THERE IS now an almost surrealistic disparity between what the overwhelming majority of Palestinians see in their present situation and what U.S. and Israeli policy-makers and Western editorialists see. This gap was starkly displayed in two side-by-side articles in the Dec. 3 issue of the New York Times. One headline read "Support for Arafat in Gaza Replaced by Wide Enmity;" the other was "Rule by Palestinians Improving, U.S. Says."

Can this gap be explained by saying only that the Declaration of Principles (DOP) signed by Israel and the PLO on the White House lawn on Sept. 13, 1993 has been imperfectly realized, that in time a real peace will develop? No, most certainly not. The declaration was in fact scripted to assure Palestinian dependency, disorganization and perhaps even civil war on the one hand, and, on the other to prolong by other means Israel's military occupation of the West Bank and Gaza, as Israeli commentators such as Israel Shahak, Haim Baram and, less explicitly, Danny Rubenstein, have acknowledged.

Celebrations of the U.S.-sponsored "peace process" in editorial commentary have generally ignored the worsening lot of Palestinians everywhere and the expansion of Israeli settlements. And so the more Yasser Arafat's unpopular repression on behalf of Israel increases, the better a "peace" it is from the point of view of the governments of the United States and Israel, both of whom have historically opposed Palestinian self-determination.

Ironically, however, most Palestinians and Israelis are now exhausted by the futility of conflict, and in various ways have expressed their willingness to live as neighbors in two independent states. Yet neither Israeli Prime Minister Yitzhak Rabin nor Arafat has had the courage to let this vision of mutuality and equality guide their actions. They opted instead for a cowardly and protracted "interim" arrangement that got them accolades for "peace" without any change in their real situations. Many Jewish liberals who have long been troubled by Israel's occupation policies, have convinced themselves -- despite the facts -- that all is well, and that Arafat is now their only answer to Palestinian needs.

The genius of the declaration was that Israel caught an isolated, bankrupt and desperate PLO leader in a dilemma whose resolution could have been easily predicted. Having reviled Arafat for the 20 years during which he really represented his dispossessed people's national goals, Israel suddenly offered him an interim settlement that would personally give him limited municipal authority over Gaza and Jericho, with his own police force and the "right" to deliver services to Palestinian residents. Arafat's total marginalization as a result of his catastrophic misjudgments and failures (his alliance with Saddam Hussein being only the latest) made the Israeli offer attractive. He accepted.

For Israel and its Western supporters this was an almost unimaginable coup. The interim settlement left Israel free to do what it wished in Jerusalem, which was seized during the '67 war, illegally annexed afterward and vastly expanded to cover 25 percent of the West Bank. Everything designated a "final status" issue was postponed for five years. No limits were placed on additional Israeli settlements, expropriations, the number of settlers or water use. Israel retained physical control of land, borders, internal and external security as well as the well-being of the more than 300,000 settlers. The PLO recognized Israel's right to exist in peace but received no reciprocal recognition from Israel or even any statement as to what exactly its borders are. The Palestinians, of whom there are 6 million in the world, were denied the right of return or compensation to the more than 50 percent of Palestinians who live outside historical Palestine as stateless refugees. In the subsequent Paris and Cairo agreements Arafat gave up still more.

Above all Arafat is now held responsible to Israel for order in Gaza, relieving Israel of a headache and turning him into Israel's man in the eyes of his people. As Israeli commentator Meron Benvenisti put it, despite "the lofty phraseology, deliberate disinformation, hundreds of pettifogging sections and subsections, appendices and protocols {of the May 4 Cairo agreement}, one can clearly recognize that Israeli victory was absolute and Palestinian defeat abject."

Arafat's capitulation saved his own skin for a time, but also converted him from being the leader of his people's quest for independence into Israel's Buthelezi, or the administrator of a Bantustan, or the head of a kind of Vichy government.

For their part the Israelis have reneged on the schedule they agreed to on the White House lawn. "No dates are sacred," said Rabin in disregard of the dates agreed on in the Declaration. Gaza and Jericho are 60 miles apart, yet the free passage between them promised by Israel has not been granted. The depredations of Israeli military rule continue all over the territories, with torture "systematic," according to Human Rights Watch. Houses have been sealed or destroyed; arrests and summary detentions are the rule of the day. Elections have been postponed again and again, although I fail to understand how "free and democratic" elections could be held in the presence of an Israeli occupation army. And meanwhile unemployment in Gaza is about 60 percent, the streets are as filthy as ever, hope (like food) is in short supply, and Israel can open or shut the borders at will. At least 5,000 Palestinians sit in Israeli jails.

