HEBRON, West Bank—The Hebron city center used to be the commercial hub of the southern West Bank, a serpentine network of lively Palestinian bazaars and thoroughfares. It is now a parade of abandoned buildings whose silence makes the ubiquitous graffiti against their former inhabitants all the more eerie.

As we walked up Shuhada Street, several young Israeli children taunted the former Israeli soldier who was leading us: “Yehuda, you criminal, you will not win.” A veteran of the toughest unit in Hebron and the son of ultra-Orthodox parents, Yehuda simply smiled. He is accustomed to invective since he denounced the expulsion of thousands of Palestinians from this area now controlled by Israeli settlers.

We walked until we reached a checkpoint that the two Israelis in our party were not allowed cross. Beyond it lies the part of Hebron under the Palestinian Authority. The rest of us crossed it, entering another world—a Palestinian town boiling with commercial and social life.

You would be mistaken to think the separation in Hebron was an abuse of power by Israel. In fact, it resulted because just 500 Jewish settlers prevailed, despite opposition from most Israelis, thanks to two factors: an electoral system producing Israeli minority governments dependent on extremist parties that represent 10 percent of society, and, more importantly, the gradual indifference of Israelis focused on other priorities.

Because of the endless political stalemate and their economic prosperity, the minds of many Israelis have drifted away to the future. And the future is a high-tech revolution churning out innovations in medicine and communications. According to the most recent statistics, seed capital investment per person in Israel is 2.5 times greater than in the United States and 30 times greater than in Europe. One young entrepreneur told us how he has patented a method for turning garbage into plastic while an older businessman shared with us his new method for renovating asphalt.

Gush Emunim, the settler movement that began in the 1960s, numbers no more than 400,000 people. To the outside world, their motivation for expanding into the West Bank—including the Hebron settlements and the ones I visited around Yatta where the traditional lives of shepherds and farmers have been ruined by settlers who have sealed off of their wells—is primarily religious.

But for most settlers, the motivation is nationalist or economic. Even the ultra-Orthodox Haredis are more interested in a confessional state than in restoring “Eretz Israel.” The ultra-Orthodox Israelis’ limited participation in the settlements has to do with cheap land, something they desperately need, given their relatively low productivity and the burden imposed on their finances by customs such as buying their children houses when they marry.

Amos Oz, one of Israel’s foremost intellectuals, told me that no more than 100,000 settlers are truly committed. “A decision by the government to remove the settlements, which have doubled since the (1993) Oslo accords, would be met with resistance by a small percentage, something manageable, as former Prime Minister Ariel Sharon proved in Gaza.” What is lacking, thinks A.B. Yehoshua, another renowned public intellectual, “is simply the political will.” The pressure from Israeli society, preoccupied with other priorities, is not there.

On paper, conditions are propitious for peace. Israel’s economy is booming and the Palestinian territories are experiencing a free-market bonanza thanks to Palestinian Prime Minister Salam Fayyad, whose policies have attracted investment. The few barriers Israeli authorities have removed have created lucrative and collegial cross-border exchanges between Israelis and Palestinians.

In 1925, Lord Balfour, the former British foreign minister, spoke at Jerusalem’s Mount Scopus. He invoked a Jewish homeland in which “not only men of Jewish birth but others sharing the common civilization of the world will have reason to congratulate themselves.” What is sad is not how distant reality is from that but how easy it is to imagine it.

The Palestinian boy who led us out of a dangerous backstreet in the Jerusalem casbah; the settler who asked us to mediate between him and Jerusalem Deputy Mayor Yosef Alalu, a critic; the economic elan of the Palestinian territories, and Israel’s mesmerizing entrepreneurship all demonstrated to us the wonders these two societies could achieve together.

“I am very optimistic,” Israeli President Simon Peres told us during a visit to his office. “Abu Mazen,” he mused, calling Mahmoud Abbas by the name Israelis prefer, “only needs to understand that great things don’t happen because you are great; you become great by doing them.”

This apt phrase actually applies to leaders on both sides.