Asymmetrical Information

Good piece. The Miracle Mile concept is quite interesting.

I'm going to have to disagree with you on this one.

I don't like the idea of simply giving everything to the Iraqis. In this country, we all worked hard to pay for roads, telephone, power, water, gas, etc. We didn't rely on handouts from another country - yes, we had help along the way, but we weren't simply given everything. We deposed a tyrant in Iraq. I think our responsibility is to help Iraq form a stable government (of thier choosing) and repair the damage we did to existing infrastructure. But, we can't just hand them a brand new country. They have to work for it at least a little bit. I think the loans represent that "little bit." Yes, it is small to us, but in the long run, when the oil starts to flow and Iraq is successfully rebuilt, it should be small to them as well.

Chris,

The problem is that, according to the CIA World Factbook 2003, Iraq had a purchasing power parity GDP of $58 billion last year--or $2,400 per capita. So, $10 billion is simply massive. By contast, "The US has the largest and most technologically powerful economy in the world, with a per capita GDP of $37,600." Our GDP is a whopping $10.4 trillion.

Excellent point. $35 is a small price to pay to rebuild what we've blown to smithereens. However, I'll be damned if I pay $35 (actually much more) for people to get universal access to prescription drugs.

It's actually even worse than that: the Economist Intelligence Unit, from which I took the figure in teh piece, puts their cash GDP at $13.3 billion.

It's actually even worse than that: the Economist Intelligence Unit, from which I took the figure in teh piece, puts their cash GDP at $13.3 billion.

I agree with Chris.

Ideally the aid being given to the Iraqi people for reconstruction (as much from the neglect of the former Iraqi regime as from the war of liberation) ought to be in the form of loans paid back by the revenue from the Iraqi oil reserves. They may be relatively impoverished right now but that will no doubt change in the long run when the oil begins flowing again.

It is not an unreasonable position and I’m sure we could work out a financing structure - perhaps delaying the first payments - that enables the Iraqi people to get back on their feet without being crushed by a burden of debt from reconstruction costs especially if we agree that they are not obligated to pay back those who loaned the money to finance their former oppressors. If France, Germany, and Russia want to collect on what they loaned the Baathist regime, they’re welcome to join the manhunt and try to collect from Saddam Hussein.

hi megan,
"But my inclination to support the war rested on the assumption that once it was over, we would be ready, willing, and able to rebuild Iraq after we invaded."

why is it that you will speak with great skepticism concerning a government's interventionist role in an economy, and then in the next breath profess to a feeling of being disappointed and hopeful that the gov't will turn around and do the right thing internationally?

i think of this as "the new republic" syndrome. the new republic supported the war, and has now professed horror at the manner in which it perceives the administration going about messing the situation up. what annoys me about this is the ample evidence that we had (before invading iraq) about the likely turn of events and our government's incompetency in this issue, given how poorly we have done in afghanistan since we "liberated" that country.

in a nutshell, its hard for me to tell any difference between how you (and tnr) sound on this issue right now. just like the it manager said to you: "this is where the magic happens." i really do hope so. fingers crossed...

Er . . . that was rather the point of the article, Cas.

But as for why we, who are skeptical of government solutions for domestic problems, are willing to trust the government on the foreign front, the answer is that we haven't much choice. There is no private market seat on the UN, and other countries don't do strategic negotiations with private citizens.

In an ideal world, loans to finance the reconstruction MIGHT make sense. But we don't live in that world. Who would we negotiate the loan terms with? If it's a loan, shouldn't the borrower have some say in what the proceeds are used for? Who would make that call? In the end, it would look like we stuck the Iraqi people with $10 billion in debt so the President could reward some friends with fat contracts. (I am NOT saying that's what we would have done; I am saying that's how it would appear.)

Sure, a fair-minded observer might understand that making loans would be better than making gifts. How many fair-minded observers are there in the press? Before the war, critics claimed the sole goal was to secure the oil -- binding future oil revenues to loan repayments will be seen as "proof" that the oil was all we cared about all along. In the end, in the world we live in, financing the reconstruction through loans is not worth the trouble its likely to cause.

Dear Megan,

Mr. Angry Left, Howard Dean, said he wouldn't pull out of Iraq, so please don't get the heebie jeebies about Pres. Bush -- he's not about to get more squishy than Dean and cut anyone's losses in Iraq and pull out too soon.

