- The Washington Times - Saturday, June 2, 2007

For a first-rate solution to Iraq’s problems, just ask a second-tier presidential contender. Former Gov. Tommy Thompson, Wisconsin Republican, proposes that Baghdad open personal oil-revenue accounts for every Iraqi.

“I would split the oil reserves — one-third to the federal government, one-third to the [18] state governments, and one-third” to the citizenry, Mr. Thompson proposed at MSNBC’s May 3 Republican presidential debate.

“If every man, woman and child is getting part of the oil proceeds, they will have a vested interest in their country.” He adds by phone: “This is the best way to build the country and secure the peace.” This idea belongs in the “hydrocarbon framework” currently before Iraq’s Parliament.

Assuming Iraq exported 1.4 million barrels of $60 petroleum daily, revenues would total $30.7 billion annually. Some 28.8 million Iraqis would share one-third of this, or about $355 each. Though modest by U.S. standards, this figure exceeds 10 percent of Iraq’s $3,400 per-capita gross domestic product. Families and individuals could use these funds to finance immediate needs or establish small businesses. A new Iraqi investor class could channel these oil proceeds into shares of emerging local companies.

Personal oil-revenue accounts “will be a key change that directly makes a difference in the lives of Iraqi women,” Frances Brigham Johnson and Bruce J. Moran of Strategic Planning Initiatives wrote in their recent free-market blueprint to rejuvenate Iraq. “The change will put women directly into the market economy as buyers of family necessities and investors in viable enterprises.”

Whenever Iraq’s squabbling, hapless Parliament (unlike America’s serene, efficient Congress) adopts an oil law, adding personal accounts would mark a dramatic break with Ba’athism. Citizens of that new republic have every right to ask their representatives, “What have you done for us lately?” Seeing Kurdish, Shi’ite, and Sunni legislators fix the nettlesome oil revenue-sharing question, while including such accounts, would give Iraq’s leadership a badly needed credibility boost.

Tamper-proof personal accounts would place much of Iraq’s oil revenues beyond politics. Economists lament “the curse of oil,” a paradox wherein petroleum-rich nations stay backward despite vast mineral wealth. Why? Government elites distribute oil proceeds to favored political loyalists more than to common citizens. Consequently, economic distortions erupt as entrepreneurs focus less on inventing new products and services and more on befriending oil-rich politicos. If its oil remains state-owned, Iraq runs this risk. However, universal accounts could alleviate this danger.

When Iraqis realize they individually own much of their nation’s bounty, they will regard sabotaged pipelines and refineries not as somebody else’s headache, but as direct attacks on their own personal fortunes. “Iraqis will watch the oil wells, because those will be their wells at stake,” Mr. Thompson says. This should drive a well-honed wedge between Iraqis and terrorist Muslim fanatics. Average Ahmads will have a powerful incentive to report Islamofascists — so they can be liquidated.

Devoting one-third of oil revenues to personal accounts might be stingy. Why not half or more?

Indeed, why not privatize the entire petroleum sector — perhaps by splitting exploration, drilling, pipeline, refining and shipping functions into distinct enterprises? Their shares could be deposited into personal accounts. A limited government could fund vital services by lightly taxing these companies and Iraq’s citizens after they have received these disbursements.

Today, Iraqi officials are first in line for oil income. Sending them to the back of the queue could revolutionize the politician-constituent relationship.

“If you don’t rely on your people to pay taxes, there’s less need for a consultative process,” Goldman Sachs Vice Chairman Robert D. Hormats, author of “The Price of Liberty,” told me. Conversely, Middle East governments, like Iraq’s, will need some consultation if they rely on the people to pay taxes.

In essence, there’s no representation without taxation. Making Iraqi politicians financially dependent on citizens, rather than the reverse, could fortify this fledgling nation.

Given Iraq’s staggering woes, this idea may be a Band-Aid on a country screaming for bypass surgery. Hoover Institution scholar Victor Davis Hanson also warns Baghdad’s leaders may spurn this notion as “not invented here.” Nonetheless, while Congress bickers over benchmarks, Iraq’s legislators should surprise the world this summer by scrapping their vacation plans and setting Iraq on a path to prosperity.

Deroy Murdock is a columnist with the Scripps Howard News Service and a media fellow with Stanford University’s Hoover Institution.

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