Jews left Palestine about 2,000 years ago! All this time the Palestinians were left alone (except for an occasional Crusader intrusion) to live happily worshiping Islam. All the way until after WWII.
However, one Islamic scholar said that the role-model Taliban were "pure Muslims." Islam is not just a religion, it also teaches a way of life -- the way they lived in the 7th century. Everywhere where Islam became a theocracy the country took a leap backwards in time -- a few hundred years...like Iran and Afghanistan.
This has nothing to do with outside, but purely with the "ideal" as seen through the Koran and numeorus Hadiths and Suras.
PS blaming underdevelopment on one event is naive to say the elast. Another favorite theory is that colonialism caused backwardness in Africa. Well, Africa was un-colonized until the 19th century, and Ethiopia was not colonized until 1930's and then only so brielfy by Italians. What in the world stopped Africa in general, and Ethiopia in particular, from becoming propserous and productive areas of the world for the past 10,000 years? Probably the same thing that stopped Palestinians from reaching their goals for the last 2,000 years.