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Taking your chain one step at a time here: The prosecution of Torah violators (whatever that means) will almost certainly not leas to the depletion of those violators (whatever that means). At best, laws that attempt to prohibit things people frequently do (like drug laws, as opposed to laws prohibiting murder which punish acts everyone basically agrees are wrong) at best shift equilibria for the amount of crime committed, they don’t eliminate them entirely, and even then it’s kind of iffy. The best you can hope for is that some Torah violators, by and large the most productive ones, will leave Israel as quickly as they can.
Couple that with your next step, isolation from western culture, and you’re looking at an economic collapse. It’s hard to believe that fifty years from now the world at large will be less interconnected than the current one is, so leaving the grid would make everyone in Israel a lot poorer.
Let’s say though that the State of Torah doesn’t really mind that and decides to reinvent itself as an insular agrarian state, since producing food is something that’s necessary and basically possible to do without relying too much on the outside world, assuming you solve for Israel’s water problems (and ignore that the only real models for a modern country trying to do that are North Korea and China under Mao). As a bonus, an agrarian state is something the Torah gives a pretty clear blueprint for.
The next step doesn’t follow at all. It’s hard to see the Torah State not falling into sectarian divisions pretty quickly, between Sephardim and Ashkenazim, Chassidim and Litvishers, etc. etc. etc. The Gadol HaTorah running the government could attempt to unify things, but what authority would he actually have to enforce his ruling? Are we reinstituting the Sanhedrin here? Semicha? Regardless of demographic shifts none of those things are going to get done with creating even more crippling sectarian divisions.
So what you’ve got is effectively a smallish, poor, agrarian state where the communities tolerate each other to various degrees, never really fighting but probably frequently engaged in serious disagreements over objectively minor matters. Lots of people are going to work hard to produce food for the population, and, at least as a percentage of the population, yeshivos will be decimated.
The world I described looks a lot like Europe at the turn of the last century. The OTD problem there was a lot worse than it is now.