I think the Israeli-Palestinian conflict can be most usefully understand as a clash of ethno-political identities. There are two communities whose identity is rooted in the same land. These identities have co-evolved in the 20th Century, making the conflict between Israelis and Palestinians a modern phenomenon. [The facile "those people have been hating and fighting for thousands of years" and the implicit corollary shrugging of shoulders and "it's hopeless" attitude is false and trivializing.]
In the late 19th Century Zionism emerged as a modern Jewish identity, focused on a people (ethnicity) and a potential state. By the turn of the 20th Century Zionism was a political ideology dedicated to creating a nation-state that would be Jewish ethnically but secular and socialist.
World War I saw the rapid emergence of nationalism in the Middle East as the Turkish Ottoman Empire collapsed. When the British and French divided up the Middle East into colonies (complete with borders that made more sense to map makers in Paris and London than the people on the ground), they laid the geographical foundation for modern national identities to emerge.
The first wave of Jewish immigrants, most of whom were fervent Zionists, began to arrive in Palestine with the support (most of the time) of the British colonial administration. They were largely Western European and North American in origin and thought of Palestine as a "land without people for a people without land." But a sense of Palestinian nationalism was emerging at the same time, creating a people who were already on the land. The fact that the Jewish immigrants were European and supported by the occupying British basically guaranteed that "we" Palestinians would view the new arrivals as "the other."
A distinctive Israeli identity emerged in the 20s and 30s as more Jews arrived and the community found itself increasingly at odds with the British. In the immediate aftermath of World War II a wave of survivors of the war and Holocaust arrived in Palestine and an armed struggle broke out between the British and the Zionists, even as the Palestinians were resisting continued British rule.
The experience of persecution in Eastern Europe and the genocide of World War II led to an emphasis on toughness, self reliance and assertive self-defense among the new Israelis and the attack on the new state in 1948 by Arab armies cemented a sense of being surrounded by enemies and under constant threat of annihilation. After the 1948 war a large number of Jews came to Israel from ancient Jewish communities in North Africa and the Middle East, often because they now feared their Arab (and Persian) neighbors. That sense persists today and has been reinforced by suicide bombings and other acts of violence by Palestinians. At some profound level Israelis feel deeply insecure and surrounded by enemies who wish them dead.
At the same time, the Palestinians experienced several events that defined them (to themselves) as victims of grave injustice. The Naqba, the displacement of hundreds of thousands of people from their homes in what is now Israel and the conquest of the West Bank by Israel in the 1967 war has led to three generations of refugees who live in refugee camps. All Palestinian live with day-to-day hassles and indignities as they go about their lives in the occupied West Bank or Gaza.
In the 21st Century Israeli politics has been dominated by a series of right wing governments featuring a growing role for representatives of the million or so settlers in the West Bank, predominantly Russian immigrants and highly ideological Europeans and Americans. An equally important new major force in politics has been the ultra-orthodox Jewish community which is passionately committed to undoing the secular basis of the Zionist Israeli state and turning it into a religiously observant, explicitly Jewish state. Sometimes lost in all the talk about a Jewish state and Israeli identity is the fact that about 20% of the citizens of Israel are Arab and Muslim or Christian, not Jewish.
Historically Israel has been very effective at socializing newcomers and integrating them socially, economically and politically but the wave of Russian immigrants was uninterested in being socialized and set out into the West Bank to establish settlements beyond the reach of the civilian agencies. They continued what they had learned about politics and life as citizens of the old Soviet Union -- not liberal democracy. Netanyahu's various governments have been increasingly anti-Arab, pro-expansion and assertively nationalistic, relying on undemocratic (if not anti-democratic) movements.
At the same time, the hopes of the Palestinians for an independent state, preferably democratic, have faded. When the Palestine Authority (PA) was created by the 1993 Oslo Accords, Yasser Arafat became the President because he headed the (PLO), the biggest faction among the various liberation groups, and positions in the new government were generally filled by former members of armed militant groups.
It seems to be an almost inescapable tragedy that men who are willing to risk their lives for the freedom of a people tend to become corruptly self-serving once they are in positions of power and the PA quickly became riddled with corruption at all levels. The territory covered by the PA is two quite distinct (and physically separated) areas: the West Bank and the Gaza Strip. In 2006 the militant Hamas movement won legislative elections in Gaza (not, for most voters, because of its pledge to destroy Isreal or willingness to wage continuing war, but because many voters were fed up with the PLO and other parties dominating the PA and voted for Hamas as a protest.) Hamas became the government in Gaza and both Israel and Egypt instituted a policy of boycott and isolation that exacerbated poverty and corruption.
Some conclusions:
Despite overwhelming military superiority, Israelis live in a culture of insecurity. The fact that both Jordan and Egypt have long since made peace with their neighbor and Syria is hardly a threat does not counter the gut feeling of being surrounded by a sea of hostile enemies. The rockets from Gaza may be fairly small and close to 90% intercepted but they have an enormous symbolic and psychological impact.
Netanyahu's governments have increasingly relied on and actively supported anti-democratic, anti-Arab and overtly racist movements, and Israeli public opinion has shifted to the right. There is precious little room for a peace movement.
The Palestinian Authority has lost its initial legitimacy and survives as a political force only because of a refusal to hold elections for parliament. The majority of people on the West Bank have grown up knowing only an inept government and Israeli occupation.
Hamas controls Gaza with an efficient security force; there is no room for political discussion. Half of all Gazans have known nothing but Hamas rule and economic hardship and have little or no sympathy for Hamas' ideology of destroying Israel and creating an Islamic state.
Netanyahu's departure will leave an excruciatingly fragile coalition in his place that will be unable to undertake even modest initiatives. The ONLY thing all members of the coalition can agree on is "Bye Bye Bibi!"
Even if Israel were ready to negotiate a two state future for itself and the Palestinians, there is no one on the other side with whom to negotiate. Even if the Palestinians were ready to negotiate a two state solution for themselves and the Israelis, there is no one on the other side with whom to negotiate.
If a two state solution is impossible, Israel faces an existential crisis: it can absorb the West Bank and Gaza and become a democratic state that offers a vote to each person at the cost of losing a Jewish identity; or it can become a fully Jewish state and continue to occupy the West Bank, at the cost of losing its democratic and traditionally Jewish values of justice and equality.
On the whole, Israel's Arab citizens have kept themselves aloof from the struggles of Palestinians in the West Bank or Gaza and focused more on improving their second class status in Israeli society and politics. There were a few signs during the recent war against Gaza that younger Israeli Arabs are beginning to identify themselves as Palestinians and part of the same community as Palestinians in the West Bank and Gaza. This may be no more than the flash of heat lightning in the desert night, or it may be the start of a profound shift in the underlying dynamics.
