In the weeks after the Iraq war “concluded” there was lots of discussion about reforming the economy. But the opening of the second front pushed those plans into remission. I hope that it is not yet too late to leave Iraq with better economic institutions. Yet as we seek a way out, our influence diminishes and the chance that the war was fought for nought increases. I was pleased, therefore, to see Nancy Birdsall of the Center for Global Development and Arvind Subramanian, a division chief at the International Monetary Fund try to push reform back onto the agenda.
As the United States, the United Nations, and the Iraqi Governing Council struggle to determine what form Iraq’s next government should take, there is one question that, more than any other, may prove critical to the country’s future: how to handle its vast oil wealth. Oil riches are far from the blessing they are often assumed to be. In fact, countries often end up poor precisely because they are oil rich. Oil and mineral wealth can be bad for growth and bad for democracy, since they tend to impede the development of institutions and values critical to open, market-based economies and political freedom: civil liberties, the rule of law, protection of property rights, and political participation.
Can Iraq avoid the pitfalls that other oil-rich countries have fallen into? The answer is yes, but only if it is willing to implement a novel arrangement for managing its oil wealth with the help of the international community…. the Iraqi people should embed in their new constitution an arrangement for the direct distribution of oil revenues to all Iraqi households — an arrangement that would be supervised by the international community.
Thanks to Dave Meleney for the pointer.