By doing a little research, and playing some games with Google Books snippet view, I was able to find the full quote:
The idea itself is natural, fine and just. Who can challenge the rights of the Jews in Palestine? Good Lord, historically it is really your country. What a wonderful spectacle that will be when a people as resourceful as the Jews will once again be an independent nation, honored and complacent, able to make its contribution to needy humanity in the field of morals, as in the past.He wrote this in a letter to Zadok Kahn, the chief rabbi of France.
When Benny Morris quotes it in One state, two states: resolving the Israel/Palestine conflict, he distinguishes this quote as an exception to the Palestinian Arab denial of Jewish claims that rose concurrently with the idea of Palestinian Arab nationalism. It is not an exception, however, since the quote pre-dates popular Palestinian Arab nationalism by at least a couple of decades.
But Morris does make a good point:
An apt indication of this denial was provided by the Jerusalem Christian Arab educator Khabil al-Sakakini, when he fulminated in 1936 that the British Mandate's new radio station referred to the country in Hebrew as "eretz yisrael" (the Land of Israel), "If Palestine [falastin] is eretz yisrael, then we, the Arabs, are but passing strangers, and there is nothing for or to do but to emigrate," al-Sakakini jotted down in his diary.In other words, denial of history is an integral part of Palestinian Arab nationalism. The movement is, to a great extent, predicated on a very basic lie.
Arabs like Khalidi knew Jewish history in the Land of Israel very well, but it became virtually forbidden to acknowledge this history a mere three decades later, because that very fact helps to undermine the entire Palestinian Arab national enterprise.
Yet the British did not have that sensitivity, as the initials for Eretz Yisrael could be seen in Mandate-era coins and stamps in Hebrew even before Sakakini noticed it:
UPDATE: Elder of Lobby tracked a more complete version of the Khalidi quote, from Morris' "Righteous Victims," showing that the mayor was hardly happy about the prospect of Zionism:
"It is necessary, therefore, for the peace of the Jews in [the Ottoman Empire] that the Zionist Movement ... stop.... Good Lord, the world is vast enough, there are still uninhabited countries where one could settle millions of poor Jews who may perhaps become happy there and one day constitute a nation.... In the name of God, let Palestine be left in peace."