On 2 August 2009, after cordoning off part of the Arab neighborhood of Sheikh Jarrah in east Jerusalem, Israeli police evicted two Palestinian families (more than 50 people) from their homes; Jewish settlers immediately moved into the emptied houses. Although Israeli police cited a ruling by the country's supreme court, the evicted Arab families had been living there for more than 50 years. The event – which, rather exceptionally, did attract the attention of the world media – is part of a much larger and mostly ignored ongoing process.

Five months earlier, on 1 March, it had been reported that the Israeli government had drafted plans to build more than 70,000 new homes in Jewish settlements in the occupied West Bank; if implemented, the plans could increase the number of settlers in the Palestinian territories by about 300,000 Such a move would not only severely undermine the chances of a viable Palestinian state, but also hamper the everyday life of Palestinians.

A government spokesman dismissed the report, arguing that the plans were of limited relevance – the construction of homes in the settlements required the approval of the defence minister and the prime minister. However, 15,000 have already been fully approved, and 20,000 of the proposed housing units lie in settlements that Israel cannot expect to retain in any future peace deal with the Palestinians.

The conclusion is obvious: while paying lip-service to the two-state solution, Israel is busy creating a situation on the ground that will render such a solution impossible. The dream underlying Israel's plans is encapsulated by a wall that separates a settler's town from the Palestinian town on a nearby West Bank hill. The Israeli side of the wall is painted with the image of the countryside beyond the wall – but without the Palestinian town, depicting just nature, grass and trees. Is this not ethnic cleansing at its purest, imagining the outside beyond the wall as empty, virginal and waiting to be settled?

On the very day that reports of the government's 70,000-home plan emerged, Hillary Clinton criticised the rocket fire from Gaza as "cynical", claiming: "There is no doubt that any nation, including Israel, cannot stand idly by while its territory and people are subjected to rocket attacks." But should the Palestinians stand idly while the West Bank land is taken from them day by day?

When peace-loving Israeli liberals present their conflict with Palestinians in neutral, symmetrical terms – admitting that there are extremists on both sides who reject peace – one should ask a simple question: what goes on in the Middle East when nothing is happening there at the direct politico-military level (ie, when there are no tensions, attacks or negotiations)? What goes on is the slow work of taking the land from the Palestinians on the West Bank: the gradual strangling of the Palestinian economy, the parcelling up of their land, the building of new settlements, the pressure on Palestinian farmers to make them abandon their land (which goes from crop-burning and religious desecration to targeted killings) – all this supported by a Kafkaesque network of legal regulations.

Saree Makdisi, in Palestine Inside Out: An Everyday Occupation, describes how, although the Israeli occupation of the West Bank is ultimately enforced by the armed forces, it is an "occupation by bureaucracy": it works primarily through application forms, title deeds, residency papers and other permits. It is this micro-management of the daily life that does the job of securing slow but steady Israeli expansion: one has to ask for a permit in order to leave with one's family, to farm one's own land, to dig a well, or to go to work, to school, or to hospital. One by one, Palestinians born in Jerusalem are thus stripped of the right to live there, prevented from earning a living, denied housing permits, etc.

Palestinians often use the problematic cliche of the Gaza strip as "the greatest concentration camp in the world". However, in the past year, this designation has come dangerously close to truth. This is the fundamental reality that makes all abstract "prayers for peace" obscene and hypocritical. The state of Israel is clearly engaged in a slow, invisible process, ignored by the media; one day, the world will awake and discover that there is no more Palestinian West Bank, that the land is Palestinian-free, and that we must accept the fact. The map of the Palestinian West Bank already looks like a fragmented archipelago.

In the last months of 2008, when the attacks of illegal West Bank settlers on Palestinian farmers became a regular daily occurrence, the state of Israel tried to contain these excesses (the supreme court ordered the evacuation of some settlements) but, as many observers have noted, such measures are half-hearted, countered by the long-term politics of Israel, which violates the international treaties it has signed. The response of the illegal settlers to the Israeli authorities is "We are doing the same thing as you, just more openly, so what right do you have to condemn us?" And the state's reply is basically "Be patient, and don't rush too much. We are doing what you want, just in a more moderate and acceptable way."

The same story has been repeated since 1949: Israel accepts the peace conditions proposed by the international community, counting on the fact that the peace plan will not work. The illegal settlers sometimes sound like Brunhilde from the last act of Wagner's Walküre – reproaching Wotan and saying that, by counteracting his explicit order and protecting Siegmund, she was only realising Wotan's own true desire, which he was forced to renounce under external pressure. In the same way the settlers know they are realising their own state's true desire.

While condemning the violent excesses of "illegal" settlements, the state of Israel promotes new "legal" building on the West Bank, and continues to strangle the Palestinian economy. A look at the changing map of East Jerusalem, where the Palestinians are gradually encircled and their living area sliced, tells it all. The condemnation of anti-Palestinian violence not carried out by the state blurs the true problem of state violence; the condemnation of illegal settlements blurs the illegality of the legal ones.

Therein resides the two-facedness of the much-praised non-biased "honesty" of the Israeli supreme court: by occasionally passing judgment in favour of the dispossessed Palestinians, proclaiming their eviction illegal, it guarantees the legality of the remaining majority of cases.

Taking all this into account in no way implies sympathy for inexcusable terrorist acts. On the contrary, it provides the only ground from which one can condemn the terrorist attacks without hypocrisy.

Slavoj Zizek is international director of the Birkbeck Institute for the Humanities szizek@yahoo.com

• This article was amended on 20 August 2009. The online version originally referred to "Palestinian-frei", while the print version had been edited to say "Palestinian-free". This editing change should have been applied to the online version. This has now been done.