With apologies to Cat Stevens, this is a question that the National Religious movement now seems to be asking itself. The linked article in Ynet just reinforces what has been developing over the last 3-4 years. Of course, it's not a new question and since the retreat from 'Aza, one that has to have been foreseen.
One must remember that the original purpose of the Mizrachi movement was to create a synthesis between Torah observance and Zionism, to create a philosophy that saw the return to Israel to create an authentic Jewish state as an expression of one's Judaism just like kashrus and Shabbos.
Yet for some reason this synthesis has never been particularly successful. Perhaps it's because the two groups that it draws from, the secular Zionists on one side and the Chareidim on the other, both believe there is no room for compromise in their particular beliefs. This lack of support, and the not infrequent campaigns to delegitimize the National Religious community, have been all too successful over the years.
Despite this the community muddled on, providing an example of what Judaism could be at its best, even if no one outside the movement seemed interested in learning from it.
But something happened after 1967 that led the movement astray. While I will agree that the retaking of Jewish land from our enemies was a historic miracle and gift from God, and that the resettling of that land which had been stolen from us in the 1948-49 war was and is still a major Jewish priority, the National Religious movement went further, making it the priority. And this has ultimately led to a decline in the movement which I hope and pray is not irreversible.
The major catalyst for the acceleration of the decline in recent years was Ariel Sharon's decision to cover up his impending corruption charges by expelling loyal and hard-working Israeli chalutzim from their rightfully owned lands in 'Aza and northern Shomron. Until that time the National Religious movement had seen the state of Israel as reshis tzimchas ge'ulaseinu, the first flowering of our redemption, and invested a religious importance to it. For that same state to then turn around and attack the National Religious movement was a tremendous blow. After all, the Chareidim had been warning for years that the state of Israel was iredeemably not reflective of any Jewish values (not that this stopped them from demanding as much money as they could from them) and that, given the chance, it would have no ethical difficulties betraying the National Religious community if it needed to. But when it actually happened, the shock throughout Mizrachi was unprecedented.
As a result, disengagement amongst the youth of the movement became an unavoidable consequence. One cannot raise children to pray for a state, believe in its holiness, and then not expect massive disillusionment when the state then spits in their collective faces. This happened as a result of a misunderstanding of the role the state of Israel plays in the unfolding of our final redemption.
We must remember the state of Israel, as miraculous as it is, is but one step towards God returning us to our loand with true sovereignty and a rebuilt Temple, may it happen speedily in our days. The state, however, is not the end-all and be-all of this process and to see it as such, to invest it with that importance, leads to delusions that can only be cruelly shattered.
Are the Chareidim right? I must emphatically answer: No!
The job of Mizrachi has never been to support a secular state of Israel, especially not the corrupt and barely competent one in existence today. Its mission was and is to work towards reaching out to our secular brothers and showing them that the true destiny of the Jewish people is to rebuild a Torah state in the land of Israel run on God's values of truth and justice. It is to influence and educate so that all our people will come to see God's hand in history is with us visibly today. If the National Religious movement wishes to regain any of its strength instead of withering into a fringe movement, then it must quickly change course - it must educate its children that they are not meant to be just chalutzim on hostile hilltops surrounded by our enemies but inspiring examples. Our Judaism is the real Judaism. Our Torah is the real Torah and the sooner we imbue our children with a sense of pride and an understanding of those two principles, the sooner we can move forward and allow the final redemption to continue to unfold.