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October 31, 2014

Liquid Freedom: The War-Winning Weapon in Iraq
by Lenny Glynn

The Prussian theorist Carl Von Clausewitz famously defined war as “politics by other means.” That formula applies even more crucially to insurgencies than to conventional campaigns. People, not territory, form the center of gravity in such wars. And the key to victory lies not just in winning “hearts and minds” but in driving as powerful a wedge as possible between the insurgents and the people they claim to be fighting for – and whose support they need to win. Given the centrality of politics to guerilla war, the most distressing aspect of the struggle in Iraq today is the near absence of any serious political strategy, other than elections themselves. Perhaps it’s time for President Bush to send Karl Rove to Baghdad.

Because there is, in fact, a war-winning weapon close to hand that the Allawi government could use – with support from allies and from both Democrats and Republicans. This weapon could, at a stroke, put flesh on the bones of formal democracy, change the dynamic of the insurgency, begin to win the confidence of the Iraqi people and create a powerful, growing force for stability, national unity and economic development. The weapon, of course, is oil -- and the huge flows of cash it generates.

The way to deploy it is straightforward. Iraq’s new government should simply announce that as of a date certain, it will establish a new national investment fund – call it The Iraqi People's Freedom Trust – which will be credited with a major share of all future Iraqi oil earnings. A popular real world model might be the Alaska Permanent Fund, which grants a share of that state’s oil revenues to every citizen. Revenues directed to Iraq’s Freedom Trust could be invested in Iraqi government bonds, keeping a small cash reserve to provide for cash withdrawals from the Trust by individual Iraqis.

All 27 million Iraqis – men, women and children – would be eligible for an equal, personal account in the Freedom Trust simply by proving Iraqi birth and pledging their allegiance to the government. With assistance from coalition allies, registration for ownership shares in the trust could go hand in hand with registering citizens for the upcoming national elections. Any adult citizen of Iraq would then 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 immediate effect would be electric. But the Trust’s real power would compound over time. For the first time in the history of Iraq, indeed of oil nations generally, the new Government would be offering each and every citizen a real, guaranteed ownership share in an asset that has been long since nationalized and regarded as a public patrimony. Establishment of the Freedom Trust would dispel the fantasy that this war was waged by the U.S. to somehow steal Iraqi oil. The Freedom Trust would instantly offer a stark contrast with the Saddam regime’s practice of stealing and wasting oil revenues on weapons, palaces and luxuries for a tiny elite of privileged cronies.

Revenues credited to the Freedom Trust would not go directly to the public as cash payouts. They would, instead, be invested, initially at least, in new Iraq government bonds. This would give Iraq’s new bond market a huge jump start – actively leveraging the central government’s financial power. But legal ownership of shares in the Trust should be vested in each individual Iraqi, not the patriarch, the husband, tribe, clan, or regional power-broker. The goal would be to “personalize” oil revenues streams, empower women, give democracy a material base – and give all Iraqis a stake in the survival and stability of their new democracy.

Offering all Iraqis an equal, permanent – and possibly rising – future income stream would rapidly move resources out to remote regions and jump-start broad-based entrepreneurship and local development more efficiently than any centralized aid scheme. Instead of having to wait for political officials and aid workers to design, approve and deliver on projects, poor and rural Iraqis who have never seen a dime’s worth of their nation’s oil wealth would have a strong incentive to come to town, register for accounts in the Trust and claim a share of their own nation’s wealth.

Word of the first cash redemptions from the Trust would spread like wildfire, build its credibility and create a strong, growing interest among all ethnic and confessional groups and tribes in ensuring their nation's future stability.

We're not talking small money here. Even amid ongoing war and sabotage, Iraq today pumps over 2 million barrels of oil a day – roughly $100 million a day or $36.5 billion a year at $50 a barrel. A more stable Iraq could pump 5 million barrels a day or more – which would be nearly $45 billion a year at even $25 a barrel. Crediting, say 50% of these future revenues to Iraq’s Freedom Trust would ensure each person in the country a wealth stream worth hundreds of dollars a year -- this in a country whose per capita gross national product is less than $1500.

Since funds in the Trust would accumulate over time – beginning on the day of inception – there would be a strong and growing incentive for Iraqis to register and pledge allegiance to their new government. Just by its existence the Trust would provide the promise of a real, predictable financial future for Iraq’s young people. Their holdings would grow steadily until they come of age.

By adopting such a policy, the new Iraqi government could have the same impact on the de facto civil war it is waging against Ba’athists and terrorists as Lincoln's emancipation proclamation did on the domestic politics and international diplomacy of the American Civil War. With that one move, Lincoln effectively redefined America’s civil war from a struggle over regional power or “states’ rights” to a moral, even revolutionary, struggle over slavery.

Creation of the Freedom Trust could have the same kind of profoundly moral -- and revolutionary – impact. Every Iraqi would, at a stroke, have not just a shot at freedom, in the abstract, but the money to enjoy it, while seeing wealth build up, over time, for their children. The conflict would be redefined – accurately – as one between the common interests of all Iraqis and the special interests of insurgent groups who are running what may be the first “National Re-enslavement Front” in history.

Ba’athist dead-enders are, in essence, fighting to regain the power to steal fellow Iraqis’ wealth – and kill anyone who objects. Their terrorists allies, would also be hurt by the creation of the Freedom Trust. The commonsense justice of giving Iraqis a personal stake in their own oil wealth would undercut terrorists’ appeal to Iraqi youth. These “militants” would suddenly find themselves defined as fighting to steal young Iraqis; future, while Iraq’s Aremy and National Guards would be fighting to defend that future. .

It is deeply disappointing that the Bush Administration, which is advancing the virtues of an “ownership society” in America has not advanced any creative ideas for using Iraq’s oil to benefit its people directly. Nor has the Allawi government laid out any path away from the regional tradition of state-centered oil paternalism and public clientelism. Yet it is difficult to conceive a policy action that could better clarify what it means to "liberate" Iraq, empower its people, and create real common ground for a national rebirth. Reform in the distribution of oil revenue is as critical to “winning the peace” in Iraq as land reform was to fostering democracy in post-war Japan.

By sharing some of Iraq’s vast oil wealth with its people, a new Iraqi government could foster the rise of a broad-based, democratic middle class. It could turn black gold into liquid freedom, the fuel for democracy and the engine of development. The Freedom Trust would give the Iraqi people – and their new police and Army – a future to believe in – and fight for. This single move would do more than any other initiative to help secure a lasting peace, grounded in justice. And such a peace may be the only outcome that could, in some small measure, redeem the sacrifices that Americans and Iraqis are now enduring.

Boston-based writer Lenny Glynn has written for BusinessWeek, Global Finance and Institutional Investor and served as a speechwriter for Governor Bill Clinton’s 1992 presidential campaign.

 

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