Power to the People

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If government controls most of the wealth in a country, it is in the self-interest of the citizenry to kowtow to the government. If private citizens control most of the wealth, it is in the self-interest of the government to kowtow to the people.

Nowhere is this more starkly the case than in the oil industry. In the U.S. and other western countries, where corporations own the oil in the ground and control its production and marketing, stockholders (that is, citizens) have control of the wealth produced. And affluent citizens are better at getting the government to kowtow to them than are impoverished peasants – like those in third-world countries where oil and gas are nationalized. Like the Middle East. Like Iraq.

Borrowing from the approach of General MacArthur in post-WWII Japan, here is a simple proposal to end the strife in Iraq: create three or four integrated oil companies. Grant them rights to all the oil and gas reserves and production infrastructure in Iraq. Award equal ownership shares to all 26,783,383 men, women, and children in Iraq (all figures in this discussion come from the CIA “World Factbook”). With an annual production of 730 million barrels per year selling at $70 per barrel and costing $1.50 per barrel to find and lift, that works out to $1,867 per year in profit for every Sunni, Shiite, and Kurd in Iraq. Payout half in dividends and reinvest the rest to bring oil production back to the 1.3 billion barrel per year production level reached in the early ’90s – or higher. In Iraq, reserves are not a problem. Proven reserves are 115 billion barrels: enough for 88 years at the 1.3 billion barrels per year production level. Assuming no further discoveries. And not counting natural gas. At a price-earnings ratio of 10, the same as ExxonMobil’s, each Iraqi’s stock would be worth $18,670. Those who wanted to cash out and reinvest elsewhere would be free to do so.

In one bold stroke the U.5. would accomplish at least four things:

1. Lessen sectarian strife while marginalizing the insurgency. Even when the Sunnis controlled Iraq, the average Sunni got nowhere near $933.50 per year from oil. The Shiites and Kurds got next to nothing. It would immediately be in every Iraqi’s self-interest to protect the infrastructure rather than bomb it.

2. Prove that lust for oil is not the reason the U.S. went to war in Iraq. Don’t worry. We would still be Iraq’s biggest customer. American companies would still be free to compete for contracts to explore and drill. And when you consider the lessening of our expenditure in blood and treasure, we would be paying less for oil than we are now.

3. Allow those Iraqis who cash out and reinvest to sow the seeds of an economic revival in the cradle of civilization. At least they would spend it more wisely than Saddam did. All he did was build more palaces for himself.

4. Add capitalism to democracy to make Iraq the shining beacon of freedom and general prosperity in the Middle East that the neocons are always dreaming about.

Once the government of Iraq starts kowtowing to its people, the allure of radical Islam, government corruption, and tribalism will decrease. Hope will replace hopelessness among the people. Pursuit of profit will replace shame as entrepreneurs invest their oil windfall in other ventures and diversify the economy. The u.S. and its coalition partners will be able to decrease investment in maintaining security in that part of the world. It’s a win for everyone involved – except displaced autocrats everywhere.

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