The so called Palestinians missed many chances to create their own state, but opted instead for terrorizing Israel. That was more important to them. They missed their first chance in 1947 when the UN was partitioning the region and wanted to create two states.
In 1949 through 1967, Egypt and Jordan were the occupiers of Gaza and the West Bank. The Palestinians did not even try to create their own state then. It probably was not even in their minds to do so.
The Six Day War against Israel occurred in 1967, and Israel offered to withdraw from lands they captured in the winning of that war. The Palestinians refused the offer, and stated: no peace, no negotiations and no recognition of Israel. Thus, the land was in Israel's hands. Up to this time, we had no Israelis in any settlements in Gaza or the West Bank.
From 1968-1979, we see that 6,000 Israelis settled in these areas. Menachem Begin became Prime Minister in 1977. Terror from Palestinians did not deter us. Then we had a peace treaty with Egypt, and Israel removed their Sinai settlers in order to have peace with Egypt. In 1979 the Camp David treaty was created. Israel offered autonomy to the Palestinians, something just short of statehood that would have led to independence. This also allowed Israel to watch their behavior and see if they turned away from terrorism. At this time Israel had 136,109 settlers in the territories, which is about 1/4 the population of Portland, Oregon.
From 1995 to 1999 we had the 2nd Oslo Agreement and we continued to withdraw from territories while terror never stopped. Terror then escalated, and Israel realized peace was not to be with the Palestinians. At this time we had only a slight increase in population to 146,207 in the territories as we stopped withdrawing people from these areas.
In 2000 we had a 2nd Camp David and we probably reluctantly agreed to the creation of a Palestinian state in all of Gaza and most of the West Bank. We also promised to dismantle most of the West Bank and compromised on one point on Jerusalem; that being that East Jerusalem would be the capital of Palestine. To my great relief, Yasser Arafat rejected the deal without even countering another idea. For him it was all or nothing, no negotiations. At this time we had a growth in the territories to 203,067 Israelis. Ehud Barak was Prime Minister of Israel then.
Two years later in 2002 the Road Map to Peace was created. The Palestinians are asked to fulfill some commitments starting with ending the violence against Israel. Israel's part is to end the settling of the territories. However, the Palestinians just escalated their terror. The Road Map fails. Israel does evacuate all their citizens and soldiers from the Gaza Strip. Palestinians ignore the chance to build a state in Gaza to prove that they are interested in living as peaceful neighbors. Instead, Hamas takes over Gaza and fires over 10,000 rockets and missiles into southern Israel. Israel reels at the reality that they have traded land for terror, and are unwilling to discuss new territorial concessions. Why should they? The Palestinians are not behaving like Egypt did. At this point there are now 253,748 Israelis living in the West Bank. None are in Gaza.
Today Israelis have given up on the idea of trading land for peace for these deadly neighbors. Hamas has deadly rockets that could hit any part of Israel. Now the settlers in the West Bank total 276,000. It would be difficult to move and resettle them. What has stopped the state of Palestine from being created is the people's own rebellion and hatefulness toward their future neighbor, Israel. If the Palestinians would adopt the mind-set of Anwar Sadat, there would be a peaceful Palestine that would not be a threat to Israel. Evidently it is not to be.
Don't blame Israel for settling in the territories. What it was promised originally in the Balfour Declaration was a much larger Israel that was hacked up, until it became very small. If the Arabs don't ever intend on having peace with Israel, Israel is legally free to use the land they inherited from the Arab attacks that failed. That is a lesson; don't mess with Israel and attack it, or you suffer the consequences. Crime doesn't pay off. Somebody seems to be watching over Israel.
Resource: Mitchell Bard #69