There are no armed guards on the gate of Number 17 Ben-Gurion Boulevard in Tel Aviv, just a tired, two-storey villa set back from the street and an open door that leads to a dark kitchen and a little room with a cot on the floor.

There are bricks over the window above the neat little bed – to protect its owner and his wife Paula from Egyptian bombs during the 1956 Israeli invasion of Sinai, and the 1967 war – but upstairs is the bejewelled centre of this little home, David Ben- Gurion's library of 20,000 books. I pad through this den, scribbling in my notebook any clues to the mind of this most persuasive of Israeli leaders. Most of the books are in Hebrew – on religion, histories of the Zionist movement, research on Eretz Israel – but the creator of Israel and its first prime minister was also a linguist. There are Demosthenes and Homer in Greek, a three-volume history of the Hellenistic world, Julius Caesar in French, Duff Cooper's life of Tallyrand, George Bernard Shaw's complete works, a history of Vichy France, Henry Picker's Hitler's Table Talk (in English), Freud on psychology (in German), Guy Chapman's The Dreyfus Case, histories of Israel (including his own), a series on Jewish Influences on Christian Reform Movements. Ben-Gurion learned Spanish so that he could read a new biography of Cervantes. He loved Spinoza.

Then there are the photographs. Ben-Gurion with de Gaulle, with Kennedy and with a sad and debilitated Churchill, in 1961. Ben-Gurion wanted to read Churchill's almost forgotten essay on Moses; Churchill's letter to him, enclosing a copy of Thoughts and Adventures, is a little classic. "I have re-read it," Churchill wrote, "...and I would not particularly wish it to be remembered as one of my literary works."

But it was the set of Ben-Gurion's quotations that caught my eye: statements on the eternal morality of the State of Israel, messages from the great man – who physically was a very little man (I opened his bedroom cupboard and there were jackets and trousers of almost midget size) – in time of war. Here is Ben-Gurion, for example, during Israel's War of Independence – the Palestinian Arab 'Nakba' – when he feared that Jewish forces would destroy Muslim holy places in Jerusalem, cabling on 15 July 1948. "Further to my previous order relating to the Old City – you should see to it that the special force to be appointed for guarding the Old City uses mercilessly machine-guns against any Jew, and especially any Jewish soldier, who will try to pillage or to desecrate any Christian or Moslim holy place." In 1967, he was boasting of how, during the establishment of the state of Israel, "we did not damage any single mosque." Yet he was already creating myths. The undamaged mosques, he wrote in the same statement, were found in villages "without a single Moslem, as all of them had already fled during the [British] Mandatory rule and before the declaration of the State..." Amid the detritus of Ben-Gurion's life, his thick-framed spectacles, his Quink fountain pen ink ("permanent black"), the willow-pattern plates, the original 1951 Marc Chagall sketch of a rabbi with a harp, the old transistor radio in the shelter – we shall forget the elephant tusk from the president of Gabon – there are musings on the morality and nobility and purity of arms of Israel's army. "The fate of Israel depends on two factors: her strength and her rectitude." And again. "The State of Israel will not be tried by its riches, army or techniques, but by its moral image and human values."

During the blood-soaked Israeli siege of Beirut in 1982, an event which marked the decline of that rectitude and moral image, a wonderful Doonesbury cartoon depicted a press conference in which an anonymous voice asked an Israeli spokesman: "What has become of the Israel we knew and loved?" And the immediate rejoinder to the questioner? "Come off it, Yasser!" For in a sense, the lugubrious Arafat did adhere to Ben-Gurion's myth-making. In the end, he even signed up for peace with the state which had already taken 78 per cent of the land he called home. He was a super-terrorist who became a super-statesman and then – after refusing to submit at the final Camp David meeting – became a super-terrorist again.

The truth is that Israel has destroyed many mosques, that the original Palestinian Arab victims of the 1947-8 war did not all flee, as Ben-Gurion suggested; many, like the doomed men and women of the Deir Yassin massacre, were murdered in their villages. The Israeli army, to some of us who have watched it in action, is a rabble, little different from the Arab armies of the Middle East. The numbers of civilian dead in the Gaza war were as much an outrage as the Sabra and Chatila massacre of 1982 when Israeli soldiers watched – quite literally – as the Lebanese militia they had sent into the refugee camps eviscerated the Palestinian civilians inside. Foreign journalists continue to prattle on about the supposed purity of Israel's soldiers.

