I first visited Israel in 1969. It was a time when much of the western world was still passionately enthused about the country's triumph in the 1967 six-day war. President Nasser had for years promised to sweep the Israelis into the sea. Instead, the tiny Jewish state, less than 20 years old, had engaged the armies of three Arab nations, and crushingly defeated them all. The Israelis successively smashed through Nasser's divisions on the western front, scaled and seized the Golan Heights, and snatched east Jerusalem and the West Bank in the face of Hussein's highly capable Jordanian army. Sinai was left strewn with the boots of fleeing Egyptians. The Israeli victory was an awesome display of command boldness, operational competence and human endeavour.

There was a euphoria in Israel in those days, which many visitors shared. We watched Jews from all over the world gathering to pray at the Wailing Wall for the first time in almost 2,000 years; Israelis of all ages revelling in the sensation of being able to work the kibbutzim of the north free from Syrian shells. From inhabiting one of the most claustrophobic places in the world, suddenly they found themselves free to roam miles across Sinai on a weekend. The soldiers of the Israeli army, careerists, conscripts and reservists alike, walked 10ft tall – the image of an exulting soldier made it on to the cover of Life magazine. They had shown themselves one of the greatest fighting forces of history, expunging almost at a stroke the memory of Jewish impotence in the face of centuries of persecution, of six million being herded helpless into cattle trucks for the death camps.

In the years that followed, I gazed across the Suez Canal during the artillery bombardments of the 1970 war of attrition with Egypt. I was a correspondent there in October 1973, during the Yom Kippur war. It was an extraordinarily moving spectacle, to behold the people of Israel rallying to meet what they perceived as a threat to their national survival. One morning I stood on the Golan Heights and watched Israeli tanks duelling with the Syrians, amid pillars of smoke and flame. A few nights later I bivouacked in the Sinai passes, talking for hours under the stars to Israeli reservists about their hopes and fears. With a colleague from the Financial Times, having thinly disguised ourselves as Israeli soldiers, we made an illicit night crossing of the Suez canal, to report Ariel Sharon's stunning encirclement operation which trapped the Egyptian army on the east bank. In those days I loved those people, and boundlessly admired their achievement. I wrote in one of my less temperate dispatches, expressing faith in Israel as a bastion of western civilization in the Middle East: "These last three weeks, I am proud to have shared the Israelis' camp fires in Sinai. They are a very great people who three weeks ago came closer to destruction than blind Europe seems willing to recognise."

After I came home from the Yom Kippur war, I received a note from the renowned journalist, James Cameron. Jimmy, a longstanding Zionist, wrote warmly about my reporting. He said: "It is impossible to work in combat with the Israeli army without this response, if you have any sense of history and drama." But then he added: "I have sometimes wondered over the past few years whether this irresistible military mesmerism hasn't clouded for us some of the political falsities. I just don't know. I think I was marginally led up the garden in 1967."

Jimmy's tentative note roused the first stirrings in my mind of ideas which evolved only slowly in the years which followed. Remember, I was still in my 20s. I had always loved soldiers. I was enthused by the romance of the battlefield. I possessed an excessive respect for military prowess.

Ironically, it was the experience of spending much more time with the Israeli army in the mid-1970s, in the course of researching a book, which caused me to begin to perceive the importance of what Cameron said. I glimpsed a darker side of Israel. I learned a lot about the ruthlessness of Israeli anti-terrorist operations. I spent many hours talking to thoughtful Israelis, who voiced their fears about the perils, the threatened corruption of their own society, which they perceived in the 1967 conquests. I also became dismayed by the naked imperialism displayed by Israel's rightwing zealots. One night at a dinner party in Jerusalem in 1977, I heard a young Israeli talking about the Arabs in terms which chilled my blood. "In the next war," he said, "we've got to get the Palestinians out of the West Bank for good."

