Jewish World Review March 27, 2003 / 23 Adar II, 5763
The curse of oil
Oil's role in postwar Iraq has been one of the big themes of the week. UN Secretary General
Kofi Annan is pushing to continue the old oil-for-food programme. Prime Minister Tony Blair
wants a UN resolution on the question.
The idea of some sort of institutionalised redistribution of oil revenues is a compelling
one. There are the long-suffering Kurds in the north, on whose territory oil was discovered
in the first place. There are the rest of Saddam's victims, who will require the sort of
Marshall Plan scale billions that a national oil company can generate. Anxious to prove he
is not the nasty imperialist of caricature, Colin Powell earlier this year declared outright
that Iraq's oil "belongs to the Iraqi people".
But belonging to the people tends to translate into belonging to the government. And the
assumption that government-controlled oil actually can benefit the Iraqis is tricky. Indeed,
one can argue that state ownership of oil has cursed Iraq. And that come reconstruction
time, the single most important thing that the US and Britain can do to facilitate stability
is to privatize Iraq's reserves. Even if that means cutting deserving Kurdish leaders out of
the bounty. And even if it means being accused of creating a "Texas on the Tigris".
The privatization argument may seem improbable. Still, it begins to make sense when you
look at Iraq's history, and that of other oil-rich states.
State control of oil fields, after all, fuelled Saddam's rise. His Ba'ath Party came to
power in the 1960s. In the 1970s, Iraqi's reserves were nationalized. As in the rest of the
postcolonial world, the idea was that local state ownership would somehow work out better
than ownership by the imperial powers.
This proved wrong. Saddam merely used his cash to strengthen his regime, becoming president
at the end of 1970s. He oppressed the Kurds to ensure his control of northern oil fields.
State oil money gave Saddam the means to rise from the status of standard despot to that of
Nor did oil benefit the cause of Iraqi freedom in the 1990s. The oil-for-food scheme
engineered by the UN for Iraq was praised as a masterwork of "smart" sanctions: Iraq was
monitored as it sold its oil to ensure it used the billions to purchase food and other
humanitarian needs exclusively. But it also helped to ensure that they remained in chains.
This was because Saddam nonetheless managed to abuse the programme for military purposes. It
is also because the program reinforced Saddam's role as father with the pantry key. And so
made his regime harder to topple.
Iraq, of course, is not alone. In neighbour Iran, oil secured dictatorship, the
fundamentalist variety. In yet other developing nations with state-owned oil the damage has
sometimes been less extreme, yielding garden-variety corruption or poverty. Still, it has
been damage all the same. Stanford University's Terry Lynn Karl argues that such "petro
states" have a recognizable profile: "extreme centralization of the executive" (to the point
of body doubles), "the strong tendency toward expansionism" (Kuwait) , and "the missed
opportunity to build a capable administrative structure" (Saddam indeed).
This sort of thesis tends to come from the left, who use it to bludgeon the US for policy
in Latin America. The left theorists' basic equation is "oil is wealth and wealth is bad".
Property rights advocates and free marketeers, though, offer a different version of the
argument: it is the state ownership of oil and other natural resources that is the problem,
they say, not the commodity itself.
In Iraq, the oil curse theory argues against establishing some sort of oil-for-food
programme before unconditional surrender. That is because it would help the current regime
resist its opponents, leading to a protracted guerrilla war a la Vietnam.
The second point is that handing over control of the oil fields following surrender to any
national entity--old, new, or "semi-autonomous"--is also dangerous. That is because
controlling bounty of oil will corrupt, or at least challenge, any new Iraqi political leader
within a few years, even if, right now, he looks like a veritable De Gaulle. If the past few
decades have taught us anything, it is that today's brave freedom fighter gets oil, he
becomes tomorrow's petro-warlord. Indeed, a measure of the legitimacy of any would-be leader
is his willingness to promise to separate a new government from oil. Would a UN-created
trusteeship be less vulnerable to corruption? Not in the longer run.
