I'm not an optimist. I strive to be a realist. I would like to recognize where people are coming from, what's the concern that they have, in their heart of hearts; how is that translated into action, and expressed in beliefs and deeds; what contradictions and conflicts lurk there. I lived in Israel between 1970 and 1972, age 12-14. I recommend to every American to live in a foreign country for some significant period of time; it does one a world of good, to gain perspective by seeing one's own country, and one's own culture, from the outside.
To understand what's happening in Israel, one needs to study the history of the Jews, the history and culture of the Arabs of the region, and of course, European and American values and realpolitik. I think that's a bit beyond the scope of a blog post. There's no question but that one can thank Adolf Hitler for the existence of the state of Israel. Wherever Jews have not been persecuted, there they have flourished and melded with the local culture, bringing the benefits of their own love of learning and justice, and aspirations to a better life for their families and communities. Modern Germany was an example of the integration of Jews into a modern culture: note the many prominent and highly accomplished German-Jewish artists, musicians, writers, and thinkers in the late 19th and early 20th centuries, when laws against Jews were disappearing. Discussing the rise of Nazism is also beyond the point of this blog post; my small shrug in its direction will have to suffice. The point is that because Jews were persecuted so severely they sought a "homeland", as many other people have done. The 19th - 20th centuries are full of examples of people identifying themselves as a nation and striving to become unified political entities, usually accompanied by a stirring narrative about oppression. It shouldn't be a surprise to anyone that Jews looked to resettle in their ancestral home; that identity has been a consistent part of the practice and study of Judaism for thousands of years.
First major problem for the State of Israel: what is the status of people who were already living in the territory, who are not Jews? If Israel is a Jewish homeland, then are non-Jews, by definition, permanently second-class citizens? I suppose that is the basis for the accusation that Zionism is apartheid in nature. This is an ethical question, and one can only take "We're gettin' ours, too!" just so far when you're confiscating someone else's property and rights. In other words, ressentiment isn't a sufficient justification, once you've whined about injustice and finally gotten what you want. I don't think that the Israeli government has reconciled this problem into any kind of coherent or fair policy. One frequently see their Supreme Court at odds with other political forces because of this problem about what constitutes justice. It's a problem that's mostly resolved in the U.S. (except in regards to the questionable status of illegal immigrants.) (Although, perhaps I should say that the problem of social justice is a constantly ongoing matter, where the interpretation of the Constitution is a reflection of the Jewish interpretation of the Torah.) Once you make a particular type of person a specially privileged person, you open a can of ethical worms. Either, then, you stand with the right wing, and say that existential threat warrants your discrimination (hawks) or you say that God loves you best and promised you this land (ultra-Orthodox). If you know something more about how Israel has managed this problem, please let me know. I doubt anyone can say this isn't problematic. On the other hand, Israel is far from unique on this score. An examination of the policies of inclusion and citizenship in many other countries would be illuminating -- hint: Japan, and many others.
Israel's major mistake (and not just "major", but perhaps "calamitous") was in not negotiating a peace-for-land deal for the West Bank shortly after occupying the West Bank and Gaza/Sinai etc. as a consequence of the 1967 war. Perhaps they tried, I don't know the history. Perhaps Jordan denied responsibility for the West Bank. At least Egypt presented itself as a negotiator for the Sinai Peninsula, although it, like Jordan, denied responsibility for Gaza. Were these cases of manipulation of Palestinians, to increase their suffering, to demonstrate to the world the monstrosity of Israel, to maintain hostilities over borders? I don't know. Certainly someone has studied/is studying the history of this question. The occupation and expanding creation of settlements in those territories has been the result of a convergence of fears and messianic beliefs, and those fears and beliefs have created a right-wing voting bloc that has dominated Israeli politics despite Israel's well-educated, socialist roots, which is the core of the left wing. The large influx of Eastern European and Russian Jews has not helped the Liberal parties. That's a separate but related topic. Israel's fears and oppositional self-identity has reflectively spawned a much stronger enemy in terms of international recognition of "the Palestinian People." Really, you'd think that Jews would have more insight about what happens when one puts people into ghettoes: in effect, their identity becomes stronger, even while one believes that one is protecting oneself from a dire influence.
I see a strong parallel in U.S. politics and Israeli politics. On the right is a convergence of fear-mongering and belief in divinely-guided prerogative, and on the left are the unions (the vestige of the political interests of the laboring classes) and the educated "elites" (as the right likes to call them) who believe in social equality, peace, and justice based on values of compassion and fairness.
Nothing can be done now until a generation of Israelis have (metaphorically) wandered for another 40 years in the desert, and confronted their dread. I'm not bothering in this brief space to make a critique of the actions and words of Palestinians on this problem; enough wise words have been said on that score, and there is fully enough blame to go around, particularly blaming Yassir Arafat and other Arab and Palestinian leaders who have cynically manipulated the emotions of people for the purposes of short term gain in feelings of honor, resulting in long term pain socially, economically, and politically. Ressentiment is now the property of Palestinians. I'm sure that there are many intelligent Israelis who recognize the irony.
The very best that could happen: more interpersonal involvement between Israelis and Palestinians in cultural and commercial enterprises. Start with the young people. That's where change comes from, as we are seeing in the Arab Spring. The more that people can see that their interests are interdependent, not mutually exclusive, and the more that one can recognize the pain that the other suffers, the sooner a more acceptable, livable reality will come about. We are not living any more in Biblical times, and one cannot model a viable political existence on the Torah. Jews no longer have a king. Jews no longer have tribes. There is no more Temple in the way that it used to exist. Noone can live that way, not even the ultra-orthodox. The power structures in Israel need to change, otherwise it will remain "Fortress Israel."
Recommended reading: Ayad El-Baghdadi's post on his position on Palestine-Israel.
Recommended reading: The Wikipedia article on the British Mandate for Palestine, the political background for the creation of the State of Israel.