PAGING HERNANDO DE SOTO:
Call it an economic and political victory for “New Iraq” — and an indication that we may see more in the future.
This past Monday, Prime Minister Nouri al-Maliki’s cabinet finally agreed to a reformed “oil law.” The cabinet will forward the legislative package to the Iraqi parliament for action later this spring.
The “oil reform” program in Iraq is long overdue, but the Iraqi government also deserves kudos for the effort. Democracy is often a slow, muddled and tedious operation (look at the U.S. Congress). . . .
The Iraqi government should consider two other economic reforms.
A logical follow-on is the establishment of an Iraqi “oil trust” program, similar to the one implemented by the state of Alaska where every qualified citizen gets a share of state oil revenues. An oil trust would put several hundred dollars a year into the pockets of every adult Iraqi — that serves as an instant economic “fire-starter.” The oil trust immediately invests everyone in the economic success of Iraq’s new democratic government.
Clarifying and affirming individual property rights is another important reform. Peruvian economist Hernando De Soto’s “Mystery of Capital” (published in 2000) argued that Egypt’s poor have around $240 billion in “dead capital,” most of it tied up in property that they cannot properly mortgage. De Soto said that individual property rights and a legal system that protected contracts would instantly energize Egypt’s sclerotic economy.
In 2004, while serving in Iraq, I read a short, unclassified study that made the same argument for Iraq. The potential economic payoff is huge.
Yes. And then we should start enacting some De Soto-style reforms here . . . .