The conundrum is how to restore order at the same time we transform our military presence from a "Humvees on patrol" image - guarding against and fighting a guerrilla foe - to that of "shotgun behind the door," where, as New York Times columnist Tom Friedman recently argued, our military is held in low-profile reserve with the sole purpose of strategic intervention to prevent the bad guys from taking control.
The only solution is to hand Iraq over to the Iraqis by recalling to active duty as many of the 400,000 Iraqi soldiers who are suitable and willing to help; by holding immediate local elections; and by throwing open the doors of commerce to people and firms which are willing to do business for profit and create jobs in Iraq. These actions won't decapitate the insurgency, but taken together they can starve it to death by depriving the guerrillas of the human despair and resentment that nourish them.
Local elections should be held within a matter of weeks, not months, to select local leaders. They should build upon the Iraqi tradition of "muhktars," or "chosen ones," who act like neighborhood magistrates or mayors. These local leaders then could be amalgamated quickly into working municipal councils, which in turn could elect representatives to regional governing bodies. Within a very few months, these regional governing bodies could elect representatives to a national parliament that could take over national governance and control of the military.
Likewise, we should invite Hernando de Soto and the Institute for Liberty and Democracy to work with the muhktars to get property registered, titled and valued and to establish a system of local common-law courts to handle property and civil disputes and routine criminal matters.
There is no need for DOD contractors to be running the Iraqi oil industry like a U.S. state-owned enterprise. Iraqis know how to run an oil industry; we should let them. But, we should turn over an industry of numerous private companies, not a state-owned behemoth. We should create real private oil-industry enterprises, owned as joint stock companies by the Iraqi people, complete with Iraqi management and boards of directors. Each new private oil company would issue an equal number of shares of stock to every Iraqi citizen, which in one fell swoop would create a community of financial interests across tribal, regional, ethnic and religious divides, and therefore provide a powerful uniting force.
Banking is another area where Soviet-style central planning must be abandoned. Rather than establishing an international banking cartel and reopening the two state-owned banks, the Coalition Provisional Authority should implement a rudimentary system to grant licenses to private banks wishing to do business in Iraq, especially those willing to lend to small- and medium-sized businesses.
These are just a few of the steps we can take to empower the Iraqi people. Above all, we must send a signal that the United States stands ready to invest in a 21st-century effort, as we did with the Marshall Plan after World War II, to generate economic growth and democratic self-rule in Iraq, Afghanistan and throughout the Arab and Muslim world.