What to do about Saddam Hussein's debt

Jack Kemp
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Posted: Dec 15, 2003 12:00 AM

As I write this column, traveling on our way from the United Arab Emirates to Kuwait and Cairo with a genuine hero of the war in Iraq, Commander in Chief of Central Command Gen. Tommy Franks, the news arrived that Saddam Hussein was captured hiding in a hole, ironically just across the river from one of his palaces. I've found no happier people on the news of Saddam's capture than the leadership of the Arab world, many of whom we are meeting with on this trip.

What a great day for the Iraqi people, and what a great opportunity for them, as one of their first acts of administering sovereign Iraqi justice, to put this man on trial for his crimes against Iraq. After all, the crimes he committed were crimes against Iraqis, and it is they, the victims, who should have the opportunity to bring him to justice. Not only is it the morally right thing to do, it will be extremely important politically for the Iraqi people to demonstrate to themselves and to the world that a free and democratic Iraq is arising like a Phoenix from Saddam's ashes and is capable of administering justice.

Saddam's capture couldn't have come at a more propitious time. The Iraqi people are clamoring to assume the central role in putting their country back together again. They are, in effect, saying to us and the entire international community, "Ask not what you can do for Iraq, ask what you can do to help Iraqis help themselves." As Iraq brings Saddam to justice, countries around the world who loaned him money can help Iraq by forgiving the New Iraq of Saddam Iraq's debts.

President Bush couldn't have chosen a better personal envoy on Iraqi debt than former Secretary of State and Treasury James A. Baker III. Baker, who left Friday to talk about Iraqi debt forgiveness to France, Germany and Russia, is perfectly equipped for the role, given his professional background. Moreover, under the leadership of Ambassador Edward Djerejian, the Baker Institute for Public Policy at Rice University in Houston, which Baker created, has produced some of the most insightful work on rebuilding Iraq that I have seen.

Especially important is the report of the Advisory Group on Public Diplomacy for the Arab and Muslim World, which Djerejian chaired, titled "Changing Minds, Winning Peace," which lays out a new strategic direction for U.S. public diplomacy in the Arab and Muslim world.

It is my hope that Baker presents America's position to Saddam's debtors this way: Much, perhaps an overwhelming amount, of Iraq's debt falls under the category of "odious debt" - debt contracted not for the needs and benefit of the people but to strengthen and support a despotic regime. Bankruptcy is a fundamental concept of capitalism that wipes the contractual slate clean. There is a political analogy to bankruptcy - today it's called "regime change" - in which the country begins de novo. It occurred in Nazi Germany, imperial Japan, Soviet Russia and Warsaw Pact Europe. It has now occurred in Iraq. Tabula rasa: The slate has been wiped clean; things begin de novo. Thus, rather than going to France, Germany and Russia hat in hand asking for debt "forgiveness," I hope Baker presents them with the stark reality that a free and sovereign Iraq will be perfectly justified in repudiating much, if not the overwhelming majority, of the debt contracted by Saddam. Better for those countries to step up to the plate on their own now than play the role of Shylock later.

Along with debt relief, open trade also must be at the forefront of what we do to help Iraq help itself. Andrew J. Goodpaster, chairman emeritus of the George C. Marshall Foundation, who was supreme Allied commander of NATO from 1969 to 1974, recently wrote in The New York Times about the post-World War II environment. He said that "peace and security, economic prosperity and stable democracy were interdependent. ... It was for this vision of collective action toward a common goal and shared purpose that he (Marshall) received the Nobel (Peace) Prize."

Today the most effective collective action countries like France, Germany and Russia can undertake where Iraq is concerned is to act unilaterally, in concert, not only to forgive its odious debt but also to lower trade barriers and to eliminate mercantilist subsidies to open a flow of trade into the region.

When Marshall accepted the Nobel Peace Prize he said, "The maintenance of large armies (in Germany and Japan) for an indefinite period is not a practical or a promising basis for policy ... we must find another solution." "The true heart and genius" of that solution - the Marshall Plan - as Goodpaster observed, "was that it gave the people of Europe hope, restored their pride and delivered on the promise of something better."

Nothing will give more hope, restore greater pride and fulfill the promise of something better than removing an illegitimate and crushing debt burden, opening trade and commerce with the rest of the world and allowing the Iraqi people to bring Saddam to justice while building what Peruvian economist Hernando de Soto calls an inclusive free-market economy.