For an Iraqi Permanent Fund

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I spoke this morning at a conference organized by the New America Foundation in support of my proposal for the creation of something like the Alaska Permanent Fund in Iraq. The fund, established by the recently deceased Gov. Jay Hammond and the Alaska Legislature in 1978, takes oil royalties and invests them in a broad portfolio and then pays every citizen of the state a yearly dividend; the dividend announced today was $845.76. This is much lower than in other years, when the dividend has been as high as $1,900; the reason is that it is based on the average of fund income over the past five years, and during some of those years the price of oil was low. The fund has capital of just under $30 billion, and most of the income today comes from investments rather than oil royalties.

An Iraqi Permanent Fund would take all or some substantial part of Iraq's oil royalties, invest them, and pay annual dividends to every citizen. I have urged this as long ago as April 2003, and the New America Foundation's Steven Clemons urged the same thing in a piece that appeared at just about the same time in the New York Times.

It seems to me that an Iraqi Permanent Fund would have several good effects.

It would reduce the flow of oil money to the state. In most oil-rich states, that money has become a source of corruption and an incentive for greedy men to seize dictatorial control of the state.

It would give every Iraqi citizen a form of property. Future fund dividends could be the collateral for loans to set up small businesses. The payments would not be so large as to be a serious disincentive to work.

If the fund reduces the flow of oil money to the state sufficiently, it would require the Iraqi government to impose taxes–and to be held accountable for spending. This is the essence of democratic government.

A permanent fund would refute the charge that America and its coalition partners fought a war for oil. It would be clear that the United States wanted no more than the opportunity to buy oil at market prices–and that the profits, or some large part of them, would go directly to the Iraqi people.

It would set an example for other oil-rich countries. People there might start to ask why they should not get a share of oil profits directly rather than have them monopolized by dictatorial or authoritarian governments.

Justice Louis Brandeis often said that each of America's states could serve as laboratories for reform. Alaska, facing a huge windfall of oil revenue, was one such laboratory in 1978. No other American state has followed Alaska's example. But Iraq can, and by doing so would enrich its people and set a good example for much of the rest of the world. Some Iraqi leaders, including the much reviled but visionary Ahmad Chalabi, who has served as oil minister, have spoken favorably about the idea. Perhaps Chalabi or others will advance this idea after the October 15 elections. If Iraqis do start receiving permanent fund dividend checks, they might pause a moment and say a word of thanks to former Alaska Governor Hammond, who died last month.