It’s an issue in any economic system. No economy built with any current or near future technology functions without human labor, which people can no longer supply once they get old enough for their health to decline, regardless of who owns what.
I get the idea, and I’m not opposed to things like that, given that they don’t seem likely to worsen the situation and might extract some kind of concession from Israel, but I don’t expect that it’d be likely to actually work. Israel is not, for it’s similarities, exactly the same as South Africa and Nazi Germany (the latter of which, for that matter, didn’t exactly collapse just because of economic sanctions), and sanctions have their limits, else for example North Korea would have collapsed long ago, along with a whole host of other regimes that have gained the ire of significant parts of the world for one reason or another.
Dismantling it unwillingly requires someone doing it have sufficient military power to defeat Israel by force of arms. Who might that be?
It’s also not realistically achievable without somehow convincing Israel to willingly dismantle itself, given that a) a significant disparity of military power exists between it and Palestine, which isn’t likely to reverse any time soon given that it is nigh impossible for Palestine to build an economic base sufficient to rival Israel while under effective occupation and b) that it is an open secret that Isreal possess nuclear weapons, making some kind of foreign invasion suicidally untenable. Actually launching those weapons would be an extremely dangerous move of course, but a state facing a clear and imminent outside threat to it’s existence is exactly the kind of situation where someone might contemplate it.
The most likely thing to work out that I can envision would be if foreign support can at least shore up what remains of Palestine enough to give it sovereignty and at a stretch some means of deterrence against further attack. All that really achieves admittedly is a two state solution, which doesn’t result in a Palestine with particularly favorable geography, but if it results in peace there’s the hope that the hatred involved can cool with time and new generations until some kind of union can be proposed without the resultant state being at risk of collapsing into a genocidal state again.
I think there is something they can do, or more to the point, there’s a reason the birthrate is so low there. I don’t think it’s a coincidence that some of the most overworked countries on the planet have such low birthrates. Taking care of children is labor, unpaid labor at that, that has a lot of other expenses associated with it. What I think they could do, is compensate people for it, not some pittance that doesn’t cover a fraction of the costs of raising a child, but an amount that would actually be sufficient to make having a kid or not, with a parent (either parent) home at any given point for them, a financially neutral decision for a family (to include the opportunity costs of not working) rather than a very expensive one.
Evolution being what it is, it would seem implausible for the average number of kids people actually would want to have, if it wasn’t a burden on them, to be lower than replacement, else the human species wouldn’t have come to exist in the first place. For individual people, sure, everyone has their own feelings on the matter, but averaged across society, one would expect most people to desire kids enough if they could manage it to keep the population at least stable.
It would be incredibly expensive, yes, and so the tax burden it would create would probably be unpopular, especially among people that didn’t personally gain from it, but continuing the status quo is nothing less than extracting the abstract resource that human labor can be thought of as, at an unsustainable rate. That situation will either end willingly or it will end in collapse.