stan,
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They were not Palestinians in the beginning. That identity was formed in 60s. Prior to that, they never thought of themselves as "Palestinians" like they do today. Arabs had come and gone from this territory without particularly identifying with it for centuries. That identity was only formed when their fellow Arabs would not integrate them into their own countries, and through suffering that common hardship of rejection.
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sure, but that is not to say there was no arab inhabitants whom had been living in what was to be the state of israel at the time. israel did not come into being in an utterly unclaimed and empty land, and so of course arises the current troubles, perpetuated by primarily the fantasies of the descendants of the dispossessed and secondarily by the ultra-orthodox jews thinking the land either empty or theirs by right of God anyway.
i wonder what would have happened had the US in the 1930s decided to grant a homeland for jews in alaska (it was a bill at the time). hard to imagine what would be palestine as a sleepy bywater.