Amid much controversy, Ian McEwan recently accepted the Jerusalem prize for literature, an honour awarded biennially to writers whose work deals with themes of individual freedom in society. On 20 February 2011, Ian McEwan gave an acceptance speech during the award ceremony.

Mayor of Jerusalem, distinguished members of the jury, Israeli and Palestinian and citizens of this beautiful city, visitors to the International Book fair, and Zev Birger, survivor of Dachau, human dynamo, friend to literature and the force behind this fair, I am deeply touched to be awarded this honour, the renowned Jerusalem Prize which recognises writing that promotes the idea of "the freedom of the individual in society."

Ultimately, the quality of any prize can only be judged by the totality of its recipients. The "backlist" of this award is unequalled in the world. Many of those writers you have honoured in the past have long been part of my own mental furniture, have shaped my understanding of what freedom is and what the imagination can achieve. I cannot believe for a moment that I am worthy to stand alongside such figures as Isaiah Berlin, Jorge Luis Borges, or Simone de Beauvoir. I am somewhat overwhelmed that you believe I am.

Since accepting the invitation to Jerusalem, my time has not been peaceful. Many groups and individuals, in different terms, with varying degrees of civility, have urged me not to accept this prize. One organisation wrote to a national newspaper saying that whatever I believed about literature, its nobility and reach, I couldn't escape the politics of my decision. Reluctantly, sadly, I must concede that this is the case.

I come from a country of relative stability. We may have our homeless, but we have a homeland. At the very least, the future of Great Britain is not in question, unless it fragments by peaceful, democratically agreed devolution. We are neither threatened by hostile neighbours, nor have we been displaced.

Novelists in my country have the luxury of writing as much or as little about politics as they care to. Here, for Israeli as for Palestinian novelists, the "situation" - ha matsav - is always there, pressing in, as a duty, or a burden or a fruitful obsession. It is a creative struggle to address it, and it is a creative struggle not to address it.

I would say as a general principle that when politics enters every corner of existence, then something has gone profoundly wrong. And no one can pretend here that all is well when the freedom of the individual, that is to say, of all individuals, sits so awkwardly with the current situation in Jerusalem.

Once I'd decided to come, I sought out the advice of an Israeli writer, a man whom I deeply admire. He was very comforting. His opening remark was, "Next time get your literary prize from Denmark." Some of the previous recipients of this prize have spoken their thoughts in a gathering like this and have upset people.

But everybody knows this simple fact: once you've instituted a prize for philosophers and creative writers, you have embraced freedom of thought and open discourse, and I take the continued existence of the Jerusalem Prize as a tribute to the precious tradition of a democracy of ideas in Israel.

I would like to share with you some thoughts about the form of the novel and the idea of individual freedom, which you have chosen to be the theme of your Prize.

The tradition of the novel that I work in has its roots in the secular energies of the European Enlightenment, during which the private as well as the social condition of the individual began to receive sustained attention from philosophers. A growing and relatively privileged class of readers emerged who had time to reflect not only on their society but on their intimate relationships, and they found their concerns reflected and extended in novels.

In Swift and Defoe, individuals were morally tested, and their societies satirized or judged by means of journeys that were fantastical or based on real accounts; in Richardson we had perhaps the first sustained, fine-grained account of individual consciousness; in Fielding, individuals were granted panoptic visions of a society in the spirit of a benign and inclusive comedy; finally, the crowning glory - in Jane Austen, the fate of individuals were delivered though a new mode of narration, handed down to succeeding generations of novelists - free indirect style, which allowed an objective third person account to merge with a subjective colouring - a technique that permitted the character, the individual in the novel, more room to grow.

Throughout the nineteenth and twentieth centuries, in the works of masters like Charles Dickens, George Eliot, James Joyce and Virginia Woolf, the literary illusion of character and the representation of consciousness were refined, with the result that the novel has become our best, most sensitive means of exploring the freedom of the individual - and such explorations often depict what happens when that freedom is denied.

This tradition of the novel is fundamentally secular - coincidence or human machinations, not God, order destinies. It is a form that is plural, forgiving, profoundly curious about other minds, about what it is to be someone else. On its central characters, high or low, rich or wretched, it manages, by a sort of divine authorial attention and focus, to confer respect on the individual.

The English tradition is just one among many, but it is intimately connected with all others. We speak of a Jewish tradition in the novel - a vast, complex tradition, but still bound by common themes: a sometimes ironical attitude to a god; acceptance of an underlying metaphysical comedy and above all, in a world of suffering and oppression, deep sympathy for the individual as victim; finally, determination to grant to the downtrodden the respect that fiction can confer when it illuminates the inner life.

We find the strands in the existential allegories of Kafka's In the Penal Colony and The Trial; in the sadness and beauty of Bruno Schulz, in the work of Primo Levi as he gave individual voice in the nightmare of the Shoah, that industrialized cruelty which will remain always the ultimate measure of human depravity, of how far we can fall; in I.B. Singer's fiction, which conferred dignity on the cramped lives of immigrants; in different terms we find a parallel theme in Saul Bellow, whose agonized intellectual heroes struggle ineffectually to flourish in a raucous, materialist culture.

Always, the victim, the stranger, the enemy and the outcast, the face in the crowd, becomes a fully realized being by the grace of fiction's magic dust - a dust whose recipe is an open secret - full attention to detail, empathy, respect.

