$2000 Katrina debit cards plus "economic stimulus" checks -- Iraqi style

"Iraq Handing out Cash to People on the Streets" reads the headline:

It is a politician's dream: Handing out cold, hard cash to people on the street as they plead for help. Iraq's prime minister has been doing just that in recent weeks, doling out Iraqi dinars as an aide trails behind, keeping a tally.

The handouts by Prime Minister Nouri al-Maliki and a handful of other top officials are authorized — as long as each goes no higher than about $8,000, and the same people don't get them twice. Aides say they are meant merely to ease the pain a bit, and are motivated by a belief that better conditions will lead to more security.

No higher than about $8000?! It's the $2000 Katrina cards all over again, which proved to be disastrously abused. Who can seriously expect this to go well? And it's even worse than the typical American-style of wealth redistribution.

The cash handouts are just one small — if eye-catching — part of a major investment push this summer by Iraq's government. The aim is to rebuild basic services and jumpstart Iraq's damaged economy by quickly distributing as much of the country's glut of oil revenue as possible.

U.S. officials and a fed-up American public are urging exactly that — for Iraq to spend its own money, not America's, to rebuild the country now that violence has eased.

The very problem is that the government is running the oil industry, then trying to dole out profits so "equitably." Does this sound familiar? It should. "From each according to his ability, to each according to his need," as Karl Marx put it.

As much as I hated Saddam Hussein and wanted to see him toppled, even I must ask: did we really "invest" thousands of American lives, not to mention those who survived but will never be whole again (lost limbs etc.) to replace a dictatorship with communism? To pour a trillion dollars of Americans' money into Iraq, then have Iraqis receive all this money while Americans are duped with $600 "tax rebate" checks?

The solution is simple: privatize Iraq's oil industry. The Iraqi government should heed the words of Andrew Jackson, who wrote in his explanation of vetoing the renewal of the Bank of the United States: "why should not the Government sell out the whole stock and thus secure to the people the full market value of the privileges granted?" If the government sells the oil industry, even if it means selling it to foreign corporations, that money can be used to rebuild the country's infrastructure. Meanwhile, the oil companies will need workers, so Iraqis can still be employed in lucrative jobs.

Then again, why should we expect Iraqis to do what Americans can't? Americans now are largely state-worshippers, despite the tradition of individualist freedom that founded this continent. Iraqis have never had that in their society: until five years ago, they were always under the rule of some kings or dictator for all the thousands of years that humans lived there. I can only hope for the irony that someday they'll reach that true freedom that Americans have lost, setting an example for us.

Yet the new Iraqi effort runs a high risk of failure: The government is disorganized, fears of favoritism remain and the shadow of corruption haunts every step.

"Money is not a problem," al-Maliki told a recent gathering of tribal chiefs in the southern city of Basra, after government forces had defeated Shiite extremists there. "But we must put it in honest hands to spend."

The problems are the direct result of government running the industry. When government spends money, it's swayed by special interests with every incentive to waste. When the private sector spends money, profit is of paramount concern, which necessarily breeds efficiency. And who cares if someone's making a profit? Profit is not evil. By definition, profit is earned in the private sector.

Despite such problems, Iraq's oil revenues, an estimated $70 billion this year, still provide the best chance of leveraging the country's fragile period of calm into something more lasting, many officials say.

So where's the repayment that George W. Bush promised before we invaded Iraq? As I've quoted before: "We are told that the money is an advance and that, a few centuries from now, we shall recover it a hundredfold. But who says so? The very Quartermaster General's Department that swindles us out of our money. Listen here, gentlemen, when it comes to cash, there is but one useful piece of advice: let each man watch his purse... and those to whom he entrusts the purse-strings."

Bastiat wrote that over a century and a half ago, warning against the enthusiasm for colonizing Algeria and supporting its economy. As he had noted in "What Is Seen and What Is Not Seen," his countrymen used several fallacious arguments much like the ones today: propping up the other country will foster jobs there and at home, and improving trade. What is not seen is the money lost to the economy at home, and it is indeed lost to Americans until we're "repaid" -- if that ever happens.

Top U.S. commander Gen. David Petraeus has repeatedly called money a crucial weapon to lure neighborhoods from extremists and stabilize Iraq. The chairman of the Joint Chiefs of Staff, Adm. Mike Mullen, urged the government to pass out money even faster this week on a trip to devastated Mosul in the north.

And what will happen when the cash handouts must inevitably cease, and these Iraqis must learn to work for themselves? That's right, they won't want to, because they'll have been used to, they'll have been bred to be dependent. They'll have no incentive to develop job skills to thrive in this new "free Iraq."

The United States has been doling out cash itself, most effectively to former Sunni militants who switched sides to fight al-Qaida. The military has also provided money and assistance to projects like fixing damaged roads in the Shiite enclave of Sadr City after battles there.

"Rebuilding infrastructure" is one thing, but these bribes -- and let's not mince words here -- will only go so far. Iranian agents, for example, will gladly pocket the money and go on fighting for Tehran's interests.