Iraqi Oil - 1 comment

Few arguments are more likely to kill an intelligent conversation on world politics than the one that sets out that the toppling of Saddam Hussein was "all about oil", especially as to retort with a political (whether well-, or poorly-intentioned; well-, or poorly thought-out) or moral argument is to be derided as hopelessly naive. Also popular is what I would call the "blood and oil" argument, namely that a country's natural resources are for the sole "use" of that country's inhabitants, and that the involvement of foreigners (especially Westerners) can be construed as "raping" a country's land/assets, etc. Of course there's an environmental case for leaving natural resources where they are, but generally when we have an asset we try to use it, extracting from it the greatest possible economic value we can. Given that we can't drink oil, or build houses out of it, we can either refine it ourselves, or sell it to someone who can do a better job, if they'll make us more money, cause less waste or damage in doing so, invest in local facilities, recruit and train local workers, and so on.

Economic nationalism, however, is one of the basic economic errors that causes governments to allocated assets to individuals, or to companies, who share the same nationality, when there are foreigners willing and able to make better or more profitable use out of them. The dangers of nationalism are even more expensive in developing countries, where scrutiny is weak, when a government takes control over the use of the resources, providing opportunities for it to use the revenue corruptly, to siphon off revenue, manipulate employment, curtail investment, or to top-up falling revenue elsewhere.

Economists can suggest and exhort policies, however, there's a time and a place to raise objections like these - and higher priorities. Reflecting this, a new petition has been set up at the Downing Street site, headlined:

We the undersigned petition the Prime Minister to not allow the privatisation of Iraqi oil, against the wishes of the Iraqi people.

The key point is "the wishes of the Iraqi people", which is why you should consider signing this one. Here's a back-of-an-envelope order of policy-making precedence:

1. The policy must be: Democratically approved
2. The policy must be: Transparent and accountable
3. The policy must be: Economically aware/well-informed
4. The policy must be: Efficient
5. The policy must: Reflect public biases
6. The policy must: Reflect public biases abroad
   

I don't know that the Iraqi people have actually voted on who should process their oil, but once the arguments have been put forward, they must approve any policy. Besides, the petition states that Tony Blair gave assurances about the dispersal of oil revenues back in 2003. The next priority is that revenue doesn't subsequently disappear into the government machine, to be used corruptly - the effects of that would be worse than any economic policy. If we're OK with (1) and (2), the next priority should be that the government at least researches the opportunities available to it, and then that it attempts to maximise revenue and minimise waste, and it's at this stage that any privatisation decision can be made. Far less important a consideration must be the nationality of oil firms, and even further down the scale is the question of whether the decision appears to armchair critics to be a defeat for America, a victory for imperialism, etc.

So if, as the petition suggests, Western corporations really are pressurising the Iraqi government into making a decision other than what is in the best interests of Iraq, that's totally unacceptable. It's another good reason to sign the petition, and support democratic forces in Iraq (which will be a first time for quite a few people), which could really do with not losing legitimacy in the face of what looks like a stitch-up. Nonetheless it would be a shame for Iraq if future economic decisions had to be made on the basis of what was necessary for national cohesion, and what minimises the chances of a backlash against foreigners. It may be essential in the medium term, but closing the economy can only make it poorer it in the long term, and this isn't a happy situation for anyone.