Especially since the only losers so far in Iraq are the supporters of Saddam. We are taking losses, and the Iraqis are taking losses, but we are still winning and still enjoy a huge strategic advantage.
Pres. Bush has no reason to pull out, and every reason to stay. So the only people who could force the President's hand are the American people, who under some circumstances might change their collective mind and demand a withdrawal.
But I am very confident that we will not do that. And even though you and I live in Dem central (New York City), I hope you can find the same confidence in our will to fight.

P.S. If Pres. Bush and Paul Bremer want our aid to Iraq to be a grant and not a loan, then that is what I want.
The Senators who voted for a loan, however, are not necessarily morons or misers or grandstanding. There are reasonable points for making $10 billion a loan, but I hope Pres. Bush prevails. I want us to be generous with Iraq.

Dear Megan,

Mr. Angry Left, Howard Dean, said he wouldn't pull out of Iraq, so please don't get the heebie jeebies about Pres. Bush -- he's not about to get more squishy than Dean and cut anyone's losses in Iraq and pull out too soon.

Especially since the only losers so far in Iraq are the supporters of Saddam. We are taking losses, and the Iraqis are taking losses, but we are still winning and still enjoy a huge strategic advantage.
Pres. Bush has no reason to pull out, and every reason to stay. So the only people who could force the President's hand are the American people, who under some circumstances might change their collective mind and demand a withdrawal.
But I am very confident that we will not do that. And even though you and I live in Dem central (New York City), I hope you can find the same confidence in our will to fight.

P.S. If Pres. Bush and Paul Bremer want our aid to Iraq to be a grant and not a loan, then that is what I want.
The Senators who voted for a loan, however, are not necessarily morons or misers or grandstanding. There are reasonable points for making $10 billion a loan, but I hope Pres. Bush prevails. I want us to be generous with Iraq.

hi megan,

"But as for why we, who are skeptical of government solutions for domestic problems, are willing to trust the government on the foreign front, the answer is that we haven't much choice. There is no private market seat on the UN, and other countries don't do strategic negotiations with private citizens."

yes, you have a choice when you are pretty certain that those entrusted with the operation are likely to botch it up: don't do it. thus, given the counterfactual you presented, we had a clear alternative to what we did:

"I supported the war on Iraq darn near unequivocally. I thought -- and still think -- that Saddam Hussein posed a strategic long-term threat to US interests. I thought that the only viable alternative to war, sanctions, were unspeakably cruel to the populace, while doing little to either punish Hussein, or remove him from power. And I believed that we could build a stable democracy in the Middle East."

that is right--cordon him off; leave off the revenge thing. sanctions worked. and this is a model that appears to be much more consistent with your own model of society and the views you usually espouse, as far as i can tell.

We are in Iraq to change Iraq and to change the Middle East.
I know that wasn't the main message of President Bush's
state of the union speech in January but that purpose is
more or less clear and, really, has been all along. We are
trying to build a legitimate state starting from the ground
up. Starting with city councils first. I think this is the
right way to do things, but meanwhile at the level of
Iraq we are more or less running things.

We are deciding where the money is to be spent or what for
and how much. I don't see how in that circumstance, however
good our intentions are, how we can turn around and charge
the Iraqi people for those expenditures.

David Walser,

I agree with you that the decision to offer a grant instead of a loan was done out of concern for the possible political fallout (e.g. “see this is all about paying Bush’s rich oil buddies back”), however I still disagree with it for several reasons.

First, the people who would criticize making the aid in the form of a loan instead of grant are probably the same ones who are criticizing making it a grant instead of a loan. It does not matter to the majority of people who opposed the war what Bush does or does not do, he will be damned for it in their eyes. IMNHO there is nothing to be gained in trying to appease them now nor anything to be lost in doing what we feel is right regardless of how they whine and try and spin it.

Second, I think that there is probably less negative political fallout amongst the people who matter most (e.g. American taxpayers, American voters) in offering an at-cost loan to fund reconstruction for a country that will probably soon be making moola bucks selling us oil then in just giving them $10 billion. I frankly think it is more defensible to have them pay for part of the reconstruction which will benefit them then to expect the people who bled and died to free them also pay to rebuild a country which will profit the Iraqis the most in the end.

