made it a problem for our government to deliver services to our people. Israeli military incursions are also a problem--the fact that they override Palestinian security control. And now the deputy mayor of Jerusalem just announced he's opening an office in East Jerusalem to better serve the Jewish population."

Qaddura Fares, who spent fourteen years in Israeli prisons, has been a proponent of the two-state solution almost since he got out. He heads the Palestinian detainees' society and was a close aide and adviser to Marwan Barghouti, the imprisoned Palestinian hero who is widely acknowledged to be a possible successor to Abu Mazen. During our meeting with Fares, he was critical of everyone but Salam Fayyad.

Fares bemoaned the fact that "the Palestinian national movement, as opposed to Islam, has no media, no message, no vision. Our TV channel shows people singing and dancing." He was disgusted with his colleagues at an academic conference in Lebanon from which he had just returned: "I was the only one who spoke about a two-state solution. The rest of them said it may take fifty or sixty years, but Israel will end. I think we have maybe two years left to save the principle of two states." Fares was disdainful of the PA president: "In the five years and two months since his election, Abu Mazen has had no major achievements. When there's a power vacuum, the only thing to fill it will be Islam. That will be a catastrophe."

Fares used his only positive adjective twice when speaking of Fayyad. "His message is good and his vision for creating a Palestinian state is good. But it won't work if Israel won't allow him to do anything in Area C--not even to put up street signs or agricultural buildings." If the Palestinian state fails, said Fares, the only alternative will be the extreme religious groups, "who are in a hurry to be in paradise."

Sufian Abu Zaida is an attractive, animated senior member of the Fatah Revolutionary Council who escaped Gaza when Hamas took over. He's an expert on Israel, a longtime opponent of armed struggle and a PhD in political science. Over strong Turkish coffee, he delighted in describing what he teaches his students at Birzeit University about Zionism and Israel.

"I tell them one reason the Jews have a state and we don't is that they had Ben-Gurion and we had Arafat. Ben-Gurion accepted Resolution 181 [the 1947 UN resolution that divided British Mandate Palestine into a Jewish and an Arab state]. The Arabs opposed it because of Jerusalem [the resolution set aside Jerusalem as a separate body under international protection]. Ben-Gurion told his opposition, 'Our generation can only achieve statehood. Don't ask us for more.' He ordered the attack on the Altalena [a ship bringing in fighters and arms for the Irgun, a Jewish paramilitary organization] to keep his opposition in line, and in '67, Israel won everything anyway. Arafat was a symbol, the father of a people but not a leader. He wanted to stay a fighter, not a statesman. For me, that was a mistake. In 2000, I said publicly that I'm against bus explosions and violence. Now, finally, some believe in nonviolent struggle. In my opinion, we Palestinians committed a lot of mistakes with violent tactics, though Israel committed a lot of crimes, too."

Abu Zaida underscored an inconvenient truth to which others had alluded--that Netanyahu has the power to throw a major monkey wrench into Fayyad's works: "He is doing a great job building our state, but if Israel decides to, they can destroy all that he built. If they do, of course, the one-state solution will rise as the answer to the conflict. More and more Palestinians are talking about one state. After twenty or thirty years, the world won't care what Israel wants. There will be 7 million Arabs. A Jewish minority will be controlling an Arab majority, and that won't be acceptable to anyone."

By the time our group met with Fayyad himself, his image loomed large. But the compact, gray-haired man who entered the ornate government conference room in Ramallah looked more like a corporate comptroller summoned to explain the complexities of an annual report than the great hope of the Palestinian people. Impeccably groomed, with a blue tie, rimless glasses and serious demeanor, he shook the hand of each of us with a tight smile and no small talk. I remembered the headline of a New York Times Magazine article by James Bennet had once called him "the radical bean counter." The radical part, at least superficially, did not fit. Oddly enough, Fayyad's lack of charisma added to his authority. The economist was all business as he immediately launched into the political implications of his much-discussed state-building project.

"Since we're not waiting for negotiations but moving ahead to establish Palestinian institutions, some have inferred that we're not waiting for the political process because we don't want it to proceed. In fact, we're relying on it to end the occupation, but if we're going to have a stable, secure state, we have to build it. The act of getting ready for statehood is not in lieu of the political process, it's a reinforcement of it. We consider this constructive unilateralism, or as Senator Joe Lieberman put it, 'healthy unilateralism.' This wouldn't have been possible three or four years ago because there was complete lawlessness in the Palestinian territories. But now that we've gotten control of security, it is."

"The US can provide financial resources as we enhance our self-reliance and move toward statehood. Israel can enable us in various ways to become self-sufficient. We need them to not put up physical barriers that impede our movement. We need to build schools in Area C. Officials, individuals, farmers--all need roads. We need physical space to be able to operate. Manufacturers need more inventory. The businessman or woman needs clear rules and predictable behavior from Israelis, and no restrictions on commerce. We need to be able to insure our customers on-time delivery, a free-flow of goods like in the US, where you have interstate commerce rules and good highways.

"We need to grow to become competitive, and we can grow substantially. The Palestinian economy is only 3 percent of Israel's. There is huge potential for development, for business-to-business relationships with Israel. But what we're able to export right now is very limited. We can't export our dairy products. Recently I toured a factory in Hebron. Israel won't import what that little factory produces. So the manager put Hebrew labels on the product as if the plant was in Israel. I saw some labels in English, some in Arabic.

"Next week, we're going to break ground on an industrial zone. We're combining government spending with donor support, but we don't want to be reliant on donor aid forever. We need the Israeli occupation to be rolled back, and for them to help validate our improved security by stopping their military incursions, into Jenin for example. They should not send the IDF into Area A. We need to show our people we can have a good security doctrine based on nonviolence.

"The police presence in our towns and villages helps us assert our authority. Some Palestinians have never seen a uniformed Palestinian officer. Imagine the psychological impact of that sight! Our police are not heavy-handed, like a sheriff in the Old West. We spend a lot of time on police training. Our officers help old people cross the street. They gave women roses on Valentine's Day.

"Suppose Israel could be convinced to stop raids into the West Bank and let us handle our own security. Little by little it would help people adjust to something they can see and talk about at their dinner tables. Ours is a gradual, evolutionary way to statehood. Most Israelis are in favor of a Palestinian state, but just 'not yet.' We want to win them over with institutions that are managed responsibly. A Palestinian state is not going to be theoretical or academic forever. People need to see that it's really happening."

Listening to Fayyad, it was tempting to forget the formidable obstacles that stand between his institution-building project and a "really happening" state--the problem of a bifurcated Palestinian leadership; of "facts on the ground," i.e. West Bank settlements and rabidly militant settlers; of Netanyahu's self-aggrandizing right-wing coalition government; of the Judaization of Jerusalem.

"The 1,600 housing units Israel authorized in Ramat Shlomo made international headlines," said Fayyad, about the just-announced expansion plan for an East Jerusalem settlement. "When I met with [US Vice President Joseph] Biden, I told him we have to deal with this kind of thing every day. There are material consequences of Israel acting this way. But if we talk too much about settlements, the issue becomes trivialized. I just talk about a kindergarten. How bad could it be for us to build a little kindergarten?"