Arnold Kling  

Who Should Own Iraq's Oil?

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Alex Tabarrok writes (it's short, so I'll quote the whole thing, except for links),


The U.S. is no longer pushing privatization of the Iraqi oil industry primarily because the Iraqi's presently in control don't want it privatized for "nationalistic" reasons. This is bad news for the Iraqi people. Even putting aside bold plans for returning the oil to the people it's an important check on government that they must tax to spend. It's hard enough to make the State respect the rights of the people even when it relies on them for its funding but when the people rely on the State for their funding its even worse. Call this the "no representation without taxation" principle.

I disagree that it would be better to force the Iraqi government to find tax revenue elsewhere. It is very difficult to create a tax collection system that works, with voluntary compliance. Also, I am not sure that the right size for the Iraqi government at this point is small. Iraq faces a major challenge maintaining security. In addition, I think that it may be important to have strong secular institutions to balance the power of religious figures. Finally, it would help to pay government workers enough so that they can be expected to act professionally, rather than requiring bribes to supplement their income.

For Discussion. What is your favorite article or book that is relevant to this issue?


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COMMENTS (3 to date)
Eric Krieg writes:

Why is the choice between statism or privatization?

It seems to me that the privatized oil companies would pay a certain tax per barrel of oil, or a certain tax per gallon of gas out of a refinery. This would probably result in more revenue for the government than outright ownership.

Or the government could own the company, but sub out operations to someone who knows that they're doing, Like Haliburton!

jack writes:

i think you're getting a little ahead of yourself because you're presupposing a government for 'the iraqi people'.

1) there may notbe a single gov't, esp if the kurds have there way; not likely

2) the oil revenue placed in trust of 'the iraqi people' is being administered by the US, not the CPA

it should be held by the oil companies who do the work of extracting the oil, not the US or 'the iraqi people'. the oil companies will then issue bonds and the proceeds distributed to every man, woman and child regardless of ethnic division.

the only problem is the oil contracts are going to US companies, which is fine (our blood, our treasure), only 'the iraqi people' may not see it that way, so pipeline infrastructure may be vulnerable. that's why as kling says, "it would help to pay government workers enough so that they can be expected to act professionally, rather than requiring bribes to supplement their income" to guard against saboteurs and terrorists still operating.

Lawrance George Lux writes:

Almost all literature I find on the Issue leaves much to be desired. Iraq Oil fields possess extraction difficulties, which requires expertise in Operations. I think a simple tax per barrel of Oil would handle the finance side for the Government and people. Distribution of the Oil proceeds is another matter.

The Shitte majority will eventually attain power. They present no assurance all Iraqis will share in the Oil proceeds. Another problem is the American Oil companies, who always get the lucrative contracts under Bush. They will only entertain Oil production, with prices maintaining the Saudi/American monopoly price-setting; this practice totally independent of either Iraqi needs, or responsive to American Consumer needs. lgl

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