"Israel has already proved itself the most restrained nation in history. It has set an all-time record for restraint," one Robert Fulford waffled in the Canadian National Post in January last year, at the height of the Gaza slaughter, when even Tzipi Livni admitted Israel's soldiers had been allowed to "go wild". Israel's own rightist correspondents still portray the outside world as a dark, malevolent planet in which every criticism of Israel emerges from endemic anti-semitism, in which Nazism did not die in the embers of Berlin in 1945. The Jerusalem Post, bashes the drum of racism almost daily. "Berlin Holocaust studies professor slammed for defending Nazi mentor." "Weisenthal slams Ukraine award to nationalist linked to Nazis." "Dershowitz: Goldstone is a traitor to the Jewish people."

I don't doubt that Stepan Bandera's Ukrainian nationalist movement was a dodgy bunch of racists – and its original adherents were indeed anti-semitic murderers in the Second World War – but where does this end? The Simon Weisenthal Centre – named after a truly honourable man whom I once met in Vienna as he campaigned for Gypsy as well as Jewish victims of the Nazis – is the same organisation which is now proposing to build a 'Museum of Tolerance' on an ancient Muslim graveyard in west Jerusalem. And poor old Richard Goldstone, a Jewish jurist and another honourable man whom I met in the Hague when he was investigating war crimes in ex-Yugoslavia, is a 'traitor' because he said that Israeli soldiers may have committed war crimes in Gaza; in other words, Goldstone – for this is the point – should have allowed his ethnic origins to rule in Israel's favour rather than abide by the rule of law.

Last week, in the dog-day resort of Herzliya, I attended much of the vast conference of Israel's great and good – or at least the largely right-wing variety – to find out how they now saw the country that was founded amid such danger by Ben-Gurion 62 years ago. It was the same old story.

"The Palestinians are the ones who are today the naysayers" – this from Prime Minister Benjamin Netanyahu's 'security advisor', Uzi Arad – and the Goldstone Report had now become part of an insidious campaign against Israel, an attempt to "delegitimise" (this is the newest cliché) the state. There were boycotts of Israeli goods. Bonfires were made of Israeli products. "I do not know anyone whose stomach does not turn" at such a sight, said Arad.

Michael Hoenlein, vice-chairman of the immensely powerful Conference of Presidents of Major American Jewish Organisations, ann- ounced that Obama's "engagement" with Syria and Iran had failed. Obama's administration had been "supportive" over Goldstone (i.e. gutlessly supine in criticising a report which it had not even read). Obama now realised it had to work with Israel. There was unanimous consent in the US Senate over Iranian sanctions. No-one mentioned settlements or colonies. I was reminded of Hannah Arendt's observation that the congress of World Zionist Organisation's American section in October 1944 would "embrace the whole of Palestine, undivided and undiminished". She went on: "This is a turning point in Zionist history... This time the Arabs were simply not mentioned in the resolution, which obviously leaves them the choice between voluntary emigration or second-class citizenship."

For Arendt, the Atlantic City congress reflected "the tremendously increased importance of American Jewry and American Zionism..." The result was to forfeit any chance of Arab interlocutors, "leaving the door wide open for an outside power to take over".

And it is worth quoting Arendt once more: "...the Zionists, if they continue to ignore the Mediterranean peoples and watch out only for the big faraway powers, will appear only as their tools, the agents of foreign and hostile interests. Jews who know their own history should be aware that such a state of affairs will inevitably lead to a new wave of Jew-hatred; the anti- semitism of tomorrow will assert that Jews not only profiteered from the presence of the foreign big powers in that region but had actually plotted it and hence are guilty of the consequences."

At Herzliya, Arendt's words were as if they did not exist. Repeatedly, we heard that Israeli officials might not be able to travel for fear of war crimes indictments against them – which suggests that Goldstone's report is indeed biting. Danny Ayalon, the Deputy Foreign Minister who preposterously 'sofa-ed' the Turkish ambassador last month, obviously smelt defeat for Obama's original Cairo message of pro-Muslim appeasement and criticism of Israel. The Israeli-American relationship had "never been better", he told us. Obama had pledged a $30bn (£19bn) package for Israel over 10 years, America had given "iron-clad" security guarantees to Israel. Israel's antagonists will behave better "when the Arab side knows there is no daylight between Israel and the United States."

