Link: Senate Committee Seeks Audit of Iraq Oil Money - New York Times, 3/9/08
The request, sent Friday to David M. Walker, the top official at the United States Government Accountability Office, estimates that Iraqi oil revenue could skyrocket above $56 billion in 2008, largely because of the rising price of oil.
That enormous influx of cash comes as the United States has been reducing spending on the reconstruction effort. Since the invasion in 2003, the United States has invested close to $50 billion in reconstruction, but the effort has achieved at best mixed results when measured by improvements in the lives of Iraqi citizens.
Still, the American military and State Department continue to finance a wide range of relatively small reconstruction projects as well as training and equipment for Iraqi military forces.
Despite the dire need for better health care, more electricity and clean water, a functioning sewage system and other services, the accountability office has previously estimated that Iraq spent only 22 percent of the oil money set aside for reconstruction in 2006. And in January, the office, which is charged with overseeing the Iraqi government’s finances, reported that Iraq had spent a meager 4.4 percent of its 2007 reconstruction budget by August of that year, the most recent figures available at the time.
The senators requested detailed information on the amount of Iraqi oil revenue from 2003 to 2007, how much of that money has gone unspent, and "how much money does the Iraqi government have deposited, in which banks and in what countries?"
Finally, Senators Levin and Warner ask the question looming over the entire rebuilding effort: "Why has the Iraqi government not spent more of its oil revenue on reconstruction, economic development and providing essential services for the Iraqi people?"
Good questions. Important questions. Who is entitled to the economic value of natural resources? The fellow who owns the land under which it is found? (We'll call him Jed Clampett.) The president of the country, to do with as he chooses, even if that choice is to give the value away to his relatives and friends? The oil companies of that country? The oil companies of another country? The sovereign funds of the oil rich country?
Or are the revenues related to scarce resources rightly the property of the community as a whole, the logical funding source for common spending on things which community members agree will benefit the entire community directly, or will produce economic development which will benefit the community. Is it right to spend those dollars on what we in America call "pork" or "earmarks?" If not, why not, and how could we make those pork/earmark projects a tool for economic development which will benefit everyone?
The answer to that last question is easy and simple and doable. All it takes to transform a pork project from a gift to a few to a gift to the entire community is a revision of the local tax code. Shift taxes off wages, off sales, off buildings, and onto the value of land. Every project, if it is worthwhile, will ultimately result in an increase in local property values -- specifically, the value of well-located land.
- Electricity? Higher rents, higher purchase prices.
- Reliable electricity? even higher.
- Reliable water supply? Ditto.
- A system to handle sewage? Ditto.
- Schools? Ditto.
- Public safety? Ditto.
- A justice system? Ditto.
- A new nursery school or daycare? Ditto.
- A new reliable bridge? Ditto
- Public health measures? Ditto.
- A hospital everyone can afford? Ditto.
- Paved roads that don't endanger tires and axles? Ditto.
- Just laws? Ditto.
Who benefits from these things? The snap answer might be "Everyone, of course!" But a bit more thought will likely lead to the recognition that those who own the land will be the ultimate beneficiaries of these public improvements. As economic activity picks up, and more people want to live there, served by all these improvements, the landlords will be able to charge their tenants more.
It isn't that the tenants shouldn't pay that higher rent; rather it is that the landlords shouldn't be permitted to pocket it., privatize it.
The alternative, of course, is to collect that increase in land value as the source for funding the next project, and the next, and the next, each making the town or city a better place for all.
Or we can just keep leaving it in the hands of the landlords, in Iraq as it is in America, and keep pumping in the foreign aid. Which plan appeals to you? Which is the one worth fighting for?
Who is entitled to the economic rent?
Go Wyn! I look forward to checking out this blog. Adam Seitchik
Posted by: Adam | March 31, 2008 at 09:14 AM