Now that Coalition forces have tossed the Saddam Hussein administration face down onto the sand dune of history, building a free and prosperous Iraq is an urgent priority. After physical security is reestablished and clean water flows once more through Iraq’s indoor plumbing, American and allied officials should help Iraqis institute a system of constitutionally protected property rights. Without the freedom to own and control their possessions — from modest homes to investment portfolios — typical Iraqis again could find themselves staring hungrily into the lavish palaces of local kleptocrats. Most important, Iraqis deserve individual ownership of their country’s oil wealth.
”For Iraq, this means doing the groundwork for all citizens to obtain property legally, including those who traditionally operate in the informal sector,” such as street vendors and home-based entrepreneurs, says Frances Brigham Johnson, cofounder of the Washington, D.C.-based International Property Rights Working Group. Absent such basic liberties, Johnson warns, “elections will set the stage for a new dictatorship over disenfranchised voters, much like the economic stranglehold Robert Mugabe wields over Zimbabweans.”
Coalition political and development personnel should advance the basic building blocks of a property-rights system: independent courts (for the enforcement of contracts and peaceful settlement of disputes), professional police officials (to protect people and property and enforce those courts’ rulings) and a free press (to assure that these matters unfold transparently). Low, simple taxes, reasonable regulations, and a strong, stable currency are all vital, too — despite advice to the contrary from the World Bank and International Monetary Fund.
A robust property-rights system must let Iraq’s 24 million citizens own their nation’s 112 billion barrels of oil, worth some $3.3 trillion at world prices. Petroleum constitutes more than 60 percent of Iraq’s gross domestic product and a staggering 95 percent of its hard-money revenues.
Rather than receive shares in a state-run oil behemoth or a single, privatized mega-monopoly, Iraqis should get stock in several, smaller concerns. Today’s Baath-soaked Iraqi National Oil Company should be divided by function, perhaps into separate firms for exploration, drilling, pipelines, port operations, shipping, and natural-gas production.
Shareholders could earn dividends as fossil-fuel income and related revenues flow in. Equities in these companies could be exchanged on trading floors from Baghdad to Broadway. Buying, selling, and bequeathing these shares could help rank-and-file Iraqis build private wealth. These stocks could collateralize such things as business development or even educational loans. Iraqis also could sell these stocks to generate capital or purchase portions of other Iraqi companies, new or old.
Letting Iraqi individuals own a majority stake in their nation’s subterranean fortunes would keep this black gold out of the clutches of corrupt politicians, unlike the way it was throughout Saddam Hussein’s blunder years. Widespread equity participation, and the corresponding diffusion of affluence, will set a fine example for other Middle Eastern states where petroleum belongs to plutocrats rather than the populace.
“Without private ownership, however, oil will remain politicized and mismanaged,” argue Heritage Foundation scholars Ariel Cohen and Gerald P. O’Driscoll Jr.
Cohen, an NRO contributor, and O’Driscoll suggest models they believe Iraq should emulate (they wrote up their argument on NRO in December). Yukos and LUKoil are two thriving, privatized Russian petroleum companies that squeaked along until Marxism-Leninism collapsed around them in 1991. Russian oil workers are among those who have enjoyed seeing Yukos gush from $2.15 at its June 18, 1997 listing on Moscow’s RTS Stock Exchange to $10.40 this April 16.
LUKoil, meanwhile, has grown from $5.70 on September 1, 1995 to $15.55 on Wednesday. LUKoil bought Getty Petroleum Marketing’s 1,300 U.S. gas stations in November 2000 and has started to substitute its logo for Getty’s at those facilities. Amazingly enough, LUKoil has moved from Soviet Communism to a street corner near you in just 12 years.
If spreading the petroleum wealth works in Moscow, why not in Mosul? Besides, distributing petroleum equities to Iraqi citizens will confound the anti-liberation protesters who hollered, “No blood for oil” and “How many deaths per gallon?” Half the joy of this proposal springs from helping regular Iraqis enrich themselves. The other half will involve watching geopoliticians like Tim Robbins and Susan Sarandon squirm at an idea President Bush legitimately could call “Power to the People.”
— Mr. Murdock is a columnist with the Scripps Howard News Service.