Ron Prosor, Israel's ambassador to London, announced that while Britain had once ruled the waves, it now ruled the airwaves. The battlefield was now in British universities, in Leeds, in Manchester, at SOAS, in institutions that preach to "students from all over the world" who enter into a "grinder" dominated by the "liberal left". Ehud Barak – small, almost diminutive, hands constantly waving in front of his face but an oddly congenial personality, the kind of guy it would be good to have next to you at dinner – announced that Israel was "facing a complication of threats from near and far". The "near" bit was the Palestinians, the "far", of course, was Iran.

There could be no bi-national state – did anyone want a Bosnia or a Belfast in the Zionist dream? Barak, Defence Minister, former prime minister and – more interestingly – former head of military intelligence, was in orator mode. "I said to Arafat...I told Abu Mazen (Mahmoud Abbas) 'Your most difficult decisions will have to be taken with your own people, not with Netanyahu'..." He quoted Barbara Tuchman on "the despotism of circumstances" and Robert Frost on "good fences make good neighbours", he quoted Churchill – "a pessimist sees a difficulty in every opportunity." And along came Salam Fayyad, Prime Minister of the Palestinian Authority, who apparently thought he was to take part in a discussion rather than make a speech. He pleaded for an end to settlement building – he did not use the word 'colonisation' – and to Israeli "incursions" and he did not – once – mention the word 'Hamas'. An obedient man, Fayyad, a good guy, someone with whom the Israelis could 'do business' because – as Barak and his friends in the Israeli government keep telling us – "it takes two to tango."

Tzipi Livni turned up to tell us that over the past 40 years "a certain reality has been created on the ground" – she meant settlements – "which takes very little of the surface of Judea and Samaria". This was extraordinary. The leader of the Israeli opposition believes the colonisation of the West Bank "took little" territory. If Area C – the Israeli-occupied part of the West Bank – is already lost, then Mr Fayyad and his chums in their 'Authority' have less than 10 per cent of the original mandate 'Palestine' to claim. Livni, too, was against "a two-nation state" because "I have a doubt whether Jews will be able to live in that state at all." I rather think Tzipi Livni is right about that, but she added that "no one will want to supply the keys of a Palestinian state to Hamas". Too true. But isn't it up to the Palestinians to elect their leadership, rather than Israel? It was Major General Benny Gantz who fascinated me. Benny is Israel's military deputy chief of staff – and anyone who lives in this "tough neighbourhood" (I am borrowing Barak's coinage) takes folk like Benny very seriously.

I live in Lebanon which is regularly visited by the Israeli air force, so I looked upon this dapper, slim officer – hair greying, with a Julius Caesar fringe – with almost fatal concern. His decisions – and he will probably be the next chief of staff – could cost me, or anyone else in Lebanon, dearly. The Gaza war, which most Israelis seem to refer to as 'Operation Cast Lead', and the 'Second Lebanon War' – a reference to the 2006 conflict with the Hizbollah which was, in fact, Israel's fifth Lebanon war (the 1978, 1982, 1993, 1996 wars being the previous ones) – was part of a "learning process" which Israel and its enemies underwent. Iran was obviously Benny's prime target.

Iran was "continuing to develop its nuclear project" and Israel was watching its "long-standing firing abilities ... exercises, drills, manoeuvring" and the "trickle-down" effect of all this on "terrorist organisations". Israel could not ignore this situation. "We should be prepared...but of course I'm not going to elaborate on that point."

Indeed, Benny would not want to elaborate on this point – an Israeli attack on Iran's nuclear facilities – which is the nightmare of not just the Middle East but of the Obama administration as well. Where he did talk frankly, however, he was very much to the point. The Lebanese Hizbollah was not just receiving smuggled weapons. "This is not 'smuggling' but a real arms transfer." These new weapons, he said, were being deployed in villages that will become operational bases in a future war. And the government of Lebanon – which includes Hizbollah ministers – will be held responsible. Thus did Benny Gantz portray the next slaughter in the Middle East; if the Palestinians of Gaza were responsible for the bloodbath a year ago – this is, after all, the Israeli line – then the people of Lebanon will be responsible for their next war.

