Oil Platform
While free-market types debate just how to privatize Iraq's oil industry, officials there favor a different approach, according to The Wall Street Journal:
U.S. advisers and Iraqi oil officials, now studying how to organize Iraq's vast but dilapidated oil industry, are leaning heavily toward recommending the formation of a large state-run petroleum company….Modeled on Saudi Arabia's Saudi Aramco or Kuwait's Kuwait Petroleum Co., an Iraqi national oil company would be run by a professional management team insulated from political interference in day-to-day affairs, but ultimately overseen by a politically appointed oil minister.
[Via Liberty & Power.]
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It’s not been tried anywhere that I know of, fyodor–it would be anarchy. 😉 And thanks, Jesse and Russ.
Jason,
Stromberg’s point is that, as state property, it was *never* legitimately owned in the first place. Unowned property becomes the rightful property of those who first personally mix their labor with it–and in this case, the workers are the best candidates for homesteading. There was never a rightful owner for them to contract with. They have a better property claim than anyone else because they are actually on the property and using it. So in this case, homesteading by the workers would be “starting from scratch”; they’d be (or rather are) the first legitimate owners.
There is, BTW, another excellent article in the Sean Corrigan archives at LewRockwell.com, in which he analyzes the process by which
1) “public” assets are created through collusion between corrupt Third World governments, the World Bank, and western business interests, in order to make western capital investments profitable;
2) the resulting debt is used as a form of discipline to impose structural adjustment programs; and as a result,
3) those same assets are auctioned off at nominal prices to the same international elites who railroaded their creation through in the first place:
“You Can’t Say That!” August 6, 2002. http://www.lewrockwell.com/corrigan/corrigan13.html
I should also mention it was Jesse who originally tipped me off to this line of reasoning by Rothbard and Hess, on a discussion list two years ago.
Kevin,
I get it now, but I guess where I’m coming from is that I don’t buy that someone who was given a job and a refinery where he can mingle his labor under these circumstances is more entitled to the refinery than a person who had a portion of his wealth confiscated to build the refinery in the first place. It seems arbitrary to me.
In the sense that it is arbitrary, any neutral criteria sufficiently removed from the discretion of government should work to begin again the allocation of wealth. I think the ‘everybody gets some shares’ aspect of V. Smith’s position is slightly more neutral than a plan that would essentially reward the government appointed oil workers currently in place with 100% of the wealth, which is my understanding of the ‘first come first serve’ idea Stromberg floats here.
re: The creation of public assets and public debt.
A large part of this problem would be eliminated if all debt to dictators were to be treated as odious and non transferrable to their subjects.
Well, which is it – will the ministry be run by a political appointee, or will management be insulated from political interference? I don’t think you can have it both ways.
Given that the company will be providing the lion’s share of Iraq’s GNP for at least the next decade or two, I suspect completely “insulating the management from political interference” is a hopeless cause. It looks like the goal here is to give the new, hopefully democratic, government the final say over the company, but to otherwise run it like a normal corporation.
I’m skeptical, but it’s hard to think of really good solutions to the problem of “who gets to pump the oil”.
The labor theory of ownership might work for some assets, but the really valuable asset here, the oil, exists underground independently of anyone’s labor.
I can see the logic of the labor approach for something like a tractor factory, but I don’t think it works for oil reserves. Just whose labor has been mixed with unpumped oil?
The analogy with the homesteader is off-point. Nobody paid the home-steader– he cannot recover the value of the labor he “mingled” (by improving the land) UNLESS he is permitted to act as an owner.
The refinery worker has already been paid (there is little reason to think industry workers are underpaid in oil states)– they have already recovered the value of the labor they “mingled”.
You guys act like you own the oil and get to decide how it’s pumped and distributed. Nice.
Divvy up the booty, pirates.
… with Haliburton named as sole and primary sub-contractor.
Joseph Stromberg has an excellent article at Mises.Org on this issue:
http://www.mises.org/fullstory.asp?control=1409
Some excerpts:
In the case of capital goods created by the communist states out of confiscated resources, the quickest and least bad solution was [for Rothbard and Hoppe] the “syndicalist” one of handing over the oil refineries to, say, the oil refinery workers and managers, since in a rough analogy with the homesteading of unowned resources, those workers and managers had mixed their labor with the goods in question.
