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An "Ownership Society" on the Tigris

A modest constitutional proposal: Why not give the Iraqi people a stake in their national oil endowment?

12:00 AM, Sep 6, 2005 • By LENNY GLYNN
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NOW THAT THE IRAQI PEOPLE'S ELECTED REPRESENTATIVES are actually trying to draft a new constitution, there is a single, central provision that any party or politician interested in shaping the country's future should seriously consider. This provision would, at a stroke, create a powerful, long-term force for democracy, national unity, and economic development--and counter the forces pushing for national fragmentation.

It is, simply, to grant personal ownership of an equal share of future oil revenues to each and every individual Iraqi--Sunni, Shiite, Kurd, Christian, or secular--just as the State of Alaska shares surplus oil revenues earned 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 new national investment fund--call it The Iraqi People's Freedom Trust--which would be credited with a substantial share--a quarter, a third, even half--of all future Iraqi oil earnings.

All 25 million-plus Iraqis--men, women and children--should to eligible to claim their own personal investment account in the Freedom Trust. All they would need do is 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.

FOR THE FIRST TIME in the history of Iraq--indeed, in the history 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, economy, politics, and society. As in many oil-rich nations, state ownership of Iraq's oil has long 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.

By holding control over oil revenues that account for the vast majority of GDP--and for 95 percent of Iraq's foreign exchange earnings--Saddam Hussein's regime was empowered 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 United Nations.

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 a powerful material base for democracy. There would be a strong, hard-coded 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. As Nobel Laureate Vernon Smith wrote two years ago 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. And it would do so much faster than any centralized, bureaucratic aid scheme.

Poor and rural Iraqis, who have rarely seen a dime's worth of the wealth extorted by top-level Baathists, would have a strong incentive to register for accounts in the Freedom 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--an equal, bankable, and growing stake in the country's future stability--a "win-win" proposition, even for Sunnis--especially compared to the "zero-sum" or even "lose-lose" game of an unpredictable civil war.