To me, in my naivete, Israel's struggle had hitherto seemed that of a brilliant little people, who had suffered the most ghastly experience of the 20th century, struggling for survival amid a hostile Middle East still bent upon their destruction. Now, suddenly, I found myself meeting Israelis committed to the creation of a greater Israel embracing the West Bank, who were utterly heedless of the fate of its inhabitants. The Palestinians were perceived as losers, a mere incidental impediment to the fulfilment of Israel's historic territorial destiny. By a curious quirk, that young Israeli whom I heard enthuse about emptying the West Bank of Arabs was Binyamin Netanyahu, today his country's prime minister.

Listening to Israelis such as himself speaking of the Palestinians 30 years ago, I began to understand what a more thoughtful young man than myself might have seen from the outset: the huge danger implicit in rooting a society's polity in its military prowess and powers of conquest.

When I said something of the kind to a politician of the Israeli right, he responded contemptuously: "You are a typical European. You loved Israel when it was a victim. Now you turn your face from us, because we have become too strong for your taste. We are no longer Jews on our knees, begging for pity." I had lunch one day in Jerusalem in 1979 with that brilliant Israeli novelist and peacenik Amoz Oz, who said something of the same kind, but from a different perspective: "People like you," he said to me, "are going to become very disappointed in Israel in the years ahead. You want it to behave like a European society. Instead, it is becoming a Middle Eastern society. I hope that it will not behave worse than other Middle Eastern societies. But you should not delude yourself that it is likely to behave much better." This seemed a profound observation. The generation of Israelis whom I met, and embraced, in the late 1960s and early 1970s were overwhelmingly formed by the diaspora from which they came. In the decades since, as they have died, their society has become dominated by those forged by different experiences – either of whole lifetimes in the fevered hothouse of Israel, or by immigration from Russia, whence so many newcomers have arrived in recent times.

Three years ago in Jerusalem, I met a very bright couple in their late 40s, who had emigrated from Russia a decade earlier. When we began to speak of the Palestinians, the husband said: "In my Russian village in 1920, there was trouble with guerrillas. Budenny's Cossacks came. They burnt the village from which the guerrillas came. The guerrillas returned twice more. The Cossacks burned two more villages. Then there was no more trouble with guerrillas." This was the culture from which these two highly-educated Israelis came. They asserted that the Budenny method was the only proper one by which to address Hamas, Hizbollah and Fatah. The policies of recent Israeli governments suggest that their view is widely shared.

Between the late 1970s and 1990s, I was one of those foreigners who progressively fell out of love with Israel. I became persuaded that the arrogance of its faith in its own military power had induced its people to go far beyond a belief in defending their own society, to support a polity committed to perpetuating a great historic injustice against the Palestinians. Whatever government is in power in Jerusalem, there is a belief that peace with the Muslim world is unattainable; and thus that Israel must resign itself to a future dependent on its military capability rather than on negotiation. Associated with this is a belief that Jewish colonisation of the West Bank is a price the Palestinians must expect to pay for their refusal to make peace.

The most extraordinary, indeed nihilistic aspect of Israeli military policy towards the Palestinians is that it has sought to punish terrorism by deliberately wrecking the economic base of Palestinian society. On its own terms, this has succeeded. Today the only thriving industries in Palestinian territory are human reproduction, terrorism, and the propagation of grievances. The conditions in Gaza are, to us, almost unimaginable. Few have work. Most live in breezeblock barracks. From one year to the next they see nothing that is beautiful except the sea and sky. Hatred for their oppressors has become the only functioning engine of their society. People who have nothing have nothing to lose.

The policies of modern Israel have created the certainty of new generations of neighbours committed to its undoing. The Palestinians' only influence rests upon the power of such weapons as they can obtain, and upon their destructive capacity to broadcast terrorism. Who can be surprised that the people of Gaza elected a Hamas government? No sane society engages an overwhelmingly militarily superior nation on the battlefield on terms which suit the possessor of power. There is no purpose in wasting rhetoric upon moral denunciations of terrorism or even suicide-bombing, especially so when Jewish terrorism played a substantial part in Israel's birth. The Palestinians, together with the Muslim world and many in the west, no longer believe that Israel will grant justice to their people by negotiation; they believe that only force might eventually drive the Israelis to make concessions.

