Wednesday, June 22, 2005

Guest blogger: Oil for the People - The Iraqi People 

As the latest guest blogger on Chrenkoff, I am proud to bring you Boston-based financial writer Lenny Glynn, who has been a staff editor at "BusienssWeek", Senior Writer at "Institutional Investor" and European Bureau Chief for "Global Finance Magazine". In 1992 he served as a campaign speechwriter for then-Governor, Bill Clinton.

As efforts to build Iraq's political future, and to include the Sunni minority in the process, continue, Lenny Glenn proposes a scheme which would give every Iraqi a stake - literary - in their country's future. So let's make Iraq a war for oil - for all Iraqis.

Oil for the People - The Iraqi People

As vicious as the post-Saddam struggle for power in Iraq is, there is a powerful political weapon that no party or faction in that country has taken up - yet. Once deployed, this weapon could, at a stroke, undercut the insurgency, promise the vast majority of the Iraqi people a far richer future than any they have known and create a powerful, long-term force for democracy, national unity and economic development.

The weapon, of course, is oil. The way to deploy is to offer to share this vast wealth with the Iraqi people - directly - just as the State of Alaska shares surplus oil revenues through the Alaska Permanent Fund with its 600,000 citizens.

To that end, an Iraqi political party or leader could declare that it seeks to write into the country's constitution a provision creating a new national investment fund - call it The Iraqi People's Freedom Trust - which would be credited with a substantial share of all future Iraqi oil earnings. Initially at least, revenues directed to the Trust could be invested mainly in Iraqi government bonds, which would spur the development of the public debt market and leverage the central government's asset flow. A sizeable cash reserve could be held to cover future withdrawals by individual Iraqis.

All 25 million-plus Iraqis - men, women and children - should to eligible to claim an equal, personal investment account in the Freedom Trust. All they need do would be prove Iraqi birth and pledge allegiance to the government. Adult citizens should be free, at any time, to ask for a calculation of their account's value and withdraw up to their full balance - no questions asked. The majority of assets, those held for minors (Iraq's median age is 19) would be held in trust, bearing interest, until the owners came of age.

Such a proposal would have a powerful impact, even as just a campaign promise.

For the first time in the history of Iraq, indeed, of oil nations generally - a new set of leaders would be offering every Iraqi citizen an ownership stake in the country's vast oil wealth. Iraq's 113 billion barrels of proven oil reserves and 3 trillion cubic meters of natural gas constitute a multi-trillion dollar treasure. Yet this national patrimony, long-since nationalized - allegedly on behalf of the people - has been routinely abused and looted in the past.

The promise to create a Freedom Trust would distinguish its proponents as genuine reformers, seeking to break with the old pattern of statist, top-down control of Iraq's natural resources. As in many oil-rich nations, state ownership has formed the material base for tyranny - enabling whatever faction controls the government to do what Bertolt Brecht once joked about: effectively dismiss its own people.

Holding control over oil revenues that account for the vast majority of GDP - and for 95% of Iraq's foreign exchange earnings - has enabled the central government to dominate and manipulate civil society - doling out jobs, contracts, favors and privileges, buying weapons, building palaces - while remaining wholly beyond popular accountability. In that negative sense, as in many other oil-rich nations, Iraq's black gold has been the key object - and corrupter - of Iraqi politics throughout the Saddam era up to and including the oil-for-food program administered by the U.N.

By contrast, any system that declares a significant share of Iraq's oil revenues to be the personal property of the Iraqi people would create both a powerful material base for democracy and a strong incentive for public accountability and transparency in the production - and use - of the nation's natural wealth.

The precise institutional form that such a system might take is less important than the principle that Iraq's natural wealth should belong, by right, to its people first of all, not to whatever faction currently holds state power. As Nobel Laureate Vernon Smith of George Mason University wrote last year in supporting the handover of all of Iraq's natural resources to popular ownership: "The details, if wrong, can later be repaired. The principle, once corrupted, can never be re-instated... The principle of individual ownership (must) be primary."

The actual adoption of such a plan would have both immediate and compounding benefits. For example, it would give all Iraqi women direct, personal claims on wealth - a real first. It would also jump-start spending, investment and bottom-up economic development even in remote regions much faster than any centralized aid scheme. Poor and rural Iraqis, who have never seen a dime's worth of the wealth extorted by top-level Ba'athists, would have a strong incentive to register for accounts in the Trust and claim their fair share. Word of the first cash redemptions from the Trust would soon give all Iraqis - whatever their ethnicity, sect or tribe - a strong, equal, bankable and growing stake in the country's future stability.

We're not talking small money here. Even amid ongoing war and sabotage, Iraq today pumps over 2 million barrels of oil a day -– roughly $80 million a day or more than $28 billion worth a year at $40 a barrel. A more stable Iraq could pump 5 million barrels a day or more - nearly $45 billion a year even if prices were to fall to $25 a barrel. Even after accounting for the oil industry's costs and domestic consumption, crediting one third or more of future net revenues to a Freedom Trust would ensure every single Iraqi a growing wealth stream worth hundreds of dollars a year. That is serious money in a country whose per capita gross national product is calculated by the CIA at roughly $1500.

More importantly, the campaign to establish a Freedom Trust could redefine what's truly at stake in the country's current civil war. It would offer every Iraqi not only freedom in the abstract but an income to make concrete use of that freedom while also watching future wealth build up in trust for their children. "Insurgents" could be redefined as what they are - a congeries of factions struggling to reestablish their power to loot Iraq's wealth - perhaps the first "National Re-enslavement Front" in history. "Oil for the People" could trump the appeal of Ba'athists and jihadis alike. Certainly it is a slogan - and a policy - that anyone can understand.

Creating an "ownership society" in Iraq could not only fuel democracy in one country. It could set a worthy example for other oil-rich nations. It could help secure a lasting peace, grounded in commonsense, Rawlsian justice. Such an outcome might, in some measure, redeem the sacrifices that Iraqis, Americans and our coalition allies are now enduring.


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