What ruined everything was the Zionist project, which funded land purchases for farms and then only allowed Jews to work on those farms. Essentially, excluding the majority muslim and christian population from an equal opportunity to work.
These exclusionary measure created tension which resulted in the armed and terroristic attacks by the Zionist groups the Stern Gang and Irgun. (https://www.britannica.com/topic/Stern-Gang)
So yes, they could have lived in peace and were living in peace, but Zionism...
If the majority between the river and the sea wanted a pluralistic, democratic and secular state it would have happened a long time ago. The status quo is what the people of Israel want (revealed preference by their votes). And Palestinians don't get a vote.
Gaza also has a political system - Hamas was elected, same as Likud. I'd say it's probably not working right now, for obvious reasons.
> The status quo is what the people of Israel want (revealed preference by their votes). And Palestinians don't get a vote.
Politics is rarely that clear-cut. The electorate was shaped by their environment and rarely sees what has been painted as impossible.
Hamas was elected almost two decades ago, and Palestinians in Gaza have been occupied ever since by Israel. Yes, they do have a political system, but said political system is not democratically driven. It is driven by the Israeli occupying forces, in ultimate control by Israeli voters. Both the military administration, Israeli politicians, and Israeli voters show no desire to change this.
Let the pot boil long enough, it will overflow.
Oh yes! Still, that's an untenable position. Israel was created so that all Jews could have a state of their own because of the suffering inflicted upon them. There really is no going back on that.
For me, a single democratic and secular state, with a legal framework that protects everybody's rights equally and fairly would be the best possible solution, but that would be a multi-generation effort (about 80 years too late, BTW).