August 22, 2005
Ex Nihilio
Pundits on both sides are making a huge mistake in both Iraq and Gaza. I wish I had an influential blog because I would like to make an economic correction to the Conventional Wisdom.
CW states that an agreement to share oil revenue is important in Iraq. This has been floated by the left and right and is currently thought to be one of the stumbling blocks for Sunni approval of the draft Iraqi Constitution. Meanwhile, pundits on the left are concerned that Palestinians in the newly autonomous Gaza strip will need buckets of aid to become anything but an economic backwater. (NPR’s Juan Williams was in good metaphorical form on FoxNews’s “The Beltway Boys” this weekend. Fred Barnes said that the ball is in their court; Williams rebutted that they don’t have a mitt to catch it or a bat to hit it back. Maybe a tennis metaphor would have served better, but he made his point.)
Oil wealth did, in fact, do wonders Jed Clampett, allowing his entire family to enjoy the high life in their Beverly Hills mansion. But when you look at the per-capita GDP figures for oil exporting nations, it looks less like a gift. Saudi Arabia has per Capita GDP of $10,430 in 2004; oil-rich Venezuela’s is $4080. (Source: worldbank.org ) Israel, for natural resources, has pretty much sand – and a per-capita GDP of $17,380.
Israel has created an economy, ex nihilio. Next week I will start a drug regimen from an Israeli Pharmaceutical company. They have tourism from holy sites – not second to Saudi Arabia – but they have not relied on natural resources. The new economy of the Gaza strip must look to its human capital for prosperity, not for aid. We’ve seen how well aid works in Africa. Likewise, a look at oil exporting nations shows the new Iraqi economy would be better served by diversifying itself.
Yes, the US still provides aid to Israel (what’s the use of having a powerful, Zionist neocon lobby if you can’t use it?) and, yes, I would support a similar aid package for the Palestinians. But I would like to see it structured as micro-loans or targeted development aid. And it will of course have to be contingent on peaceful behavior.
And yes, the oil revenues can be a big boost to Iraqi reconstruction and development. But rather than distributing shares to every citizen, why not finance the government and infrastructure with oil revenues. Entrepreneurs in Iraq could then enjoy a low tax climate with modern infrastructure and have access to inexpensive energy (no, I don’t mean buying Iran’s nuclear electricity). This would be a foundation for a long-term prosperity that would be protected from price volatility and less susceptible to terrorism or corruption. Give the Kurds the oil wealth; in time, the Baghdadian traders would be richer.
Great statistics JK. We aren't seeing those in the MSM anywhere, are we? You are, of course, correct in saying that selling a nation's natural resources without any value added is the route to subservience rather than prosperity. But the obstacle to the sort of creation from Iraqis that you rightly admire in Israelis is not the absence of either oil wealth OR foreign aid. That obstacle is altruism, as I explained in 'Altruistic Military Service.'
To the extent that each Iraqi man acts in ways to advance his own happiness and prosperity ON EARTH without killing his neighbors or foreigners there to help him, the future of Iraq will be a bright one. To the extent that he chooses the culture of death, enabled by altruism, Iraq's dark age will return.
Posted by: johngalt at August 22, 2005 3:13 PMThank you for citing the Israel's successes.
Posted by: AlexC at August 22, 2005 5:45 PMThere's a whole lot of nothing where they're at, and they've managed to far surpass those that happened to be on top of oil.
Thank you both for the kind words.
JG, I think we agree politically but not philosophically here. I am pretty much on-board for the importance of individualism and I remain sympathetic to the disapprobation toward altruism.
Yet to claim the difference between Israel and other MidEast economies is altruism is more than I can bear. The difference is a belief in the value of trade and commerce, respect for the rule of law, and the innovation that freedom facilitates.
Israel is pluralist but still a religious country. Islam forbids usury; Judaism quite famously does not. Saudi Arabia does not allow women to drive, foreign investment is severely restricted or prohibited in many of Israel’s neighbors. I just cannot agree that the difference is a delta in altruism.
Posted by: jk at August 23, 2005 10:47 AMYou are right, JK. I overreached. (A predictable occurence in comments written under time constraints of my lunch hour.)
I must be more careful in my elucidations on the evil of altruism, for even Dagny surmised I was ascribing altruism as the ENTIRE cause of suicide bombers. I want to emphasize that it is A cause, AN enabler, of murder, suicide, and the culture of death.
We are in agreement on the causes of peaceful and beneficial societies: Trade and commerce (advancement of happiness and prosperity); rule of law (without killing his neighbors or foreigners); and the innovation (IBID 1) that freedom (IBID 2) facilitates.
We both (and Alex too) hold forth on a blog named "Three Sources" for a reason. And it's NOT just that we're unabashed apologists for Israel.
Posted by: johngalt at August 23, 2005 2:15 PMActually, Judaism does prohibit charging interest to fellow Jews. Lev. 25:37. I assume you're thinking about the Jews' role as moneylenders to non-Jews.
Paul Johnson wrote this in his History of the Jews:
"One of the greatest contributions the Jews made to human progress was to force European culture to come to terms with money and its power. Human societies have always shown an extraordinary unwillingness to demystify money and see it for what it is – a commodity like any other, whose value is relative. * * * Men bred cattle with honour; they sowed grain and reaped it worthily. But if they made money work for them they were parasites and lived on 'unearned increment,' as it came to be termed.
"The Jews were initially as much victims of this fallacy as anyone else. Indeed, they invented it."
Posted by: Attila (Pillage Idiot) at August 23, 2005 10:01 PMThanks for the info. The Catholic church prohibited usury until the 16th Century. Perhaps we could all agree to keep religion out of economics...
Posted by: jk at August 25, 2005 11:08 AM | What do you think? [6]