President Shimon Peres, we all know, is a man of visions. Some have been better than others. The better ones were those grounded in grim reality - like the project that provided Israel with its ultimate defensive weapon. It could serve as a model for translating seemingly impossible visions into reality. The less successful ones, that translated into costly, failing and even dangerous policies, were those that denied reality - as when, after repeated failures, Peres kept insisting on "developing" the Negev and the Galilee through massive government "interventions"; or when he tried to enforce his dream of a peaceful Middle East by choosing Yasser Arafat's master terrorists as partners and executors. As president, a job not known to restrain the natural hubris of politicians, Peres is beginning to launch a last-ditch effort to achieve formal peace through massive unreciprocated concessions, as he did in Oslo. This would threaten our security again. Peres may end a remarkable, if controversial, career not with the praise his dedication merits but with the ignominy that inevitably overtakes those who stubbornly refuse to learn from their mistakes. PERES'S PROCLIVITY for denying reality was already evident in 1988. In May of that year I wrote a piece in The New Republic called "The profits of peace," based on a February 1988 Post op-ed "An economic answer to the Arab uprising." They dealt with the economic motives for the first intifada and proposed some economic remedies that could help mitigate the conflict. When I subsequently met then foreign minister Peres, he was already well into peace processing. I argued that economic development and prosperity can sometimes be more effective in resolving conflicts than political negotiations. For example: After centuries of bloody conflict, peace was established in Europe not through a political "peace process" but as a result of a Coal and Steel Union that made old animosities irrelevant. Since in the foreseeable future Israel would not be able to accommodate irredentist Palestinian national aspirations, and since the Palestinian political class had a stake in perpetuating the conflict (what else could make their corrupt regime justifiable?) the only way Israel could ease the conflict was by providing Palestinians with better livelihoods, and by treating them with dignity. Through economic prosperity Israel could encourage the emergence of a civil society and of a leadership that would have a real stake in peace. DIGNITY DEPENDED on security of self and of property, and on respect for the individual by the authorities. As the (then) occupying power, Israel had the responsibility to maintain law and order and to treat the inhabitants humanely with minimal bureaucratic harassment (two tasks, alas, that Israeli governments find impossible to accomplish at home). Israel should not have tolerated, as it has, the abuse of human rights by PLO agents and proxies who were terrorizing the Arab population and directing their frustration and anger against Israel. For the masses of Arabs then working in Israel, dignity meant not having to wait many hours in daily security checks. I mentioned the recently invented magnetic cards and suggested that instead of having gruff, exhausted reservists staff the checkpoints, they should be handled by professional security guards. This would probably reduce the waiting time. As for a livelihood, instead of only bussing Arabs in to do menial work in Israel, why not open Israeli markets to their products, enabling them to utilize their relative advantage in labor intensive production, in agriculture, building materials, footwear and textiles to generate economic prosperity and high employment in their own areas? Where competition could harm Israelis, as in agricultural staples and textiles, the government could help secure transition loans for the Israeli producers so they could move to the capital-intensive high end of the market, like the production of exotic and out-of-season fruits, vegetables and flowers, boutique wines, goat cheeses and condiments, high-fashion apparel etc. (the market eventually induced such changes anyhow). PERES WORRIED that this would make the Arabs "hewers of wood and carriers of water." He could not fathom that in a thriving economy people rapidly climb the occupational ladder and that at least some of the skilled and hard-working Arab laborers would soon become independent entrepreneurs, as indeed has happened despite much harsher circumstances. Such humble steps having to do with the daily life and welfare of Arab laborers did not seem to catch Peres's imagination. He wanted to discuss his vision of making the desert bloom through the harnessing of atomic power for huge desalination projects costing billions. Peres's penchant to go for grandiose schemes, while neglecting simpler realities, has become evident recently in his ambitious plans for Galilee and Negev development. Immediately upon his being named the government development czar, Peres resurrected the huge - and questionable - project of connecting the Gulf of Akaba to the Dead Sea and announced a massive government effort to make the Jordan rift area blossom. As if one Negev experiment wasn't enough. Negev and Galilee development needs less vision and more reality. These areas could have been immediately helped by assuring, for example, that a banking monopoly did not choke them by denying small businesses credit. Peres could have also helped by instituting a market-oriented land policy, by cutting impossible red tape and by lowering confiscatory taxes. But for this to happen he must understand dismal economics and not simply indulge in baseless rosy visions.