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On Point

Maliki's Political and Economic Bullet


by Austin Bay
March 7, 2007

Petroleum is the resource that dominates discussion of Iraq's economy.

However, water and rich agricultural land make the country much more than a desert oil spigot.

Combine water and productive land, and the product is history -- the history of civilization. As Mesopotamia (the land between the Tigris and Euphrates rivers), Iraq spawned the Agricultural Revolution and served as the cradle of city-states, and hence historical civilization.

Several economists and economic development experts argue that land --specifically "land reform" -- is key to ending Iraq's complex civil conflict. Among them is Peter Schaefer. Schaefer served in Vietnam as an American military intelligence officer, then in the mid-1970s became deeply involved in economic development analysis and property right issues. A former adviser to Peruvian economist Hernando De Soto, Schaefer is now working on a business project that involves "commercial scale" property registration in the developing world.

Vietnam sparked Schaefer's interest in economic development. In an interview last week, Schaefer told me: "I couldn't get my mind around the fact that the Vietnamese people were so smart and industrious, and yet they were just so damn poor. The (destructive effects of the) war didn't answer that for me. Why would someone choose Mao over Jefferson?"

Schaefer concluded the Vietnamese communists pursued a calculated land reform policy, one that leveraged Vietnamese villagers' traditional recognition of property rights.

In the 1990s, Schafer noted, Peru turned the "land reform" tables on the communists. Property rights reform helped defeat Peru's "Maoist" Shining Path guerrilla movement.

In Schafer's view, property rights reform gives Iraqi Prime Minister Nouri al-Maliki's government a very powerful political weapon, one that has war-winning potential.

Schafer supplied some fascinating evidence. According to him, less than 5 percent of Iraq's cultivatable agricultural land is "freehold" (owned with clear title). Ninety-five percent of the cultivatable land in Iraq is therefore "dead" (illiquid) and cannot be used as security for a bank loan. "Iraqi farmers who lack clear title can't get (bank) loans," Schaefer said. That limits economic creativity, particularly in a population demonstrably successful at small business operations. Schafer believes that 95 percent of family homes in Iraq also lack clear, secure title.

"Prime Minister Maliki needs to go on television," Schaefer advised, "and say: 'Citizens of Iraq, 95 percent of the property in this country is not legally in your name. You don't have title to your own land or your own houses. We're going to change that right now.'"

This reform would launch a liberalizing political and economic revolution, with the democratic Iraqi government empowering the people of Iraq. For maximum payoff, Schafer said, Maliki's government should support title reform with a mortgage program that provides wholesale money to banks and permits them to do mortgage lending for individual Iraqis, thus "jumpstarting" Iraq's sclerotic banking system.

Property rights reform also provides a political tool for assuaging sectarian and ethnic fears among Iraqi citizens, Schaefer said. Good title "means Iraqis can protect their houses with the law on their side."

This is nation-building at a subtle but fundamental level: moving from the rule of the gun to rule of law. Consider the case of Sunni Arabs who have abandoned property in Shia Arab neighborhoods. "Anyone who loses a home, but has solid title, will have legal recourse to regain (lost property) through the courts," Schaefer said. The law becomes a nonviolent option preferable to gang or militia-inspired retribution.

Schaefer thinks the Iraqi city of Kirkuk offers a perfect opportunity to link title reform to an economically productive housing construction program. Saddam Hussein "Arabized" the city by forcing Kurds to move away. Now, returning Kurds are evicting Arabs. Some 40,000 homes are in dispute. Schafer's solution: Build 40,000 new homes in Kirkuk. "Displaced Kurds have a choice -- their old home or a new one," Schafer said. "They can have their former home once an Arab family moves into one of the new houses." This defuses the ethnic clash, and Schafer noted, "the economic impact of the construction program will be enormous."

Schafer's suggestions aren't pie in the sky -- they are pragmatic, wealth-generating alternatives to ethnic violence, tyrant-imposed poverty and cowardly despair.

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