Indeed, they will pay the price. And in case any of us thought that the Gaza war might make Israel's generals a bit worried about war crimes arrests on European holidays, there was Major General Gadi Eizenkot, Israel's northern military commander, telling a Tel Aviv conference that Israel had the "moral" right to disproportionately attack Hizbollah "strongholds" in Lebanese villages. He suggested that 160 Shia Muslim villages in the UN's area of control were now arms storage dumps – a palpable untruth, as the UN knows – and that villages further to the north were being turned into a "battleground", which is indeed much closer to the truth.

But is there not another country in the Middle East which is receiving a "real arms transfer"? Was it not a corporate vice president of Lockheed Martin who announced last month – in Bahrain of all places – that his company hopes to sign a deal with Israel for up to 100 new F-35 jets, replacements for the F-16s that did so much damage to Gaza? Patrick Dewar, I should add, hoped to flog more of these planes to Gulf countries – which means Saudi Arabia – although we can be sure they won't have quite the state-of-the-art offensive power as the ones sold to Israel. Israel itself is building more Merkava tanks and Namer armoured personnel carriers, completing a new squadron of Heron pilotless but missile-firing 'drone' aircraft with a 26-metre wingspan – the same as a Boeing 737 – and a maximum altitude of 45,000 feet, and acquiring new C130 Hercules aircraft and an upgrading of Apache helicopters with new advanced radar and targeting capabilities.

But Herzliya was, in the end, the same old story. Israel was surrounded by enemies, a small, vulnerable nation – we shall forget, here, its own estimated 264 nuclear warheads – under attack by the world for daring to defend itself.

Up in Jerusalem, Prime Minister Benjamin Netanyahu was toasting that old scoundrel Silvio Berlusconi, who had announced that "my greatest dream is to include Israel among the European Union countries". Italy and Israel were proud, he said, that they were part of a Judeo-Christian culture that is the basis for European culture. This was a bit much. Roman colonial rule in Judea and Samaria was a savage period in Jewish history and the fascist ruler of Italy – with whom Berlusconi sometimes shares an astonishing physical similarity – was not mentioned.

Netanyahu called the Italian Prime Minister a "courageous leader who is a great champion of freedom and a great supporter of peace." It was a bit like Herzliya: an epic of self-delusion.

Silvio Berlusconi and I do have one thing in common: a liking for that fine Jerusalem hotel, the King David, whose staff are among the politest and friendliest in the world. I say this not just because they let me use their reception lap-top computer when the business centre closed down for the Sabbath, but because the bearded head of finance once asked me if he looked like a member of the Hizbollah. (And yes, I told him, he does.) The King David has even produced a video which boasts how someone who later became prime minister – one Menachem Begin – once blew it up (92 Britons, Arabs and Jews dead). But now I find a new booklet in my room, Jerusalem – Step by Step, by Batya and Avigdor Kornboim, which critiques other hotels. And of the American Colony Hotel in east Jerusalem, the Kornboims write: "Its proximity to the neighbourhood mosque and muezzin may prove bothersome."

Well, yes, I suppose they could be "bothersome", like those pesky minarets which the Swiss rightly decided to object to. Or the wall – longer, taller, than the Berlin Wall so let's call it The Wall – which snakes into the occupied West Bank and steals yet more Arab land for Israel. It is true – it is a fact – that it has decreased the number of suicide bombers in Israel, but it is an outrage, as internationally illegal as it is a blinding, ugly scar on the face of the Holy Land. True, the Ottomans built walls round Jerusalem, just as the Protestant once built walls round Derry, but this thing is an excrescence, not so much Prince Charles' carbuncle on the face of a much-loved friend as the wall of a vast ghetto. Just who is inside the ghetto – the Palestinians or the Israelis – I am not quite sure. But it is a monument to failure, proof positive that there is no Middle East peace. Proof, indeed, that there will not be a peace between 'Palestine' – which, as we all know, does not exist – and Israel.

