Iraq’s political and economic bullet

[BT]

Iraq’s political and economic bullet
Filed under: General— site admin @ 4:34 pm
Several economists and economic development experts argue that land –specifically “land reform” – is key to ending Iraq’s complex civil conflict. Among them is Peter Schaefer. Schaefer served in Vietnam as an American military intelligence officer then in the mid-1970s became deeply involved in economic development analysis and property right issues. His is also a former adviser to Peruvian economist Hernando De Soto.

Vietnam sparked Schaefer’s interest in economic development. I spoke to him yesterday (March 2) on the phone. Pete told me: “I couldn’t get my mind around the fact that the Vietnamese people were so smart and industrious and yet they were just so damn poor. The (destructive effects of the) war didn’t answer that for me. Why would someone choose Mao over Jefferson?”

Schaefer concluded the Vietnamese Communists pursued a calculated land reform policy, one that leveraged Vietnamese villagers’ traditional recognition of property rights.

He also looked at World War Two. “One of the crucial pieces of what we did in Japan was to give property rights to peasants who didn’t have them,” Schaefer said. “That was fifty percent of the population, approximately. General MacArthur (on the advice of his staff) gave the peasants their land and almost overnight created middle class. It was a brilliant move.”

In the 1990s, Schafer noted, Peru turned the “land reform” tables on the Communists. Property right reform helped defeat Peru’s “Maoist” Shining Path guerrilla movement.

“The Third World is not populated by proletariats, it’s populated by entrepreneurs– successful small business people,” Schafer said. (And that is what I’ve seen in the time I’ve spent in developing nations.) He added: “If you are someone who is surviving and raising a family by taking a bunch of bananas from out the city and bringing it in (to sell) you are an entrepreneur. You understand business —by low sell high And if you come to them and say you want to extend credit to them they understand that.”

In Schafer’s view, property right reform gives Iraqi Prime Minister Nouri al-Maliki’s government a very powerful political weapon, one that has war-winning potential.

Schafer supplied some fascinating evidence. According to Schafer, less than five percent of Iraq’s cultivatable agricultural land is “freehold” (owned with clear title). 95 percent of the cultivatable land in Iraq is therefore “dead” (illiquid) and cannot be used as security for a bank loan. “Iraqi farmers who lack clear title can’t get (bank) loans,” Schaefer said. That limits economic creativity, particularly in a population demonstrably successful at small business operations. Schafer believes that 95 percent of family homes in Iraq also lack clear, secure title.

“Prime Minister Maliki needs to go on television,” Schaefer advised, “and say “Citizens of Iraq, 95 percent of the property in this country is not legally in your name. You don’t have title to your own land or your own houses. We’re going to change that right now.””

This reform would launch a liberalizing political and economic revolution, with the democratic Iraqi government empowering the people of Iraq. For maximum payoff, Schafer said, Maliki’s government should support title reform with a mortgage program that provides wholesale money to banks and permits them to do mortgage lending for individual Iraqis, thus “jumpstarting” Iraq’s sclerotic banking system.

Property right reform also provides a political tool for assuaging sectarian and ethnic fears among Iraqi citizens, Schaefer said. Good title “means Iraqis can protect their houses with the law on their side.”

This is nation building at a subtle but fundamental level: moving from the rule of the gun to rule of law. Consider the case of Sunni Arabs who have abandoned property in Shia Arab neighborhoods. “Anyone who loses a home, but has solid title, will have legal recourse to regain (lost property) through the courts,” Schaefer said. The law becomes a non-violent option preferable to gang or militia-inspired retribution.

Schaefer thinks the Iraqi city of Kirkuk offers a perfect opportunity to link title reform to an economically-productive housing construction program. Saddam Hussein “Arabized” the city by forcing Kurds to move away. Now returning Kurds are evicting Arabs. Some 40,000 homes are in dispute. Schafer’s solution: Build 40,000 new homes in Kirkuk. “Displaced Kurds have a choice – their old home or a new one,” Schafer said. “They can have their former home once an Arab family moves into one of the new houses.” This defuses the ethnic clash and, Schafer noted, “the economic impact of the construction program will be enormous.”

I think I’ll post one of his quotes a second time, because it is so true:

“The Third World is not populated by proletariats, it’s populated by entrepreneurs– successful small business people.”
Yup.

http://austinbay.net/blog/?p=1650

[Plane]

That sounds like a winnin rogram to me .


But we shoud ask Henny about the extending credit part of the deal.


A Muslim view of credit is diffret from ours and some forms of lending for interest that we think ordinary would not appeal to them.

[Michael Tee]

This view doesn't seem to recognize that Iraq was already a prosperous nation with a thriving middle class under the Ba'ath Socialist regime, with one of the highest standards of living in the Middle East.  The wealth of Iraq is overwhelmingly in oil and never will be in agriculture.  Land reform in a fertile rice bowl like Viet Nam is not the same thing as land reform  in a desert.  Agriculture will never be more than a footnote in the economy of Iraq as long as the reserves hold out and the price of oil never crashes.

The Iraqi people cannot be fooled by Schaefer's scheme because they live in Iraq and remember perfectly well how everyone was doing just fine when the government owned the oil wells, and used the money for the benefit of the Iraqi people (admittedly for the even greater benefit of Saddam and his hangers-on, which practically made little difference as there was always plenty for the people's education, health and welfare.)  I think an offer to return to the economy of the good years of Saddam Hussein (minus the wars) would be of much greater interest to the Iraqi people than Schaefer's Viet Nam and Peru-based crackpot theories of redistribution. 

Also - -  land reform is always a divisive issue - - in Viet Nam, for example, the Communist Party delayed bringing it in for almost a decade because it threatened to split off the non-communist members of the National Liberation Front.

The only real change that the Iraqis need over the past socialist pattern is that like some of the more enlightened Gulf states, they need to educate their population for transition to knowledge-based industries after the oil runs out.  Of course this will never happen because of the doctrinaire knee-jerk reaction to "socialism" of  the current owners of Iraq.

[Plane]

".....the doctrinaire knee-jerk reaction to "socialism" of  the current owners of Iraq."


Hahahahahaha


I wish.

[Henny]

But we shoud ask Henny about the extending credit part of the deal.
A Muslim view of credit is diffret from ours and some forms of lending for interest that we think ordinary would not appeal to them.

The issue isn't credit, per se, it's interest ("Al-Riba", or just "Riba"). Literally, Al-Riba means to excess or increase.

There are different Hadith on the subject, thus different interpretations. Some interpretations focus on the "excess," and thus allow limited interest to be taken or paid. You will find this in Jordan and a few other Islamic countries. Others strictly interpret it and interest is not allowed at all. So in that view, it's all in the interpretation and how Iraq will view it.

But it shouldn't be a problem. In recent years in the U.S. there have been some banks offering "Islamic Home Loans" and even Muslim Credit Unions. I'm not sure how their programs work, but it seems to help in avoiding a conflict of the modern world vs. faith-based beliefs. Perhaps a similar solution will be employed in Iraq.

[Plane]

   Thank you Henny , your vantage point makes your opinion especially valuable to us.