Israel suffers the same frustration on a regional scale as that which afflicts the US globally: the difficulty – some of us would argue impossibility – of leveraging overwhelming military power to make its will prevail upon the Palestinians. The Palestinians are incapable of imposing their own will on the Israelis. But poverty, misery and impotence represent weapons of their own. These things cause Israel to be regarded by a large part of the world as an oppressor.

I often think that Israelis focus too much upon their past, not enough upon their future. In the days when I visited Israel regularly, dinner-table arguments about the nation's strategy became familiar. There would often come a moment when somebody would blurt out – justifying this or that aspect of Israeli policy: "But you've got to understand why we must do this – because of the Holocaust." For more than 60 years, the Holocaust card has been played again and again. Today in Europe, there is not the slightest danger that the unspeakable fate of the Jews in the 1940s will be forgotten. But many people, especially the young, no longer perceive the crimes of Hitler, however monstrous, as providing remotely adequate justification for – for instance – Israeli military excesses in Gaza and the appropriation of scarce water resources at Palestinian expense.

The Holocaust argument is sometimes displaced by a more facile jibe: that those who criticise Israel are guilty of anti-semitism. I have been accused of this myself. Yet I take comfort from the number of Jews who express repugnance about Israel's excesses. Avi Shlaim has dissected the failures and deceits of modern Israeli policy far more convincingly than I could. Rabbi David Goldberg has described Israel's failure to create a plausible successor vision to that of the old Zionists. "Zionism's most important achievement," he says, "was to provide a haven for the escapees and survivors of Hitler's Holocaust." Today, by contrast, few western Jews want to live there. The Zionist claim, that the country is the natural home of Jews, is rejected by a majority of the world's 14 million Jews. Goldberg argues that "Zionists claim that only in their own land can Jews lead a full, 'normal' life without fear of anti-semitism. But the irony of Israel's geopolitical situation is that the average Jew walking the streets of Los Angeles, Golders Green or even Moscow is physically safer than the average Israeli walking in Jerusalem or Tel Aviv."

Many Jews no longer believe that the Zionist concept of entitlement, based first upon Biblical history, and latterly upon the Holocaust, suffices to justify perpetuating historic injustice upon the Arabs of Palestine. Benny Morris's excellent recent history of the events of 1948 shows that even a respected Israeli historian is today ready to acknowledge the scale of Israeli ethnic cleansing at the time, and of the deceits employed since to conceal what took place. The Israeli myth, that the Palestinians displaced in 1948 voluntarily abandoned their homes and property, is unsustainable in the face of such evidence.

An Israeli listening to all this might interrupt angrily: "But why do you say so little about Hamas and Hizbollah, rocketing and suicide-bombing innocent Israeli civilians?" Yes, indeed – such acts must always be condemned. But what of proportionality? In recent years, for every Israeli killed by terrorism, the Israeli security forces have killed 30, 40, 50 Palestinians – most of them civilians. Israel exacts a blood price from the innocent of a severity which only tyrannies have historically thought appropriate.

The entire thrust of Israeli policy towards the Palestinians in recent times has been to convey a crude message of overwhelming power, of Israel's ability to command, kill or destroy at will, without fear of sanctions. The Israeli army, which once exemplified much that was best about Israel, has today been corrupted by the long experience of suppressing insurgency. Morally, if not militarily, it is a shadow of the force which fought in 1948, 1956, 1967, 1973.

Israel has tested to destruction the utility of force in achieving its security. It is not enough to assert proudly that the Jewish state remains a democracy and haven of free speech in a region in which neither of these precious things is much in evidence, if that same democracy behaves in a fashion which denies mercy to the weak. For someone like me, who enjoyed a love affair with Israel 40 years ago, it is heart-breaking to see the story come to such a pass. It is because so many of us so much want to see Israel prosper in security and peace that we share a sense of tragedy that 61 years after the state was born amid such lofty ideals, it should be led by such a man as Bibi Netanyahu, committed to policies which can yield nothing honourable or lasting. Amoz Oz's 1979 prophesy to me has alas been fulfilled. It will be as great a misfortune for Israel as for the Palestinians, if its governments persist in their past delusions through the years ahead.

Extracted from one of the Leonard Stein lectures delivered by Max Hastings. The full text of the speech can be downloaded here