And what about Russian firms' oil contracts with Iraq? Those might be all right--as long
as the Russian firms are truly private.
The "oil should be private" argument is not perfect. There is always the possibility of Al
Qaeda Petrol, Inc. And it is not easy, since the war will be so expensive. Still, what is
clear, even now, in swirling battle sands, is that to get stable economies and freer
populations, Middle Eastern governments need to give citizens the chance to enrich themselves
independent of any of regime. And this last apparently is all but in impossible in the Petro
Enjoy this writer's work? Why not sign-up for the daily JWR update. It's free. Just click here.
JWR contributor Amity Shlaes is a columnist for Financial Times
. Her latest book is
The Greedy Hand: How Taxes Drive Americans Crazy and What to Do About It. Send your comments by clicking here.
11/12/02: Political Correctness at the Fed (No joke!)
10/31/02: Local enforcer who has changed national laws
10/12/02: No Mirror for Europe; US is a picture of unity
08/14/02: Keeping your financial eggs at home
07/24/02: New Democrats' unaffordable luxury
06/26/02: The evolution of eminent domain is the story of the lasting power of Supreme Court decisions to alter the American cultural fabric
06/20/02: The distinction between known risk and uncertainty: What was lost in the Martha Stewart flap
06/11/02: Europe, long waiting for a chance to assert itself as independent from the US on the world stage, is clueless to terror's threat
06/04/02: A Cold Warrior's lessons for the Middle East
05/21/02: Geography does matter when it comes to development, but aid must nonetheless be linked to good governance
05/14/02: The increasing number of new claims is hurting innocent companies and making a mockery of the Common Law system
05/09/02: Aid, development and guilt in our times of terror
04/30/02: Wine lovers may at last be able to stray across state borders. The Internet is coming to the aide of free trade
04/23/02: Taxation by way of Madison Avenue
04/17/02: Special relationships and free trade do not mix
04/08/02: Is terror the flip side of globalization?
03/20/02 Bush gives aid but seeks results
03/13/02 The Danger in policy by numbers
02/26/02: States' smokescreen for tax hypocrisy
02/20/02: Echoes of leadership against a global threat
02/13/02: Jackson Vanik May be a Useful Analogy When Thinking About the Middle East
02/07/02: Budgeting for victory: Requiem for a peace dividend
02/05/02: The detectives of 1930s pulp fiction had a nose for clients bearing gifts. Sadly, those consulted by Enron did not
01/22/02: Allow all American children a decent chance
01/15/02: Do not disturb the profit-sharing revolution
01/09/02: It is dangerous to elevate a currency as a political emblem if the need for other economic reforms is obscured
01/03/02: There is only one way for a free thinker to bring up children
12/20/01: Why America's economy always bounces back
12/18/01: When it comes to taxes, Washington lawmakers can learn a thing or two from The Honeymooners
12/13/01: Bush opens a new era
12/12/01: A flamboyant reversal for the Democratic party
12/06/01: Threat of an oil embargo on the U.S. is a bluff
11/29/01: Which is more important--the war or diplomatic comity?
11/20/01: Unbalanced by a wealth of oil and diamonds
10/17/01: Afghanistan Needs a General MacArthur
09/27/01: The US has gained an understanding of the costs of war for which its European allies have hitherto wished in vain
09/13/01: War against terrorism will rise from the ashes
08/15/01: Geography is no excuse for the state's economic stagnation. Its policymakers should take a leaf from Ireland's book
08/07/01: Teamsters may pay a heavy price for winning its batle in Congress
07/25/01: Towards a patent-free nirvana?
07/17/01: History proves the lasting value of tax cuts
07/10/01: Stem cell research has awakened a bitter debate in Washington but voters care more about other electoral issues
07/03/01: America foots the bill for Europe's largesse
06/26/01: America the litigious, land of the lawyer's fee
06/20/01: Five reasons for gloom about global growth
06/18/01: Show pity for Alice in Tax Wonderland
06/13/01: America must take a French lesson in trade
06/11/01: Time to dream the impossible dream for Iraq
06/07/01: Whatever happened to simple?
