April 9, 2003

REASON TO HOPE, IF NOT TO GET GIDDY:

Sharing, Alaska-Style (STEVEN C. CLEMONS, April 9, 2003, NY Times)
Most revolutions that produce stable democracies expand the number of stakeholders in the nation's economy. America's occupation of Japan succeeded not just because the United States purged Japan's warmongers and established a peace constitution but because it imposed land reform. American occupiers broke up vast estates held by the Japanese aristocracy and redistributed the land to farmers, thus linking Japan's most lucrative resource to millions of citizens. Now America should do the same with Iraq's most lucrative resource, oil.

Here is where Alaska comes in. In the 1970's, during the construction of the Trans-Alaska Pipeline, the state realized that the new oil leases would produce an enormous windfall. Its citizens set up the Alaska Permanent Fund to manage this income, directing that the revenue be invested, the principal remain untouched and the gains be used for state infrastructure investments. A part of the proceeds was distributed as dividends to every Alaskan. By July 2002, the fund had grown to more than $23.5 billion. Dividend payments to Alaskan families averaged about $8,000 per year.

Iraq's annual oil revenue comes to approximately $20 billion. A postwar government could invest $12 billion a year in infrastructure to rebuild the nation. The other $8 billion could anchor an Iraq Permanent Fund, to be invested in a diverse set of international equities. The resulting income would go directly to Iraq's six million households. These payments would make a huge difference to families in a country whose per capita gross domestic product rests at about $2,500.


If only real life worked like plans on paper... Posted by Orrin Judd at April 9, 2003 8:31 AM
Comments

Why didn't we ever see major (liberal) publications talking about GDP/capita during the Saddam Hussein tyranny, or urging the regime to "invest" more of the oil revenues in the people?

Posted by: Kevin Whited at April 9, 2003 10:51 AM

If even the NYT realizes that perhaps the best use for Iraqi oil money is not for it to be spent by the UN for the Iraqi's own good, there may be hope for us yet.



This would also fit nicely with the theme that the new Iraqi government needs legitimacy from the Iraqis, not from Kofi Annan.

Posted by: mike earl at April 9, 2003 10:59 AM

There are also sytems like this in place (or about to be in place) in other places, Norway and Chad, that I've heard of. I'd be interested to see a comparison of how the three work out. Well, hopefully, how the four work out.

Posted by: Timothy at April 9, 2003 11:40 AM

Nauru I know about, and apparently there is one in Singapore.



Nauru's has been a failure, because it overspent its

income and is now in danger of losing its permanent wealth. It invested in Honolulu real estate.



Alaska's has also been a failure. The subsidies are dropping, and the politicians in Anchorage are dreading

the moment when 100,000 drunken Indians, no longer

on the dole, come out of the country. The state, with help of its Republican senators, dipped into the oil fund

to hire some smart people to devise genuine economic development in the rural areas, without urbanizing them.



The head of this mission quit in disgust after about a year, when he realized that the rural Alaskans had no intention of working for a living.



This is a brothersjuddblog exclusive; nobody in Alaska willl admit it, and the ex-head of the mission won't talk in public.

Posted by: Harry Eagar at April 9, 2003 3:55 PM

That's about the size of it. Natural resources that enrich a country without anyone having to actually work or initiate is rarely if ever a blessing.....

Posted by: Barry Meislin at April 9, 2003 5:29 PM

Apart from the idea of having endowments, it is noticeable that valuable natural resources, like oil or diamonds, do not always lead to prosperity and comfort.



As we used to say in the '60s, everything is political. For some reason, oil did not destroy Norway, but it did

Nigeria. (See also Angola, Congo, Venezuela, Mexico, Indonesia, Iran, Russia, Iraq, Saudi Arabia, Libya -- did I leave anybody out?)

Posted by: Harry Eagar at April 9, 2003 8:21 PM

Harry:



Martin Luther strikes again.

Posted by: oj at April 9, 2003 10:03 PM

I am intrigued by another aspect of this proposal. After thirty years of rule by a police state, people are expected to happily register with the authorities in exchange for a check? I would expect them to be a bit less trusting.

Posted by: Tom Maguire at April 10, 2003 11:21 AM
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