The recent "donors' conference" in Madrid, Spain, raised $13 billion in addition to the $20 billion provided by the United States for Iraqi reconstruction, much of which will come in loans. The good news about the conference is that it exceeded expectations, and it shows progress in the right direction.
The best news is, as The Wall Street Journal said, "It is over and now the far more important consideration of what to do with Iraq's debts can begin." What to do about Iraq's outstanding debt is key to establishing a capital-friendly environment in Iraq.
That's why Empower America, founded by Ted Forstmann and celebrating its 10th anniversary this week, has joined together with Peruvian economist Hernando de Soto and his Instituto Libertad y Democracia to create the 21st Century Committee. The committee is a bipartisan, private-sector endeavor inspired by the spirit and success of the 20th century Marshall Plan in Europe and Gen. Douglas MacArthur's efforts in Japan after World War II. The committee consists of internationally successful businessmen and women, renowned economists and policymakers who believe that a vibrant, private-sector movement is essential to assisting in the transition to free enterprise and democratic self-rule in Central Asia and the Middle East.
Unfortunately, the international aid agencies and interest groups organized as NGO's (nongovernmental organizations) have all too often made "profit" a dirty word. The 21st Century Committee intends to demonstrate that entrepreneurs and companies in search of profit who are willing to put private capital to work in Iraq creating jobs are the only way for the country to become free, democratic and prosperous. In a soon-to-be-released report, we put forth a blueprint for bringing President Bush's vision of a democratic, prosperous and free Iraq to fruition. We believe the report can provide a framework within which Iraqis can develop a truly representative democratic system in the shortest time frame possible and provide the institutions that will unleash what Maynard Keynes called the "animal spirits" of the Iraqi economy and the other nations in the region.
Part of the plan will include dealing with outstanding debts remaining from Saddam Hussein's odious regime. We also make the case for why it is essential for Iraq's oil industry to be privatized, not restored as a state-run enterprise. The report lays out a strategy for establishing the rule of law by using de Soto's approach to establishing property rights that was successful in Peru and is currently under way in Egypt. And we argue strenuously for giving Iraqi entrepreneurs and foreign companies the freedom and flexibility they need to generate a thriving market economy.
In 2002, at the International Conference on Financing Development in Monterrey, Mexico, when Bush introduced the Millennium Challenge Accounts, he said, "We have a tremendous opportunity to begin acting on a new vision of development (that) unleashes the potential of those who are poor, instead of locking them into a cycle of dependence. This new vision looks beyond arbitrary inputs from the rich and demands tangible outcomes for the poor." A similar logic can and should be applied in Iraq.
Beyond short-term emergency food, medical and other humanitarian relief to serve as a bridge from tyranny and war to peace and prosperity, Iraq does not need random contributions from future donors conferences, especially not if they come from foreign governments and international organizations that tie up the contributions with all manner of strings to further politically correct agendas.
The next conference on Iraq should be an investors' conference devoted to close consultation among contributing governments, firms willing to do business in Iraq and the Iraqis themselves to discuss the kinds of policies that will make Iraq a capital-friendly environment. As Walter Wriston, former Citicorp chairman, said, "Capital goes where it is welcome but stays where it is treated fairly." In other words, the secret to getting capital into this region of the world is not only security in a physical sense but also the security of making a profit.
An Iraqi investors' conference could, in fact, serve as a template for a series of conferences and consultations with other Muslim nations. Not only would such conferences help facilitate development of free-market economies in the region, they also could serve as an antidote to the disturbing trend of "rising (Muslim) hostility toward America (that) has reached shocking levels" that is warned of by a report issued recently by a U.S. State Department advisory panel.
The advisory panel's chairman, Edward Djerejian (former U.S. ambassador to Syria and current director of the James A. Baker III Institute for Public Policy at Rice University), explains the rising Muslim hostility, in part, by the fact that "the United States is not in any significant way present in the daily discourse, the debates, the discussions, the conversations that are going on in the Arab Muslim world about us." There is no better way to get engaged in the daily discourse than to bring potential investors and entrepreneurs together with the people of Iraq and the entire Arab Muslim world.
If we do these big things right, the little things will begin to fall into place, and we will have left the Iraqis and eventually the entire Muslim world democratic capitalism, if they can keep it.