Third, while I agree that there is a certain moral question in how do you loan money to a country which (a) does not even have a government to act on its behalf and (b) cannot negotiate for the most favorable terms, I think there are ways to deal with this problem. We could have it go through an international agency (World Bank) in which case the United States would be fairly insulated from charges that this was done to line our own pockets (or those of the President’s supposed “supporters”) or we could just offer it to them at cost where we only recoup the principle in real dollars (I prefer the latter as it would limit the likelihood of mischief and interference in our getting Iraq up and running).

Fourth, I think in the long-run a loan would be best for all concerned. It would be best for the Americans since we would not be forced to pay for a nation which will probably be wealthy again fairly soon. It will be best for the Iraqis since they will get funding to get back on track while at the same time, when the loan is repaid this will be one less thing to be held over their heads when they are an independent and free nation.

Just my $0.02.

Considering the importance of the long-term US interests at stake, the shortsightedness of the arguments put forth by the pro-loan folks reminds me rather forcefully of Coolidge's famous refusal to forgive any of the Allied war debt (with consequences that helped bring about the world-wide Depression and hence, WWII)- "They hired the money, didn't they?" And Churchill's retort is even more apropos here: "That is true, but not exhaustive."

After the first Gulf War, we called on the Iraqis to rise up against Saddam, and then abandoned them. Iraqi society was completely devastated by combined effects of our economic sanctions and Saddam's brutal crackdown against the rebellion. And now we're going to make the Iraqis to use their oil money to pay for the contracts given to Bechtel and Halliburton?

Also the idea that as soon as the oil starts flowing the Iraqis will be livin' on easy street is ludicrous. The example of post-Soviet Russia shows that the transition from a totalitarian government and state run economy to free markets and democracy is quite wrenching and difficult. And as Jane has blogged about before, oil wealth turns out to often be more of a curse than a blessing for economic growth.

If anything, we should be giving even more aid than what Bush is proposing.

I think that the lesson of the 20th century is that the nature of the peace is almost more important than the war that preceded it.

World War I ended with a humiliated Germany facing restrictions and paying reparations, never ending the conflict and leading eventually to WWII.

In contrast, WWII ended with commitments by the Allies to safeguard and rebuild Germany and Japan, commitments we are still keeping in part with troops stationed in both countries. Today, we may compete with these two former foes, but we are not on the brink of armed confict.

(If I were more learned, I would remember how Churchill put this much better. Oh well.)

I think the first Gulf War ended up like WWI, with impossible to enforce restrictions and strong resentment, also leading to a second conflict.

I hope the second Gulf War follows the WWII model, for everyone's sake. The worst possible model to follow would be Vietnam, where we certainly lost the peace in our hasty desire to be done with the whole mess. Had we lived up to our commitments in the Paris peace accords, might there have been no re-education camps, no boat people, no lost decades for the people of Vietnam?

Feh! RC and Mark Woodworth are correct. This is a prime example of what Niccolo Machiavelli meant when he talked of ruin being caused by men who did not know how to be either good or evil. If you're going to loot a country because you regard it as a conquest (As those Leftists who push these loans seem to wish! Note that it is mostly Democrats, particularly the "antiwar" ones, who have befouled themselves by wishing this!) you should go ahead and do it that way in order to get the maximim benefit of having come as a looter rather than as a liberator. But is that truly the way those of you who opposed *or* supported the war out of concern for the nation of Iraq wish our own nation to be? Because quite frankly the use of loans rather than grants will surely fail to produce any of the returns that these good, liberal gentlemen seem to look for. Far from teaching the Iraqis any lesson in self-reliance it will merely show them that we are the sort of people who would go through a man's pockets when he is down, if they are foolish enough to draw *any* moral lesson from us in such matters, would simply teach them that this is the way to deal with others who are down when *they* are strong. Is this truly the lesson we would have them learn? o_O

