Israel-Palestine - the key is economic, the barrier is religious.

The Israeli-Palestinian talks seem destined to collapse. The ostensible reason for the collapse is Israel's refusal to block the resumption of construction of "settlements" on the West Bank and in east Jerusalem. But I seriously doubt that this is the case. This is not the essence of the differences between Israel and the Palestinians.

As I have stated many times, Israel did not create the Palestinian problem and Israel cannot solve it. The essence of the problem is the existence of a Jewish state in the heart of the Middle East. Israel is an affront, an unacceptable insult, to both Arab national aspirations/self esteem and religious precepts (it is a Muslim imperative that no infidel may rule land once ruled by a Muslim governmental authority). In the last few decades it is the latter that has become much more important. But both are really smokescreens in the service of realpolitik. The Arab dictators of the area, and Arab and Muslim dictators further afield, use the "Palestinian cause" to deflect attention away from their own corruption and despotic rule - for their failure to modernize and liberalize their economies. The Palestinians are pawns in the hands of outside rulers who are dictators, religious fanatics, or both. The Saudis top the list. A true peace with Israel would deprive them of this.

Of course, it does not help matters that Israel is so monumentally successful and a democracy to boot. For those convinced that Israel is the problem, this simply multiplies the insults by widening the economic and cultural-political gap. By a curious stretch of logic, if Israelis are doing so well it must be because the Palestinians are suffering so much.

But, not all Palestinians are so bitter or so naive. Many see in Israel a mirror of their own possibilities, and the West Bank economy is now growing rapidly, in part owing to employment supplied by the expanding settlements.

For the record: I condemn the use of public money for the construction of any private buildings or settlements wherever they may be - in Palestine or in New Jersey. And I condemn the religious fanaticism that claims land on the basis of a biblical promise and uses political power to divert funds to its cause. There should be no doubt where I stand on this. But, as I understand it, these are not the central objections to the settlements by those who blame Israel. Rather they see any Jewish settlement as a form of "occupation" and seem to think that if only the "occupation" could be ended, peace could be achieved. This view is as dangerous as it is wrong.

The settlements are a mixed bag. I don't know how much state funding lies behind them, but all-in-all the settlers constitute a population of about 300,000 - a tiny minority among the 2.5 million Palestinians. By all accounts they are industrious and productive. If they are financed by the Israeli taxpayer (or international Jewish donations) they are a gift to both the settlers and the Palestinians. In any future Palestinian state, a peaceful neighbor with Israel, the status of Jewish people living there will have to be determined. Will Jews be able to live as peacefully in Palestine as the million Arab Israelis do in Israel. If not, why not? And if not, then that is no real peace. Assuming they are, and depending where the borders are drawn, the settlements would indeed be valuable economic models for the new state. A rational approach to real peace would not be to walk out of peace talks on this account.

If there is any hope for real peace, I believe it will have to be based on shared economic interests. The Palestinians constitute a huge labor force and a huge potential local market for both Israel and future Palestinian industry. Israeli ingenuity and technology could prove invaluable. There is an unlimited potential for mutual advantage - a substantial "peace dividend." But for this to even have a chance, religious fanaticism on both sides will have to be controlled.

Economic prosperity depends largely on economic freedom. As China and the thriving economies of the UAE illustrate, a large measure of economic freedom can exist within a politically restrictive state. Private property, honoring of contracts, the absence of price controls and oppressive economic regulation, a stable financial system, etc. are all necessary for economic growth. Political freedom, though not necessary, is also helpful in this regard. Of course, freedom is an overriding end in itself. Economic growth is of little use if the options available to consumers are severely limited, if what they can read and say are restricted. And that is why oppressive states that experience economic growth also experience tremendous pressure for political liberalization. The prime example of this is Chile.

In fact economic growth does best in liberal democracies - economies that are "democratic" in the broader sense of that word - not just politically in the sense of being able to elect representatives, but democratic in the sense of being open, free societies whose citizens possess what we understand as civil liberties, among which the most important is freedom of speech. And these liberal democracies are also secular societies, where religion is a private matter and everyone is free to practice her/his religion as long as s/he does not attempt to forcibly impose it on anyone else. There is no official religion and religious precepts ideally do not govern public life - have no expression in law.

All of the states in the Middle East have official religions. The case of Israel is ambiguous. It is the freest society in the region (and one of the freest in the world) and it affords its citizens many civil liberties. But on the matter of religion, there are violations of basic individual freedoms. The law-of-return discriminates in favor of Jews in matters of citizenship, and certain civil functions are monopolized by religious authorities - owing to the power of the orthodox Jewish political parties in the proportional representation system of election. So, marriage and funeral ceremonies must be performed by the recognized religious authorities - in the case of Jews this is the orthodox Jewish establishment; and intermarriage is effectively ruled out - interfaith couples have to leave Israel to marry!

On its face this is unacceptable to anyone who believes in civil liberties - which includes most Jews worldwide. But the politics of the situation has proven to be an immovable barrier to its reform. Breaking the monopoly of the religious right-wing to make room for more liberal denominations and, importantly, to allow for civil marriages, has been impossible. This disturbs me, but I am even more worried about another trend and what it may portend.

Israeli demographics tracks world trends. The piously religious families are the ones having lots of babies, while the secular liberals have very few. This trend will, not so gradually, erode the secular liberal component of Israeli society. In addition the worldwide renaissance in fundamentalism has affected Israeli youth as well. Religious identification in Israel is at an all time high. And because of the right-wing religious monopoly this means right-wing religious affiliation. Israelis living abroad in North America often affiliate Conservative of Reform, but no such alternative exists in Israel (these movements are tiny in Israel).

The religious population in Israel has posed numerous challenges, most of which have been successfully met by palatable compromises. Most mundanely, the religious communities receive huge subsidies so that their young men may study in Yeshivot. They also receive exemption from army service - though it is true that more and more soldiers are in fact religiously observant - it is only the anti-Zionist branches of the religious right to whom this exemption mostly applies. Jewish religious holidays are national holidays - but for most Israelis this means a day at the beach or out with the family. There have been political initiatives to try to ban such activities, most especially the driving of cars during holy days, but to date Israeli law has has upheld the principle of individual civil liberty in this regard. With increasing political power going to the religious establishments who knows how this will play out in the future?

So, projecting both the demographic and cultural trends one sees an increasing right-wing religious influence that could prove inimical to both Israel's own economic development and to the prospects of a spontaneously developing peace. Leaving it to the religious fanatics on both sides, it is easy to see, would mean continual hostility as the conflicting claims of each in matters of belief and land are simply irreconcilable. The religious constituent in Israel is the most belligerent when it comes to foreign policy.

True, a Jewish theocracy is likely to be more tolerant than a Muslim one - but were I a Muslim I would prefer neither, and moderate Muslims clearly will not and should not accept either. Both Jews and Muslims have rich histories of pragmatic commercial achievement and it is this, rather than their respective religions, that holds the greatest hope for a spontaneous evolution of peaceful coexistence. Once substantial trade and economic interaction exists the official recognition will follow. But for that to happen religious fervor on both sides must be constrained.

I don't know how strong the current momentum for mutually advantageous economic development is, but this clearly should be a conscious component of any intelligent understanding of the situation and any sensible foreign policy toward it.