Everything is economics. Every decision that a person makes takes a cost in what the decision requires, what you can't otherwise do, and whatever penalties come of it, and a benefit in the good things that come and the bad things that don't happen. In Iraq, we are trying to establish the some of the good thing we have in America, rule of law, personal liberty, etc., in the hopes that Iraq can earn some of the posperity that we take for granted and show the rest of the region that it is the structure of their governments and not the US that is holding them in poverty.
If the Iraqi method is to make the situation suitable for the carrot, the Palestinians are learning the sting of the stick. The intifada against Israel is causing vast increases in poverty. Granted, the Palestinian situation was not great to begin with, but when a person has little, they tend to be more dependant upon it. Whatever authority there is in Palestine is going to have to keep an eye out on their own. If they get hungry enough, and see the means to food with the other side, Hammas et al. are going to get a revolution, just not in the direction they wanted.