It wasn’t perfect, but it beat funny auctions, that amounted to new expropriations by domestic and foreign investors and, even worse, rested on an assumption of ultimate state title, which pushed aside the whole question of just ownership.[9]
Proposals to auction off Iraqi properties, with the state acting as effective owner, would likely lead, if implemented, to a massive alienation of resources into the hands of select foreign interests.
Kevin,
Has this been tried somewhere?
Well, which is it – will the ministry be run by a political appointee, or will management be insulated from political interference? I don’t think you can have it both ways.
Excellent link, Kevin.
Since management won’t be insulated from political interference, there can only be one way.
Thanks for the Stromberg link, Kevin — I’ll add it to the post.
re: Stromberg’s argument for syndicalization
I absolutely agree with his critique of Smith’s plan for auction, but I can’t help but to scratch my head at his proposed solution. The underlying problem from a right of property perspective is that there is no untainted property to be devolved from a recently defunct despotic government.
Workers in the refineries did not really contract for the resource, nor did they contribute to the refineries’ startup costs. There was no voluntary transfer to speak of, and so legitimacy of ownership is not analyzable. The worker has no more right in a Rothbardian sense than anyone else.
If the underlying right is not discernable, we are left with the plan of starting from scratch and letting a market proceed apace. From that standpoint, I can see merit in Smith’s plan.
Jason, I think Stromberg scratches his head at it too. But there is no such thing as starting from scratch.
You guys act like you own the oil and get to decide how it’s pumped and distributed. Nice.
The oil is under Iraq. We run Iraq. We, therefore, control how the oil gets pumped and distributed. We do, for want of a better term, “own” the oil.
We’re being nice and giving it back to the Iraqis. We’re just trying to decide how to do that. The previous ownership scheme — “genocidal dictator spends the money on tacky mansions and anthrax research” — had a few minor wrinkles in it that we’d like to iron out this time around. 🙂
Dan,
Well, the dictator is gone. And according to Rumsfeld and Bremer, the new government’s going to be made up of nice guys–democracy, and all that.
So why not leave the basic institutional arrangements in the state-owned oil industry alone, and leave the decision to the Iraqis after the transfer of sovereignty. There’s something awfully shady about an occupation government making fundamental decisions about an occupied country’s natural resources, especially when crony capitalism enters the picture.
But in the politically sensitive oil sector, occupation advisers say they strongly support establishing a state-owned company
“politically sensitive oil sector”. Oh sure. More like: “in the BIG MONEY oil sector…”
Jason,
I think the reason Rothbard, Stromberg, et al, prefer syndical “privatization” to distributing ownership among taxpayers is that it’s simpler. It doesn’t require a central mechanism for keeping track of the process. And ownership shares are almost certain to be sold for virtually nothing to the moral equivalent of Russian oligarchs.
The “odious debt” theory is another topic, but one I find very interesting. I used to have a link to a site called “Odious Debt,” but I lost it the last time Windows froze up on me.
I don’t think the decisions of even most nominally “democratic” regimes should be binding on their people, since representative states are set up to make sure people have as little direct control over policy as possible.
Encouraging default on World Bank debt is definitely worth considering.
R.C. Dean,
I suppose you could say that the oil workers are involved in mixing their labor with oil to the extent that it’s extracted, and therefore have a primary claim on the oil under the ground they’ve mixed their labor with. But whether an occupier and user of surface space automatically appropriates all the resources below, down to the Earth’s core, or whether they should be considered a commons with access regulated by the community, I’m not sure. It’s something I’d need to think about a lot more to work out a consistent position on it.
As with most issues of property tenure, the practical answer probably lies more with the mores enforced by a local community than with any arbitrary set of rules.
Andrew,
He’s already been “paid” an arbitrary wage set by a privileged client of the state, who preempted ownership of the land illegitimately. Imagine, similarly, that the state preempted ownership of empty land in the New World, and parcelled out vast tracts of it to favored land speculators who then charged a monopoly price to the actual settlers and homesteaders for access to it (that’s actually what happened). You could say that the sharecropper was “paid” for the labor he did, but all it really means is that he was allowed to keep a part of the value created by his labor acting on the land, after he paid the monopoly tax to the land baron for access to the land.