This tradition is vigorously upheld in Israel's literary culture - and right from the beginning of the founding of the state. A recent discovery for me has been S. Yizhar's Khirbet Khizeh, published in 1949 - the luminous account of the clearing of an Arab village during the 1948 war - and of a protest that never quite leaves the throat of its narrator as the houses are demolished and the villagers driven from their land. It is a tribute to an open society that this novella was for many years required reading for Israeli schoolchildren. Khirbet Khizet remains painfully relevant, and the moral questioning lives on.

There are so many writers one could mention, but let me single out three senior figures who have earned the respect and love of readers around the world - Amoz Oz, Abrahim Yehoshua and David Grossman. Very different writers, with overlapping but far from identical politics, writers who love their country, have made sacrifices for it - and have been troubled by the directions it has taken, and whose work never fails with that magic dust of respect, the bestowing of the freedom of the individual on Arab as well as Jew.

In their long careers they have opposed the settlements. They and Israel's younger literary community are the country's conscience, memory and above all hope. But I think I could say of these three writers that in recent years they have felt the times turning against their hopes.

I'd like to say something about nihilism. Hamas, whose founding charter incorporates the toxic fakery of the Protocols of the Elders of Zion, has embraced the nihilism of the suicide bomber, of rockets fired blindly into towns, and embraced the nihilism of an extinctionist policy towards Israel.

But (to take just one example) it was also nihilism that fired a rocket at the undefended Gazan home of the Palestinian doctor, Izzeldin Abuelaish, in 2008, killing his three daughters and his niece. It is nihilism to make a long term prison camp of the Gaza Strip. Nihilism has unleashed the tsunami of concrete across the occupied territories.

When the distinguished judges of this prize commend me for my "love of people and concern for their right to self-realization," they seem to be demanding that I mention, and I must oblige, the continued evictions and demolitions, and relentless purchases of Palestinian homes in East Jerusalem, the process of right of return granted to Jews but not Arabs.

These so-called "facts on the ground" are a hardening concrete poured over the future, over future generations of Palestinian and Israeli children who will inherit the conflict and find it even more difficult to resolve than it is today, more difficult to assert their right to self-realization.

To the humble atheist it seems clear enough - when parties to a political dispute draw their primary inspiration from their respective, partisan gods, a peaceful solution drifts further away. But I'm not really interested here in arguments of equivalence. A great and self-evident injustice hangs in the air, people have been and are being displaced.

On the other hand, a valuable democracy is threatened by unfriendly neighbours, even to the point of extinction by a state that could soon possess a nuclear bomb. The urgent question is Lenin's - what is to be done? And when we pose the question, we are also asking, who is to do it, who has the power to act?

The Palestinians are split, their democratic institutions are weak or non-existent, violent jihadism has proved self-defeating. They have been unlucky in their leaders. And yet many Palestinians are ready for a solution, the spirit is there.

And Israel? Believe it or not, there is an arithmetic to measure the creative energies of a nation. Look to the editions in this book fair, the numbers translated in and out of Hebrew, or to the number of successful patent applications, (astonishing for a small country) or the numbers of scientific papers cited, the breakthroughs in solar energy technologies, the sell-out concerts around the world for the Jerusalem Quartet.

The creative energy index is high and so is the capability. But where is Israel's political creativity? What do national politicians have to compete constructively with Israel's artists and scientists? Surely not the concrete mixer? Surely not the eviction order?

We have all read the documents leaked to Al Jazeera. That was surely not the best Israeli politicians could do, when they succumbed to what David Grossman has called "the temptation of strength" and casually brushed aside remarkable concessions from the Palestinian Authority?

In this context, the opposite of nihilism is creativity. The mood for change, the hunger for individual freedom that is spreading through the Middle East, is an opportunity more than it is a threat. When Egyptians decide en masse to reform their society and think constructively, and take responsibility for their nation into their own hands, they will be less inclined to blame outsiders for all their misfortunes.

This is precisely the time to restart the peace process. The new situation demands bold creative political thinking, not a retreat to the sourness of the bunker mentality, or an advance behind yet more concrete.

After her recent visit here, The United Nations High Commissioner for Human Rights notes that the firing of rockets into Israel from Gaza constitutes a war crime. She also notes that that the annexation of East Jerusalem contravenes international law and that East Jerusalem is steadily being drained of its Palestinian inhabitants.

There are some similarities between a novel and a city. A novel, of course, is not merely a book, a physical object of pages and covers, but a particular kind of mental space, a place of exploration, of investigation into human nature. Likewise, a city is not only an agglomeration of buildings and streets. It is also a mental space, a field of dreams and contention. Within both entities, people, individuals, imaginary or real, struggle for their "right to self-realization."

Let me repeat - the novel as a literary form was born out of curiosity about and respect for the individual. Its traditions impel it towards pluralism, openness, a sympathetic desire to inhabit the minds of others. There is no man, woman or child, Israeli or Palestinian, or from any other background, whose mind the novel cannot lovingly reconstruct.

The novel is instinctively democratic. I gratefully accept this prize in the hope that the authorities in Jerusalem - a twin capital, one day, I hope - will look to the future of its children and the conflicts that potentially could engulf them, end the settlements and encroachments and aspire creatively to the open, respectful, plural condition of the novel, the literary form that they honour tonight.

Ian McEwan is donating ten thousand dollars to Combatants for Peace, an organization that brings together Israeli ex-soldiers and Palestinian ex-fighters. These ex-combatants go about in pairs, talking in public to make the case that there can be no military solution to the conflict.