Why was the Palestinian Authority Established?

Neither Israel nor the PLO signed the Oslo Accords in good faith. The PLO was founded to destroy Israel and has never abandoned its Anti-Zionist zeal to destroy the Jewish state. Israel of course was keenly aware of this fact but sought to unburden itself of military administration of millions of Palestinians. Palestinian autonomy was already agreed upon in the 1979 Egypt-Israel peace treaty. This was notably a peace agreement concluded by a Likud government in showing that the plan to establish Palestinian autonomy was not partisan but was long planned by the Israeli security establishment. 

Israel traditionally had three peace options:

1. The Jordanian Option meant Jordanian annexation of most Palestinian areas of Judea, Samaria and Israel, plus Gaza. Israel would retain all Jewish communities in Judea and Samaria. Israel had originally intended to retain the former Jewish communities of Gaza as well. However, while Jordan is a trustworthy and reliable peace partner, Jordan would not agree to Israel retaining Arab areas of East Jerusalem as well as the Temple Mount and would not officially cede the claim for millions of Palestinians to immigrate to Israel. Furthermore, the viability of the Jordanian monarchy is not guaranteed and an Islamist revolution could unseat it at any time just like the Iranian monarchy was unseated by the Islamist revolution of 1979. This would once more open up the eastern front. Were the Jordanian monarchy to fall from power, then Israel would have no choice but to defensively reoccupy all areas up to the Jordan River and would this time be a foreign occupier. The Jordanian Option was clearly not viable. 
2. The Palestinian Option meant that there would be a Palestinian state in most Palestinian areas in Judea, Samaria, Israel, plus Gaza. Israel would retain all Jewish communities in Judea and Samaria and had originally intended to retain the former Gaza Jewish communities as well. The problem remains that the Palestinian movement seeks Israel’s destruction and is not shy to officially and publicly state so all the time. The Palestinian movement has simply no interest in concluding an end-of-claims final status agreement with Israel. The establishment of a Palestinian state alongside Israel would require establishing a ruthless proxy regime subservient to Israel. Such a regime would not be widely internationally recognized and certainly not by the Palestinian people. Such a state would not have a border with Jordan. This is not a viable option.
3. The Israeli Option originally involved not only an Israeli annexation of the entire Judea and Samaria but also the entire Gaza. However, Palestinian fertility rates did not fall as quickly as hoped for and there has been no major wave of Jewish immigration from Western countries. This led to the 2005 disengagement from Gaza. The documented rediscovery of core Median Jewry in 2014 means that the Israeli Option is the only remaining option. The other options are simply neither realistic nor viable. 

Israel recognized already in the 1970s that it needed an interim solution to manage the security solution until the demographic situation was such that it could implement the Israeli Option. Israel counted on Ultra-Orthodox fertility rates causing a demographic revolution and hoped for Western Jewish mass immigration. Israel knew that Palestinian autonomy would probably last for decades but it was never designed to be permanent. The Palestinian Phased Plan (The PLO Ten Point Plan) envisioned the establishment of a Palestinian National Authority on some lands as a transitional stage on the path towards the destruction of Israel. Israeli strategic planners saw a tactical convergence between Israeli and Palestinian interests and decided to establish a Palestinian autonomy under the guise of a so-called “peace process”. The Israeli government knew perfectly well all along that it would face a wall of rejectionism once it reached the stage of final status negotiations but permanently turning the PLO into collaborators was nevertheless deemed a worthy stratagem which ultimately turned out highly successful.

Of course as we know now the Israeli plan worked but the Phased Plan did not since the scattered autonomous archipelago did not turn into a strategic threat against Israel as the Palestinian Authority remains highly dependent on Israel for everything. 

It is important for the international community to be cognizant that there was never a chance for a two-state solution, this was never possible. It is also true that both sides have systematically misled the international community about their respective strategic intentions.

There are currently only two options for the future and these are either a) continuation of the status quo and b) Israel redeeming and enfranchising the entire Judea and Samaria with Jordan subsequently annexing Gaza. Of course, this change cannot happen until after ten million Median Jews have immigrated to Israel and so it cannot be implemented immediately. However, there is no question that most of the tens of millions of Median Jews in the Middle East, Africa and China will be very eager to immigrate to affluent Israel once obstacles to their immigration have been removed.