Natural Sovereigns of Iraqi Oil
By Jack Kemp
Copley News Service
December 30, 2003
There is now widespread speculation in the nation's capital that as a result of stubborn Iraqi resistance to the U.S. occupation, American officials have fundamentally altered their plans to "remake" Iraq. Specifically, The Washington Post reported on Sunday, this means "back(ing) away from several of its more ambitious initiatives to transform Iraq's economy, political system and security forces."
"Transforming" Iraq into a completely secular, Western, pluralistic, free-market democracy was never something U.S. occupation forces could hope to accomplish in the near term.
Professional historians may recoil at the simplistic notion, but I believe each society arrives at its present point in history by journeying down a historical path that can never be "transformed" but merely redirected. My instincts tell me that one country cannot be "airlifted" or "transported" to another point in history by another country, no matter how great that country's political, economic and militarily prowess - absent what we accomplished post-World War II.
Our goal in Iraq should have been what Hernando de Soto and I have called a 21st Century Marshall Plan for the whole region. It should not be to "transform" anything but simply to throw a couple of the right switches on the historical track to allow the new Iraqi government to head out along a new path of democratic development. Therefore, our giving up plans to withhold Iraqi sovereignty until a new constitution was drafted to our liking is a very wise decision. Also, working out the thorny relationship between secular political power and Islamic religious authority is something that prudence dictates can only be done by the Iraqis themselves as they come to realize that Sunni, Shi'ah and Kurd all share in the future of Iraq.
The key to economic reform and development in Iraq, therefore, is not to privatize everything immediately but rather to leave the switch to private property rights and free markets open. But there is one important switch to private property and free markets that can be thrown open immediately - privatization of the oil industry the right way.
The Bush administration has scrapped its scheme to convert Saddam's old-style socialist oil industry into a new semisocialist oil industry like the one that exists currently in the state of Alaska. Under the Alaska-fund model, which the administration is said to favor, a certain share of the proceeds from the state-owned oil are placed into a state fund and paid out to citizens as the legislature sees fit. Although these payments are gussied up as "dividends," they are really little more than welfare payments since citizens do not actually own the oil at all, i.e., they do not have title to the land under which the oil resides or the mineral rights to the oil itself, nor do they have property rights through stock ownership in the business enterprise that does.
The Iraqi oil industry is the most economically developed of all industries in the country. It would be a straightforward matter to "privatize" the industry by simply designating the various existing administrative subdivisions of the industry as separate enterprises, each with an Iraqi CEO and board of directors, giving - not selling - an equal share of the stock in each of those enterprises to every Iraqi citizen. Presto, the industry is privatized. And the Iraqi people become shareholders in Iraqi oil products or in the Iraqi oil industry and stakeholders in Iraq's move toward democratic development.
If the new Iraqi government wanted access to those revenues, it would have to levy a tax, not simply dip into them at will. Not only would this arrangement prevent the typical corruption and profligacy that inevitably accompanies state-owned oil industries, but it also would generate enormous centripetal forces pulling the country together as citizens from all religious, ethnic and tribal backgrounds suddenly were given a shared financial interest in private economic enterprises.
The privatization of Iraq's oil should be done immediately, not through the half-baked "voucherized" auction method that failed so miserably in Russia, or the even less-than-half-baked idea of Noble Prize-winning economist Vernon Smith, who would offer the Iraqi peoples' most valuable asset to the highest bidder, whether Iraqi or multinational corporation. Rather, Iraq's oil ought to be privatized along the lines of President Lincoln's fabulously successful Homestead Act in 1862 America, where clear title to 160 acres of federal land was "given" outright to citizens. It was, after all, theirs to begin with, and it is our solemn duty to make sure it stays that way.
Sunday, August 3, 2008
Saturday, August 2, 2008
Iraqi Shareholder Concept
My daughter is a U.S. Army adviser to an Iraqi battalion on her second deployment. I pray that we can resolve Iraq before she deploys a third time. The beauty of the following approach for ending the current impasse in the Iraq Government over the distribution of oil revenues is that it is a largely self-contained, complete, closed-ended, low cost, quick, achievable undertaking with little downside risk. One that would not offend anyone's politics nor interfere with any on-going operation . As my little league coach said 50 years ago, “Get the easy one.”
IRAQ OIL REVENUE DIRECTLY TO IRAQI CITIZENS - BYPASS GOVERNMENT
The Iraqi people can create Iraq, Inc. and convey to it, ownership of all Iraq’s petroleum resources. Each citizen would own one non-transferable share of common stock in Iraq, Inc. The shareholders would elect a board of directors who would manage the company. The company would pay quarterly dividends directly to shareholders. Shareholders would pay taxes. A dynamic would change. The flow of money would reverse. Money would flow from the people to the government rather than flowing from the government to the people.
The immediate advantages would be manifold:
1. End the political impasse about how to divide oil revenue among Iraq’s competing groups.
2. Give Iraqi citizens a vested interest in stopping the sabotage of pipelines.
3. Give Iraqi citizens more power over how their government spends money.
4. Provide some financial security for Iraqi citizens.
5. Empower Iraqi Women
6. End suspicion that the United States is attempting to exploit Iraqi oil.
Follows will be more detailed presentations of the concept including comments from leaders who had been directly involved with the oil revenue distribution issue. The presentation has been favorably received, but the general response was that the Iraq Government would not initiate it. The prospect of a California style national referendum on the issue and serious pressure from the United States may be enough move those Iraq Government leaders who would lose significant power as a result of an Iraq, Incorporated. I recognize that it is a bold move, but it may be a way to resolve the current impasse. Seems doable to me. Certainly less difficult and dangerous than what are doing now.
IRAQ OIL REVENUE DIRECTLY TO IRAQI CITIZENS - BYPASS GOVERNMENT
The Iraqi people can create Iraq, Inc. and convey to it, ownership of all Iraq’s petroleum resources. Each citizen would own one non-transferable share of common stock in Iraq, Inc. The shareholders would elect a board of directors who would manage the company. The company would pay quarterly dividends directly to shareholders. Shareholders would pay taxes. A dynamic would change. The flow of money would reverse. Money would flow from the people to the government rather than flowing from the government to the people.
The immediate advantages would be manifold:
1. End the political impasse about how to divide oil revenue among Iraq’s competing groups.
2. Give Iraqi citizens a vested interest in stopping the sabotage of pipelines.
3. Give Iraqi citizens more power over how their government spends money.
4. Provide some financial security for Iraqi citizens.
5. Empower Iraqi Women
6. End suspicion that the United States is attempting to exploit Iraqi oil.
Follows will be more detailed presentations of the concept including comments from leaders who had been directly involved with the oil revenue distribution issue. The presentation has been favorably received, but the general response was that the Iraq Government would not initiate it. The prospect of a California style national referendum on the issue and serious pressure from the United States may be enough move those Iraq Government leaders who would lose significant power as a result of an Iraq, Incorporated. I recognize that it is a bold move, but it may be a way to resolve the current impasse. Seems doable to me. Certainly less difficult and dangerous than what are doing now.
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