Sunday, November 04, 2007

Why Iraq was a dry run

By Carl

I.F. Stone once wrote that reporters should write the news so that, as the story develops, no one is ever surprised when they read their morning paper.

Issy was a smart man. I was surprised by this:

Who holds the world’s oil? You might assume it’s in the hands of big private oil companies like ExxonMobil. But in fact, 77 percent of the world’s oil reserves are held by national oil companies with no private equity, and there are 13 state-owned oil companies with more reserves than ExxonMobil, the largest multinational oil company. The popular perception in the United States is that if leaders of oil countries nationalize their oil, they are bucking a global trend toward privatization. In reality, nationalized oil is the trend. And the percentage of oil controlled by state-owned companies is likely to continue rising, mainly because of the demographics of oil. Deposits are being exhausted in wealthy countries — the ones that exploited their oil first and generally have the most private oil — and are being found largely in developing countries, where oil tends to belong to the state.

Nationalization is also a political trend in some regions, mainly Latin America, where the populist presidents of Bolivia and Ecuador have made it part of their discourse. They are led, of course, by Hugo Chávez of Venezuela. He has made private producers accept state control of their operations. When they wouldn’t, as in the case of ExxonMobil and ConocoPhillips, he simply nationalized their holdings. Chávez has also asserted his control over Venezuela’s state oil company, which before him operated very much like a private, profit-driven enterprise.

Meaning, for one thing, if you thought $100 for a barrell of oil was a lot, get used to it.

The upside of capitalism is it tends to make things cheaper and more efficient all around. There aren't many people who would disagree with that, in theory (practice being different in that no capitalist system really exists in the world).

The downside of capitalism is, as I just pointed out, its non-existence. While capitalist forms of economy thrive, they thrive in partnership with governments, or at least within the context of a political system.

In America, we see one side of this coin: eventually money, which always equals power, co-opts the government and turns it into a tool for a ruling class of some sort: a plutocracy.

In other nations, the government cuts out the middle man and goes straight for the profit. Since governments are not beholden to shareholders, they are free to play with markets and supply and demand as they see fit. Who's going to stop them? They hold two forms of power: political power and economic. It's very hard to overturn that kind of ruling class.

In fact, that kind of overthrow only happens when people get desperate enough to exploit the only true power they have: the power to disobey.

All governments are an illusion: the governed allow the governors to govern. If the governed get frustrated and angry enough, they just change the government. We're seeing this now in this country, as the nation slips slowly in a slightly more progressive direction, we've changed the governing party. The pendulum swings and once it starts, it's nearly impossible to stop until it swings too far in the other direction.

Similarly, all freedom is an illusion, again, as we've seen here in the past eight years. The government of this country, regardless of party, has given up being the bulwark against the predations of the not-so-free market and has full-throated decided to not only protect those markets, but to enhance them with regulatory mechanisms designed to close them to outside competitions.

Kinda....frustrates you....don't it? We can't exactly survive this threesome.

The fact that oil has been mostly nationalized now is an indication where the marriage of government and business can lead: if Chavez wanted to shut down Carcas for not "voting" for him, how hard would it be to stop oil refining in that region, then charge an arm and a leg to ship it in?

And doesn't the United States government already punish its opponents, to the detriment of its own security? How hard would it be to imagine American heating oil owned by the government, being used to freeze out the poor?

And then...there's foreign policy, which leads us back to the article. The more nationalized the oil industry becomes, the more likely it is that oil will be used as a weapon in an economic war that would eventually boil over into a military one. And so then, Iraq would have only been a test run.

(Cross-posted to Simply Left Behind.)

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