Benjamin Netanyahu can say whatever he wants to distance both himself and any "official" Israeli position from Avigdor Lieberman's speech to the United Nations; but the content of Lieberman's speech is the moral equivalent of toothpaste out of the tube, not to mention the truly Faustian bargain that Netanyahu had to make in order to form a government in the first place. Were this sort of thing happening in any other country, we would declare the inability of a prime minister to exercise control over any member of his cabinet, particularly a foreign minister, with a broader view of national interest in mind to be evidence of a "failed state." In this case, however, the country is Israel; and even the faintest suggestion that such a phrase may be applicable is as off-limits as photographs of Franklin Delano Roosevelt on crutches used to be.
The good news is that there is at least one Israeli who knows how to take stock of a situation like this. His name is Avishai Margalit, he is Professor Emeritus of Philosophy at the Hebrew University of Jerusalem, and, for the purposes of this argument, he is the author of the book On Compromise And Rotten Compromises. His Wikipedia entry provides an excellent summarization of the thesis of this book:
The book  deals with political compromises: what compromises are morally acceptable and what are to be rejected as unacceptable, or "rotten." The argument of the book assigns great value to the spirit of compromise in politics, while warning against rotten ones. A rotten compromise is taken to be a compromise with a regime that exercises inhuman policies, namely systematic behavior that mixes cruelty with humiliation or and treats humans as inhuman.
If we accept Max Weber's thesis that the study of politics is basically the study of the power to exercise authority, then, from a political point of view, the noun "regime" can be applied to a political institution within a country, as well as to the country itself. This is an important perspective, since every coalition government is a product of compromise and therefore should be subject to Margalit's criteria for "rottenness." With these criteria as a guideline, we should consider the BBC account of Lieberman's remarks to the United Nations:
In his speech, the leader of the right-wing nationalist Yisrael Beiteinu party said the Israeli-Palestinian conflict hinged not just on practical issues but on "emotional problems", such as the "utter lack of confidence".
"That is why the solution should also be a two-staged one," he said. "We should focus on coming up with a long-term intermediate agreement, something that could take a few decades."
"We need to raise an entire new generation that will have mutual trust and will not be influenced by incitement and extremist messages."
He also said the guiding principle for a final agreement should not be "land for peace, but rather exchange of populated territory".
"We are not talking about population transfer but about defining borders so as best to reflect the demographic reality," he added.
Mr Lieberman said the "other misguided argument is the claim that the Palestinian issue prevents a determined international front against Iran".
"In truth, the connection between Iran and the Israeli-Palestinian conflict is precisely reversed. Iran can exist without Hamas, Islamic Jihad and Hezbollah, but the terrorist organizations cannot exist without Iran."
"Relying on these proxies Iran can, at any given time, foil any agreement between Israel and the Palestinians, or with Lebanon."
What may be most important is that, in the midst of his laundry list of terrorist organizations, Lieberman has scrupulously avoided the use of any language that recognizes any of the people involved. He thus applies the rhetorical device, which seems to be particularly popular among conservatives representing the vested interests of the powerful, of "objectifying the subject," keeping off the table any recognition that this is a matter of human beings taking motivated actions. To deny any consideration of motive is, in Margalit's framework, to treat the acting human as inhuman. To this we may then at least hypothesize factors of cruelty and/or humiliation behind Lieberman's talk of "demographic reality."
In the context of this reading of Lieberman's text, the walkout by Palestinian delegates during his speech is entirely understandable. However, I would take issue with Permanent Observer Riyad Mansour's effort to be diplomatic about the affair, telling a Reuters representative:
This man is completely detached from political reality.
On the contrary I would suggest that Lieberman understands the political reality all too well. He knows that he has gotten his position through a truly rotten compromise, he appreciates the power now at his disposal, and he has never been shy about exercising that power from the time of his appointment. This is nothing more than his recognizing another opportunity to recognize that power. He is the metaphorical leopard whose spots can never change.
From this point of view, "failed state" rhetoric misses the point. More important is that the Israeli government has sanctioned the formation of a power structure through a rotten compromise. How, then, are the other governmental institutions of the world to deal with this structure? Can they arrive at a consensus, with or without the United Nations as a setting for debate; or will they just muddle along with the status quo, as they have traditionally been wont to do? When we consider just how drastic the consequences may be (not to mention those consequences that have already ensued), muddling certainly does not seem like an option for the well-being of the world at large; but, like it or not, it may be as inevitable as entropy.