I travel to Bethlehem, to Area 'A', controlled – if that word can ever have licence in the Middle East – by Fayyad's 'Palestinian Authority', and there, in the grotty coffee-shop beside the Church of the Nativity is Salah Atamari, former governor (no longer – for reasons hedged in uncertainty) of this little town and, in a former life, head of the 12,000 prisoners in the notorious Ansar prison in Lebanon. We have met before – though he doesn't remember this – and Atamari struck up a friendship in 1982 with the Israeli commander of the camp, a certain Colonel Meir Rosenfeld, who lived in Nazareth (Israeli friends insist he is still alive) and was "a courageous and straightforward man – his family perished in Auschwitz". The Holocaust is part of the grammar of Israel. Gantz told us that his mother, who died eight months ago, was a Holocaust survivor. "When a rocket fell near her home [during the Gaza war], she said to me on the telephone: "Don't stop sending them food – but don't stop fighting them."

And I remembered my own mother (who was not a Holocaust survivor but who joined the RAF in 1940) telling me during the 1982 Israeli siege of Beirut that I should stay in the west of the city because if – as the Israelis insisted – journalists should leave the Lebanese capital, it would allow the Israeli army to kill more civilians. I think my Mum was right. Benny Gantz thought his Mum was right. But back to Salah Atamari.

"Obama is not a sultan in an isolated, deserted oasis. He cannot go against the establishment. Can Hamas and Fatah be mature? Maturity means breaking away from innocence. I am against Hamas, ideologically and intellectually speaking ... They turned their back on their heritage as Palestinians. They thought they could turn it into Islamic rule. I am in favour of elections. Let Hamas rule if they can. As a Fatah member, we always advocated a one-state solution where we live with Israelis with equal rights in one democratic state. I think this is inevitable, after maybe 50, or 100 years. Peace is inevitable. I know that the Israelis go crazy when you talk of a one-state solution. But one day they may come to us and say: 'Let's stop this stupid, bloody conflict. Let's live together.' The two-state solution is passing."

I ponder this thought. I do not believe in the one-state solution. I suspect Livni is right about this. But then we have Meron Benvenisti arguing in Ha'aretz that "the artificial existence of the Palestinian Authority in itself perpetuates the status quo because it salutes the illusion that the situation is temporary and that the 'peace process' will soon end it". Half the occupied West Bank, Benvenisti says, has effectively been annexed, "leaving the occupied population with disconnected lands and no viable existence. Only a strategy of permanent rule can explain the vast settlement enterprise and the enormous investment in housing and infrastructure estimated at $100bn." And it is true that the huge colonisation project – you have only to look at the vast tracts of land taken from the Palestinians for Jews, and Jews only, to understand this – is permanent. These are the "facts on the ground". Benvenisti disregards the idea that only Canada and Switzerland proved the worth of the bi-national model. He wants "soft" internal boundaries, as in federated or confederated states.

I look to Atamari to rid me of this argument. "I am a Bethlehemite. This means something. It means deep faith in the inevitability of peace and justice. I believe our focus should be the unity of our society ... We should empower our civil establishment and be an active part of our human society." Yitzak Rabin was killed because of his opposition to the Jewish settlements, Atamari says, and the suicide bombings of the Palestinians made them losers at both the Israeli and the international level. "I was part of the Palestinian Authority ... now we are doing well, but we cannot build our authority under occupation, with 11,000 prisoners in jail." Atamari looks away. He talks about the Ansar prison camp, about the Israeli bulldozer which mutilated the bodies of four prisoners who were hiding in the camp. "There were no informers in the camp," he says. "I issued a statement to the prisoners, that if you have any information about any prisoner, you must inform our leadership." But Ansar was infamous for its informers. Atamari met John Le Carré in Sidon in December of 1981, and told him – so he says – "the other side of the story". But what is the "other side"? I travel around 'Area C', the huge area – more than 60 per cent – of the West Bank which is already lost to the Palestinians, and I look at The Wall. It snakes across orchards, through villages, over hills like a beast, a confidence trick, a massive indictment of political failure. Is this to be here forever? Or is it – as Netanyahu claims – temporary; which means that it can move further east, towards the Jordan river rather than away from it? I drive to Gaza. It's as bad as they say. Schools, hotels, companies are sliding into the 'Islamist' Hamas regime. Headscarved women, a strict schooling for children, no serious political debate. When I hand over my passport to the lady from Hamas, I notice the warning on the wall behind her: "ON THE INSTRUCTION OF THE MINISTRY OF INTERIOR TO PREVENT ALL FORMS OF LIQUOR (the capital letters now disappear) are confiscated immediately be seized and destroyed and poured in front of their owners." Ye Gods! The Palestinians of Gaza are besieged; they are under the most odious sanctions; they have to build their homes from mud. And they threaten infidels that liquor will be destroyed? In front of their owners? Has Hamas lost its moral compass? Or is this part of the lunatic law in which we must now believe?

