Juan Cole in his recent essay Wolfowitz's Plot to Destroy OPEC And Why it was always Ridiculous
(Friday, March 18, 2005) is nothing but an attempt to undermined market. Let ignore that the essay is full of blatant bias and Cole's obvious dislike for Wolfowitz. What is wrong with privatizing petroleum industry? Juan Cole, beside his conspiracy theory and diatribe, did not even bother to reason why privatization of petroleum industry in Iraq is bad. His only two reasons are
a) the Iraqis wouldn't put up with it and b) even US Big Oil could see that it was a disaster waiting to happen.
Perhaps Professor Cole did a survey of Iraqi opinion on this matter and all the sudden the US Petroleum Industry is standard bearer for truth. The closer look at Saudi Arabia and other major oil producers, it is obvious that state-ownership of petroleum industry produce a negative effect on society. Let ignore the fact that state-owned industry is far less efficient and productive as privately-owned industry. State ownership of petroleum industry in OPEC countries creates an overall negative economic and social impact.
Fareed Zakaria has called oil a curse because it creates a dysfunctional relationship between the people and the government. It further remove incentives for entrepreneurship, a key factor to economic progress. A future Iraqi government with a large oil revenue does not need to listen to her people since the money do not come directly from the people. There is no need for accountability. State revenue can be squandered on any frivolous project because oil revenue is readily available. Furthermore a large part of the economy, labor and capital, will revolve around the state-owned petroleum industry deprive Iraq of economic diversification. A serious risk when oil price fluctuates. Juan Cole believes that because oil industry had always been state-owned, it should remain so.
... Iraq has been a socialist country since at least 1968 (and had elements of socialism in the period of military rule 1958-1968). Most major industries were publicly owned. Moreover, the Iraqi population liked it that way. Opinion polls who that 80% of Iraqis think the purpose of a government is to take care of people.
I guess by this thinking, Juan Cole argue that the Soviet Union and the Warsaw Pact should have remained Communist. The economic reform of China and India should not have happened. Certainly, the people of the Soviet Union and the rest of the Communist block depended on the government for every aspect of their lives. And for a short while, they liked it that way. But it created a society of dependency. It robbed them of their individual economic freedom and their initiative. And obviously looking back at the Soviet Union, it was disastrous. (On a side note, I wonder where Cole came up with the 80% figure. There was no poll conducted in Iraq since the invasion - for good reason, pollsters are afraid to go there.) Western oil industry is far from being the source for economic wisdom. Western petroleum industry had everything to gain from state-ownership of natural resource and nothing to loose. Who want free and fair competition.
The Middle East and particularly Iraq need more than just a political facelift, they need economic reform (as well as social reform), one that is not dependent on the unpredictability of the oil market. One that provides employment, encourages technological skill set, and creates an entrepreneurship class. The tigers of the Pacific Rim should be the economic model for Iraq, not the long dead Soviet Union. It is obvious that the economic model of Saudi Arabia creates hyper-unemployment, unresponsive government, and other social malaises noticeably young unemployed men who have no other alternative but channel their energies into religious extremism.
Even if we take Juan Cole assumption that Paul Wolfowitz is the Likud demon from hell, an emissary of Lucifer, it does not change the validity and soundness of market economy. Juan Cole simply used Paul Wolfowitz and neoconservatives as scarecrows to promote his leftist pseudo-liberal agenda and attack free market. "Global South?" Give me a break.