Though most Americans don't believe this war is about oil, much of the rest of the world does. How the United States handles Iraq's oil after the war is therefore crucial. For guidance, America might look to its experiences in Japan after World War II and -- perhaps more surprisingly -- in Alaska in the 1970's.
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.
Establishing this fund would show a skeptical world that America will make sure Iraq's oil revenues directly benefit Iraqi citizens. By spreading capital broadly among new stakeholders, the plan would also prevent a sliver of Iraq's elite from becoming a new kleptocracy. Finally, the creation of an Iraqi oil fund could begin to help repair America's damaged image abroad -- itself no small dividend at a time when many people remain suspicious about American motives in the Middle East.
Copyright 2003, The New York Times