In Gaza, I find Palestinians living in tents beside homes that were destroyed in the war a year ago, living in mud homes constructed by the United Nations. One family greets me amid a pool of water and mud, the woman slopping through the filth in her plastic shoes. Her family of 11 children has been dispossessed by a greedy landlord who wanted more money, no war victims these but refugees from society. They were Bedouins. Indeed, their family, the Moughasibs, originally came from a village near the Israeli town of Sderot – yes, that very hamlet so beloved of Hamas' rockets, original name Deir el-Balah, though of course we don't mention that today – and before the 'Nakba', the disaster of the Palestinians, they lived there, in a tent. In a tent before their catastrophe and in a tent after the Gaza war. I splash back to the car, but there is to be a meeting with the Hamas 'Deputy Foreign Minister', Ahmed Youssef. My driver, Ashraf, is worried about my shoes. He washes them, one by one, under a garage hose-pipe and then he cleans the rubber floor of the car.

And when we arrive at the home of Ahmed Youssef, the 'House of Wisdom' – it might also be translated as the 'House of Reflection' – I understand why. Shoes are left at the door. The sofa and pillows are immaculate, the marble floor spotless. No muck from the Moughasibs must stain this place. Nabil Shaath has just been visiting, that scion of the Palestinian Authority. They talked about the lifting of sanctions and the rebuilding of Gaza (some hope!) and about the preparedness of Hamas to allow Palestinians loyal to the Authority to return "unless they were involved in bloody clashes". Odd, this. The Israelis refuse to free Palestinian prisoners who have "blood on their hands". Now Hamas uses the same terminology about its enemies. It's like the Israeli government demanding that the Lebanese government disarm Hizbollah – an idea that would split the Lebanese army and create a new civil war. Just as the Palestinians demand the withdrawal of all Jewish colonies in the West Bank – which the Israeli government won't contemplate for fear of, yes, civil war. The Hizbollah and the settlers have more in common than they realise (as perhaps my finance officer at the King David Hotel knows all too well).

Youssef is all smiles. Yes, Mohamed Dahlan, the hated PLO security boss, can return to Gaza – but he must use Hamas's own security men for his protection. He wanted to come back with his own protection – this could not be tolerated. "He did not accept Hamas security. He wanted other political factions to take care of his security."

I ask about the Hamas murders of collaborators during the Gaza war a year ago. They killed 35 Palestinians, almost three times the number of Israelis who died in the war. Youssef is a little cowed by this. The police and security authorities were attacked, he said. Individual people who wanted revenge for the death of their loved ones wanted retaliation. In some cases, they were waiting at the homes of the collaborators to kill them. "Revenge is part of our culture here. If there is no law-and-order, people will sometimes take the law into their own hands."

This is extraordinary. The Deputy Foreign Minister of Hamas is telling me that revenge is part of Palestinian "culture". But then he talks about negotiating with the Israelis – which, of course, Hamas did, before it became the "centre of world terror". "The Israelis always take you into this big room of optimism. But you quickly figure out that there is, after the light at the end of the tunnel, another tunnel and then light and then tunnel after tunnel." And could Tony Blair help? And here I suspect my heart might warm to Youssef – as indeed it does. "He is a very hypocritical man. He says something one day and the next day he says something else." There, indeed, lies the man we watched speaking before the Chilcott inquiry a few days ago.

And of course, it all boils down to this. The Israeli-Arab conflict is about land. It is about colonies and walls and about bi-national states and two states and – in the end – about who has power. The Israelis with their eternal American supporters? Or the Palestinians, hopelessly divided and soaked – in Gaza, at least – in corruption and nepotism. The tunnels that feed Gaza are skimmed for profits by Hamas.