A similar point was made by Jonathan Chait in "No Pain, No Gain in the Middle East":

Well, guess what? The Americans and Israelis demanded Arafat's removal. And credible Palestinian leadership did step forward. To be sure, luck — in the form of Arafat's timely death — intervened. Still, we now can see that negotiating with Arafat would have been folly. And President Bush, despite his many — almost innumerable — failings, deserves enormous credit for backing Sharon despite intense international pressure.

The doves got it so wrong because they fundamentally misread the situation. The idea that harsh Israeli counter-terrorist measures must inevitably backfire is rooted in the view that the Middle East conflict is a "cycle of violence." (No doubt you've heard this phrase countless times.) According to this theory, Palestinians attack Israelis because Israeli repression makes them desperate and angry. More repression creates more desperation and anger, which creates more terrorists. Yet the last Palestinian uprising began as a response not to excessive Israeli strength but to a perception of Israeli weakness.

In 2000, Israeli Prime Minister Ehud Barak withdrew his army from Lebanon in response to continued attacks. Later that year, he made concessions to Arafat in a noble but doomed effort to sign a peace accord. Arafat interpreted both these things as a sign that he could win even more concessions by unleashing a terrorist campaign.

Sharon's counteroffensive stymied Hamas and the other militant groups and proved to many ordinary Palestinians that they couldn't bleed Israel back to the bargaining table. Indeed, Palestinians came to realize that their uprising was inflicting far more pain on them than on Israel. That doesn't make the suffering of innocent Palestinians any less tragic. But it does suggest, cruelly, that some pain was probably necessary not only to stop terrorist attacks but also to persuade the Palestinians to elect a moderate like Mahmoud Abbas, who would renounce violence.

It must have quite painful for Chait to have to admit that. But as much as I'd still express serious mistrust of Abbas - as Krauthammer does - I think this is correct. What's odd is that this is not conventional wisdom. Most commentators seem to attributed the current thaw between Israel and the Palestinians on Arafat's death. Krauthammer was right in calling that a necessary but insufficient condition for negotiations. Others, though, do all they can to muddy this point - that Israel's counterattacks and wall were necessary to get the Palestinians to seek peace.
Hirsh Goodman of the Jerusalem Report is one. On All Things Considered, this is what he attributed the seeming Palestinian interest in calm (via IMRA):

Yes, there's no question about it, this is the real turning point. And I think the four years of fighting have made it a real turning point. It's a horrible thing to say, but sometimes wars are necessary. And I think that this war's allowed Israelis and Palestinians to speak eyeball to eyeball rather than the Palestinians being on their knees and us dictating an agreement to them.

This is truly chilling. The Palestinian needed to feel like equals? Former PM Barak didn't do that?
Eyad Sarraj, considered a moderate in Gaza wrote:

I have spent many years observing Hamas at close range as it has grown from a small Islamic religious movement into a major army. I have been debating politics with its leaders and members for a long, long time. That experience leads me to believe that Hamas will very soon transform into a political party and will seriously contemplate taking over the government by democratic means.

There are sound reasons for my optimism. The first is that Hamas finally has an incentive to halt terrorist activity. For years, its raison d'etre has been military action. But Hamas has just achieved an astounding victory in municipal elections in the Gaza Strip, winning 70 percent of the seats in local councils. Fatah, the ruling party that had long dominated the political scene, was roundly defeated. Hamas has a guaranteed political future when it chooses to abandon the armed struggle.

Furthermore, close observers have noted important signs of change within Hamas over time. From remarks made by its spiritual leader, Sheikh Ahmed Yassin, before his assassination last year, we understand that Hamas is now prepared to accept a two-state solution to the Israeli-Palestinian conflict. And as the recent elections showed, Hamas now participates fully in the democratic process -- something that it once called a Western conspiracy, and even a sin.

Hamas is becoming more organized, more sophisticated and more confident in itself. For example, in the first intifada, Hamas was quick to charge people with collaboration with Israel and to kill them. That was a sign of insecurity. The Hamas of today pledges not to kill fellow Palestinians, but instead urges the Palestinian Authority to enforce its laws.

Hamas was moderating? Killing is a sign of insecurity? Hamas was forced into moderation with the successive killing of its two leaders. But it still regrouped for further terror attacks. Still it has been seriously weakened. Under Arafat it was operating with impunity.
Krauthammer and Chait have it right. The PA was forced to moderation by the Israeli counterterrrorism efforts. Whether that will lead to actual peace is an open question. It was the reason that anything happened at all.
Crossposted on Israpundit and Soccer Dad.