Will the New Iraq Strategy Revive the Iraq Oil Trust Idea?

Lynne Kiesling

I apologize in advance for tooting my own horn twice in a row; first Beckham and now this …

Over dinner Friday night with the KP Spouse and a couple of old economist friends, one friend asked me what I would do in Iraq. I told him I would pay efficiency wages to employ young Iraqi men to deter them from radicalism (an idea that my economist friend Diane also articulated to me over the weekend), and I would establish an Iraq Oil Trust to give all Iraqis “3D property rights” (defined, defensible, divestable) in the nation’s oil assets.

Then I see the transcript of President Bush’s speech from Wednesday night, and I see the following:

To establish its authority, the Iraqi government plans to take responsibility for security in all of Iraq’s provinces by November. To give every Iraqi citizen a stake in the country’s economy, Iraq will pass legislation to share oil revenues among all Iraqis. To show that it is committed to delivering a better life, the Iraqi government will spend 10 billion dollars of its own money on reconstruction and infrastructure projects that will create new jobs.

I hope that this means that they will (finally!) be taking seriously the long-discussed Iraq Oil Trust that my colleague Vernon Smith proposed in the Wall Street Journal and in Newsweek magazine back in 2003 (which has also been proposed by Michael Barone, by Glenn Reynolds, and others. The idea is to implement a design similar to that used in Alaska for oil royalty disbursement to Alaska residents; more recently, Senator Clinton and Nevada Senator John Ensign have backed the idea. Clinton and Ensign had a Wall Street Journal editorial in December 2006 (subscription required) arguing for an Iraqi oil trust.

The key to creating stability and prosperity is to create stakes in the community among parties at risk of succumbing to radicalism. I believe that doing so effectively will have more of an impact than additional troops, notwithstanding all of the attention that troop increases are receiving in the media.