06/04/01: When the relationship between companies becomes as close as a marriage, the eventual break-up is often very painful
06/01/01: Loving and hating the Bush tax bill
05/30/01: Will Grisham soon be unemployed? In America's courts these days, there's no room left over for legal fiction
05/22/01: Republicans sample the rhetoric of confidence
05/16/01: Boeing has been promised $60m to site its headquarters in Illinois. The deal looks a poor one for taxpayers
05/14/01: Adam Smith in love
05/09/01: Those rotten Russian capitalists
05/07/01: Why tax havens provide shelter for everyone
05/04/01: Middle classes pay for get-the-rich folly
05/01/01: Money can't buy happiness? Think again.
04/26/01: Calling America's rogues and entrepreneurs
04/19/01: High earners right to feel lonely at the top
04/11/01: The right must learn the comfort of strangers
04/04/01: When domestic law arrives by the back door
03/30/01: A Lexus tax cut suits the jalopy driver
03/27/01: The unchallenged dominance of King Dollar
03/20/01: Natural selection of an intellectual aristocracy
03/16/01: The hidden danger of a regulatory recession
03/14/01: Is the American condition that boring? Why so many Oscar nominated movies aren't set in America
03/07/01: Trampling on the theory of path dependence
03/05/01: Fighting the good fight
03/01/01: It is time for Fannie and Freddie to grow up
02/27/01: IT's important
02/22/01: The guilty conscience of America's millionaires
02/14/01: The benefits of helping the 'rich'
02/09/01: The Danger and Promise of the Bush Schools Plan
02/05/01: Crack and Compassion
01/31/01: Debt is good
01/24/01: A gloomy end for a half-hearted undertaking
01/17/01: The challenge of an ally with its own mind
01/15/01: An unexpected American family portrait
01/10/01: A fitting legacy for America's beloved dictator
01/08/01: The trick of tax 'convenience'
01/03/01: Time to stop blaming Greenspan over taxes
12/11/00: So smart they're dumb
12/06/00: How economic bad news came good for Bush
12/04/00: The Boies factor
11/30/00: "The inevitable demands for recounts erupted like acne…"
11/28/00: Fair play and the rules of the electoral game
11/23/00: The shining prospect beyond a cloudy election
11/21/00: Try the Cleveland model
11/16/00: A surprising winner emerges in the US election
11/09/00: Those powerful expats
What's right for America versus what works
11/02/00: Time to turn off big government's autopilot
10/30/00: Canada beating America in financial sensibility
10/26/00: When progressiveness leads to backwardness
10/24/00: The most accurate poll
10/19/00: The Middle East tells us the hawks were right
10/17/00: The split personalities of America's super rich
10/10/00: 'Equity Rights' or Wake up and Smell the Starbucks
10/04/00: Trapped in the basement of global capitalism
09/21/00: The final act of a grand presidential tragedy
09/21/00: Europeans strike back at the fuel tax monster. Should Americans follow?
09/18/00: First steps to success
09/13/00: America rejects the human rights transplant
09/07/00: Minimum wage, maximum cost
09/05/00: Prudent Al Gore plans some serious spending
08/31/00: A revolution fails to bring power to the people
08/28/00: A reali$tic poll
08/21/00: "I Goofed"
08/16/00: Part of the union, but not part of the party
08/09/00: Silicon Alley Secrets
08/02/00: Radical Republicans warm up for Philadelphia
07/31/00: I'll Cry if I Want To
07/27/00: Cold warrior of the new world
07/25/00: The Estate Tax will drop dead
07/18/00: Shooting down the anti-missile defence myths
07/14/00: A convenient punchbag for America's leaders
07/07/00: How to destroy the pharmaceutical industry
07/05/00: Patriots and bleeding hearts
06/30/00: Candidates beware: New Washington consensus on robust growth stands the old wisdom on its head
06/28/00: White America's flight to educational quality
06/26/00: How Hillary inspired the feminist infobabes
© 2001, Financial Times