Yesterday in a Wall Street Journal article, “Plan for Iraq: Shareholders Don’t Shoot Each Other,” Charles Wolf, Jr., a long-time economist with the RAND Corporation, suggests something similar to an April 2003 article I wrote suggesting that the Alaska Permanent Fund model might create more cohesivness among Iraqis, prevent the return of kleptocracy in Iraq, and build a class of political and economic winners that is an essential part of any successful occupation (and there are very, very few).
Here is part of Wolf’s article:
Privatizing Iraq’s oil assets, and vesting all citizens with shares, can provide incentive for every Iraqi — including Sunnis, the insurgency’s core — to view commerce as a better path than violence. Ownership would provide 28 million citizens with a prospective increase in per-capita income of about $5,800, substantially raising their present income. This is unlikely to persuade hard-core terrorists to change course. But turning all Iraqis into stockholders of the nation’s oil wealth can win over the support of the bulk of the Sunni population that now backs the insurgency through provision of foot soldiers, intelligence, cover, safe houses or passive acceptance.
Iraq’s oil reserves, estimated at 115 billion barrels, are the world’s third-largest after Saudi Arabia and Iran. However, the geographic location of these reserves within the ethnically divided federal Iraqi state presents a problem: 80% of the oil is located in southern Iraq where the Shiites, who constitute 60% of the population, predominate; 15%-18% of the oil is in northern Iraq where the Kurds, who constitute 20% of the population, are concentrated.
Less than 5% of reserves are located in Al-Anbar, Nineveh and Salahuddin provinces, where most of the 20% of the population that is Sunni lives.
In a federal, democratic Iraq whose majority is Shiite and whose most lucrative assets are located in areas where Shiites and Kurds predominate, the future appears gloomy for Sunnis when benchmarked against the Saddam years, in which Sunnis had it all: privilege, status, as well as the oil assets regardless of their geographic location.
A readily, though perhaps not easily, available innovation can go a long way toward redressing this portentous Sunni outlook. At present, oil assets are a government monopoly.
Privatizing them and giving every Iraqi an equal share in ownership can be accomplished by turning over the assets to private companies — two in the south and one each in north and central Iraq — and vesting all citizens with equal shareholdings in each company, e.g., five or 10 shares issued to each Iraqi in each company. Shares could be traded at market-determined prices, but trading would be limited to Iraqis, at least for an initial period of 5-10 years, after which the market might open to foreign participation.
When I wrote my New York Times article, there was quite a bit of attention paid to the idea — and many, many endorsements from both Republicans and Democrats and editorial boards around the country. According to the New York Times‘ John Tierney, who later did a story on the proposal, calling it a “wonky idea with mass appeal,” about 3/4 of the then Iraqi Governing Council liked the notion.
What I learned later is that Ahmed Chalabi and his minions were lurking in the background preempting any serious move towards such a proposal. Some have recently reported that Chalabi, who now serves as Iraq’s Deputy Prime Minister, is now positively predisposed to the concept.
But be careful, if Chalabi now likes the idea, those implementing it must make sure that Chalabi’s brand of structural corruption and fraud does not find a way to milk these privatized assets for Chalabi’s corrupt purposes.
Wolf’s proposal, in general, should have been implemented early in the occupation. But now, it may be too late. Forces have been unleashed that won’t allow Iraq to congeal along old lines, once forcefully and ruthlessly held together by Saddam Hussein.
— Steve Clemons
