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The Daily Planet editorial of Dec. 19-22 invited positive ideas for the future of the Holy Land. Following is a summary of a peace plan which I presented 

at a conference on “war and peace” that took place in London in 1991, and which is still relevant today. 

The heart of the Israeli-Palestinian conflict is the struggle for territory. The remedy is not just simply to divide the land but to also compensate the party that loses what it regards as its rightful land. Even though the pre-1967 boundary of Israel is an arbitrary cease-fire line which does not reflect the historic claims of either side, in fact there is now an international acceptance of that boundary, including by Arab nations, which has to serve as the de-facto starting line. 

The Holy Land should therefore be divided into Israel within its pre-1967 boundary and a Palestinian state in the Gaza and the whole West bank. The 

Jewish settlers in the Palestinian State should then be able to remain provided they pay rent for the land they are using. The payment of rent would serve three purposes. First, paying rent acknowledges that the land is part of the State of Palestine. Second, the rent provides funds that Palestine needs. Third, the rent creates a price for the Israelis holding that land; they will be less eager to hold land if they have to compensate Palestine by paying rent every year they possess it. While many Palestinians would prefer that the Israelis evacuate the West Bank and Gaza settlements, at least if the Israelis pay rent, there will be some justice,since the Palestinians will be continually compensated for not being able to use that land. 

Because Israel and Palestine are mutually dependent and need to use resources such as water jointly, a peace plan will work much better if there is a confederation between Israel and Palestine. For want of a better name, I will call it the Confederation of the Levant, from the french term for the Middle East. 

Arabs who are in Israel would be free to choose to be citizens of Israel, Palestine, or the Confederation. Jewish settlers in the State of Palestine would also be free to choose their citizenship; most would choose to remain citizens of Israel. The problem demographics would be solved by separating citizenship from territory. Palestinian exiles would be free to return to their old locations in Israel, but they would have to be citizens either of Palestine or the Confederation. Israeli Jews would thus be assured that Israel would continue to have a Jewish citizen and voting majority. The ability to be a citizen of the Confederation rather than of Israel and Palestine would provide an alternative if people were unh ppy under either state. The choice of citizenship would also create an incentive for the Israeli and Palestinian governments to avoid being too oppressive. 

The Confederation government would have a parliament. Some of the members would be elected directly by its citizens, while others would be elected by 

the legislatures of Israel and Palestine. The Confederation would have courts to resolve disputes between Israelis and Palestinians, and also control the corridor between Gaza and the West Bank. The Confederation would best be financed from taxes on the land value in Israel and Palestine. There would be no tariffs or other trade barriers between Israel and Palestine. Internationally, the Confederation of the Levant would operate much like the European Union does now. The Palestinian state would not have an army, and gradually, as trust develops, some security and defense services would be shifted from Israel to the Confederation. 

One of the problems of setting up a Palestinian State is that some religious Jews regard all of British-mandate Palestine as having been given by God to Israel. The answer to this is threefold. First, Jews could continue to be live as citizens of Israel in the territory of the Palestinian state, just as Arabs in Israel could be citizens of Palestine. Second, the agreement could have a religious clause stating that title to the Holy Land belongs ultimately to God, and from God to Jews, Christians, and Muslims jointly, with the confederation as trustee. Because some Jews in Israel converted to Islam and Christianity and are now “Palestinians,” their inheritance rights would also be acknowledged. Third, the payment of rent would not imply lost sovereignty, but would be technically a compensation for the loss of other’s traditional and historic occupancy.  

What has been missing in the peace plans and road maps for the Middle East is the concept of paying rent for occupied land. Rent is essential to justice. Rent allows continued residency, but with compensation for exclusion. The tension between the need for a unified state while also wanting separate homelands is solved with confederation. The freedom to choose citizenship, and with the third option of citizenship with the Confederation, creates a competition for citizens and mitigates potential oppression. The taxing of land value by the Confederation turns land to some extent into common property, further reducing the conflict. 

Extremists of both sides will reject any solution that accommodates both sides, but the evidence is that the majority of both sides have sufficient good will to accept a solution that provides justice and leaves both with what is most essential. Israelis want security, and Palestinians want land and an end to the Israeli governmental occupation. Symbols are as important as substance, and the jurisdiction over the West Bank and Gaza, with rental compensation, should provide Palestinians with sufficient justice, so that the violent elements will lose popular support. Then the Israelis can withdraw their troops and take down their security wall, since they will have the true security and peace that can only come from justice.  

Once we recognize and accept that the key to peace is paying rent for land, peace will follow.  

Fred Foldvary teaches economics at Santa Clara University.