The Bush administration has scrapped its scheme to convert Saddam's old-style socialist oil industry into a new semisocialist oil industry like the one that exists currently in the state of Alaska. Under the Alaska-fund model, which the administration is said to favor, a certain share of the proceeds from the state-owned oil are placed into a state fund and paid out to citizens as the legislature sees fit. Although these payments are gussied up as "dividends," they are really little more than welfare payments since citizens do not actually own the oil at all, i.e., they do not have title to the land under which the oil resides or the mineral rights to the oil itself, nor do they have property rights through stock ownership in the business enterprise that does.
The Iraqi oil industry is the most economically developed of all industries in the country. It would be a straightforward matter to "privatize" the industry by simply designating the various existing administrative subdivisions of the industry as separate enterprises, each with an Iraqi CEO and board of directors, giving - not selling - an equal share of the stock in each of those enterprises to every Iraqi citizen. Presto, the industry is privatized. And the Iraqi people become shareholders in Iraqi oil products or in the Iraqi oil industry and stakeholders in Iraq's move toward democratic development.
If the new Iraqi government wanted access to those revenues, it would have to levy a tax, not simply dip into them at will. Not only would this arrangement prevent the typical corruption and profligacy that inevitably accompanies state-owned oil industries, but it also would generate enormous centripetal forces pulling the country together as citizens from all religious, ethnic and tribal backgrounds suddenly were given a shared financial interest in private economic enterprises.
The privatization of Iraq's oil should be done immediately, not through the half-baked "voucherized" auction method that failed so miserably in Russia, or the even less-than-half-baked idea of Noble Prize-winning economist Vernon Smith, who would offer the Iraqi peoples' most valuable asset to the highest bidder, whether Iraqi or multinational corporation. Rather, Iraq's oil ought to be privatized along the lines of President Lincoln's fabulously successful Homestead Act in 1862 America, where clear title to 160 acres of federal land was "given" outright to citizens. It was, after all, theirs to begin with, and it is our solemn duty to make sure it stays that way.