Give All Iraqis a Share.

Smith, winner of the 2002 Nobel Prize in Economics, is professor of economics and law at George Mason University and Rasmuson visiting chair at the University of Alaska, Anchorage

No country has ever given its citizens full rights to share in the wealth generated by the sale of nationalized resources and industries. These rights have been recognized in privatization schemes from Great Britain to Alaska to Eastern Europe, but never in full. Now is the time to consider doing so, starting in Iraq. The objective would be to auction government property, including exploration and development rights, to ensure Iraq realizes the vast potential of its oil resources, and that all Iraqis benefit.

The revolutionary principle of full citizen's rights to public assets-- in the form of tradable shares--should be placed at the forefront of the world debate on the future of Iraq. The process would begin with the government issuing shares or "land scrip" to all qualified citizens. These shares would be listed on world stock exchanges. Government auctions of any asset from wells to exploration rights would require all bids to be denominated in these scrip-shares.

If Iraqi scrip is currently trading at $100 per share, an investor who wants to bid 1,000 shares ($100,000) for some government property at auction must therefore buy--or obtain an option for--1,000 shares of scrip. If his bid wins, he tenders the scrip to the auction authorities, and it is retired. The investor obtains the property, and the monetary value of the property goes not to the government, but directly to those citizens who elected to sell some of their shares. Shareholders would be free to buy and sell scrip at any time, and winning bidders would be free to resell any equipment, property or exploration rights purchased at auction.

This may sound pretty commonsensical, but it has in fact never been tried before. One way or another, governments find a way to pocket the auction money. Properties privatized in Russia--also a state, like Iraq, with a history of state domination of key industries--were captured by party members, or government or business insiders. In the 1980s New Zealand used proceeds from privatization to reduce the government's debt. It can be argued that the government, now ...