And do not think that this would serve in "recovering our costs" as the foolish would have it! (Why is it that Senators who have had no trouble pushing us in the direction of becoming like Argentina over the past 70 years should suddenly become such beancounters now? @_@). As was alluded to by Steve LaBonne, Finland alone among the Europeans repaid our loans in an honorable manner while the rest merely dodged their debts. And this was when they borrowed the money of their own volition rather than having it forced upon them as we would force such loans upon the people of Iraq if the selfish and the greedy are allowed to have their way! Would you or any sane human be quicker to repay the principal and interest of a loan that was forced upon than one you had *_CHOSEN_* to make? Do you really expect Iraq to give greater honor to such a forced loan that Europe gave to the debts it had willingly undertaken? I think that we all know the answer to that! The Chinese referred to such arrangements as "unequal treaties" and unfailingly broke each and every one the moment they had the power to do so. Would we not be the same if such were done to America? And if this is the case for China and for us then why should it not be the case for the people of Iraq? O_o

If on the other end we are to be liberators rather than conquerers then it behooves us to understand that the Good Samaritan did not charge the man whom he aided and he was wise do do so because a charge of money in such a case would have been extortion rather than succor. Do not worry about what the public will say; The public has always had a greater understanding of logic than those who scorn them would credit. I think the American people can be relied upon to be wiser than a shortsighted gang of selfish Beltway patronage hounds in a case of this sort. For that reason let us take a closer look at our own history.

Excluding the Mexican War from our calculations as one that was a war of conquest rather than of liberation, it seems to me that we have 2 models before us of nations that we had come to liberate. On the one hand, we have the examples of Germany and Japan where we ended our occupation after a period of 8 years. Japan cleaves to us as a friend to this day while the other has become estranged after decades of friendship but can anyone deny that aiding them without strings has been to our benefit in ways that do not show up in a bookkeeper's ledger? A nation's honor is as important as its power and can be of direct material benefit to a nation even when its power is gone as witness the gentler treatment Athens received at the hands of both Macedonia and Rome in contrast to that which was dealt out respectively to Thebes and Corinth. The other examples before us is that of the Phillipines and Puerto Rico where we stayed as conquerers when we came as liberators out of a foul notion that we should "recover the costs of liberating them". We paid for that in the former case when the Fillipinos, bravely scorning anything less than freedom bled us fiercely for the 40 and more years that we sought to rule over them and ended by initially welcoming the Japanese who took those islands from us. It is only because the Japanese succeeded in making themselves even more odious than we had been that we have any friendly relationship with them at all today. Were it otherwise we would still be hated. As it is the memory of that betrayal is still a strain upon that relationship as well as a stain upon our honor. Does anyone really expect an unlooked for event of that sort to redeem us a second time the next time we stray into that particular sin?

As for Puerto Rico they have accepted our betrayal only because they are not truly capable of independence but were that to ever change how long do you think that they would wish such association with us as they have now? As it is they were and are a drain upon us to this day. They cannot be made a state, they cannot be set free and they cannot function without subsidies both direct and indirect. If forced loans truly have such marvelous powers of teaching self-reliance as some aver then why do we not start with them? I think we know the answer to that. There is a difference between a Paladin and a Yakuza, there is a difference between a healer and a leech. A true sempai does not exploit his juniors and a truly good Samaritan will not rifle the pockets of the wayfarer he seeks to rescue. If those who are serious about self-reliance are serious in their concern there *is* an honorable alternate; I seem to recall that Salam Pax claimed that local contracters could handle the job cheaper than American companies could and with similar quality so would it not be worthwhile to take a look at this claim? An Iraq rebuilt by Iraqis, if this is viable, would be of greater honor both to ourselves and them.

Those Senators, such as Dick Durbin of Illinois, who pushed this measure proved themselves unfit for office no matter the party to which they belong, and are nothing more than a bunch of maggot inhabited ghouls who lurch from grave to grave to in search of a human corpse to eat. What they proposed deserves nothing save a Veto from the President, mocking laughter from the House, and the scorn of all the voting public. It is as simple as this. Someone forces Jalapeno peppers down your throat in the name of saving you and then pours out a glass of water. Then he undergoes a mental debate as to whether or not he should charge you money for giving you the glass of water. If you agree that your life was at risk you might be grateful for jalapeno and water alike and regard the person who did it as a friend but how much gratitude would you have towards someone who charges you $50 for a glass of water after forcing jalapenos down your throat?

In our 2 wars against Iraq we have given them jalapenos. Let us not be misers where a glass of water is concerned! ^_^;

Sincerely yours,
S.P.M.

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