Still, the U.S. government thinks that the lot of Palestinians is "improving" under such conditions. When President Clinton was in the Middle East in November he said nothing about the suffering of Palestinians and indeed seemed obsessed, Israeli-style, with "terrorism," as if everyone who opposed his peace was only violent, fundamentalist. He seemed totally unwilling to comprehend that for all its unsavory qualities, Hamas (formerly encouraged by Israel to undercut the PLO during the intifada) is a protest movement using terrorism to express the justifiable frustration and anger of almost the entire Palestinian population.

Not only does the U.S. government continue to funnel in $5 billion annually to Israel, its policy has become even more one-sided in recent years. Under the leadership of a cipher-like secretary of state, a small group of totally pro-Israeli officials really run Middle East policy, chief among them Dennis Ross and Martin Indyk. The latter is a former Israeli lobbyist and former head of the Washington Institute of Near East Policy, an offshoot of the lobby. Ross is a Soviet expert and resident scholar at the institute. (Last week, Indyk was nominated to be the next U.S. ambassador to Israel.)

Whereas the Bush administration had vocally opposed Israeli settlements as an obstacle to peace, the Christopher-Ross-Indyk team at the State Department refrains from commenting on the settlements on the grounds that the issue will have to be settled later by the Israelis and Palestinians. Nor does the Clinton State Department take a disapproving position on Israeli building in East Jerusalem.

More worrisome than ever, the core of U.S. policy has become a fixation on Israel's security, which, to my mind, inevitably entails Arab subservience. Americans who recoil from the notion that their country's foreign policy requires the subservience of others should understand exactly how the protection of Israel's security translates into reality for non-Jewish residents in Israel and the occupied territories.

In the first place, alone of all people, Palestinians are supposed to be content with the denial of their right to self-determination. Secondly, Israel's vastly superior military can set up check points and barriers at will, whereas Palestinians must go through endless interrogation and search, while Jewish settlers wander about with complete freedom. Third, not only do Palestinians have to go on living through the rigors of a 28-year-old military occupation regime, Palestinian leaders such as Arafat are required to submit to unending declarations of their concern for Israeli security.

With what poor results! Arafat's acceptance of these terms has now made it impossible for him even to hold a meeting of the PLO Executive Committee. He has been unable to convene the Palestine National Council. Not a single constitutionally legitimate Palestinian body has gone along with any of his decisions or agreements with Israel.

As the peace process unravels in "autonomous" territories, many Palestinians now feel that non-cooperation with the Palestinian Authority is the only responsible political position to take. Arafat, they surmise, will soon outlive his usefulness, even to Israel and the United States.

Yet without seriously addressing the underlying substance of the Palestinian case, no peace can ever really be possible.

What is to be done? A curious feature of Arafat's presence in Gaza is that the organization he theoretically still heads, but does not actually lead, the PLO, still exists as a diaspora but nevertheless national organization. It has offices at the United Nations and in a large number of countries. Along with the dormant Palestine National Council, these organizations are now gradually coming to life again and are gradually becoming rallying points for the more than 2.5 million exiled Palestinians abandoned both by Arafat and the Declaration of Principles. Arafat himself is slowly losing support from the community. Successful Palestinian business people all through the Middle East, Europe and North America are drawing back from him, unwilling to invest in his autonomous domain, disillusioned and angered by his methods. The same is true of competent Palestinians whose skills as engineers, teachers and doctors will be needed in any future state, and who are uninvolved in what is happening now.

I think all these diaspora Palestinians must now galvanize the PLO into re-asserting our claims as a people: self-determination, the total independence of the territories, and addressing in a humane and practical way refugee claims for repatriation and/or compensation. Arafat must be forced from office as a result of orderly processes that exist within our only constituted national body, the PLO. He must be voted out by a democratically re-assembled Palestine National Council which elected him in the first place. This process may be beginning.

The Oslo accord, it is quite likely, will become unworkable, and so a reaffirmation of willingness for real peace with Israel must be made, and so must its foundation: mutual recognition of the national rights of both peoples in two independent states. If in the territories Palestinian elections are held, every effort must be made not to return Arafat to power, although all election plans he has approved are guaranteed to make him president for life. This idea must be disallowed and discredited before the elections.

The looming danger is that Arafat's rule, if perpetuated, will produce assassinations, chaos and civil war. Hamas, Islamic Jihad, and the various Damascus-based guerrilla groups cannot now accomplish the change of leadership that is needed, although the likelihood of more cruel bloodshed is extremely high.

Our two assets are the capacity to speak out, and to organize courageously in resistance: These served us well in the intifada. They must be marshaled in as widespread a way as possible so that Arafat, and the Israelis who have invested so unwisely in him, realize that the real future for two people in one land must be a different, more equitable and just one.

Edward Said is a professor of humanities at Columbia University and a former member of the Palestine National Council.