by Hal Cranmer by Hal Cranmer
My father called me a couple of nights ago with an announcement. The US government has asked him to go to Iraq for six months to manage their oil sector. He has an extensive background in the oil industry, having worked as an executive for a major multinational oil company for approximately 30 years. He seemed excited about the position, for reasons that I just cannot understand.
So I am writing this article to try to convince him to turn down the position. There are obvious arguments of thinking of his family and his safety, not to mention the unconstitutionality of his position. However, I believe that if he is truly in favor of freedom and liberty, then perhaps posting this on the Internet will help to sway him. Perhaps I could just send him to Lew Rockwell's excellent article on why his course of action is counterproductive, but words coming from his son may be more persuasive. After all, I have my parents to thank for bringing me up to hold freedom so dear, and I believe that the light of liberty burns somewhere in my Dad still. It was my Mother who first handed me a copy of Human Action and told me that I must read it. They certainly like to give me a challenge!
When I asked why he accepted the position, my Dad explained that he told his interviewer he would prescribe solutions that would not be popular, such as raising prices for the oil and privatizing it. Currently there are price controls on the oil, imposed by my Dad's future employer, and he knows that price controls only create shortages. He stated that even with his u2018tough' answers the government still wanted to hire him. The reason the people will hire him is not because they want to u2018privatize' the Iraqi oil industry, and believe my Dad will be the catalyst. Instead my father will be part of the bureaucracy, and subject to their rules. With him, the Government can claim that they are open to many different views, and have another expert to direct the economy. The fact that the government has asked my father to u2018manage' the oil sector inherently suggests that they believe the oil industry should be centrally planned by a governmental authority, and calling it privatization holds about as much water as calling the President's social security plan u2018privatization'.
Mises explained that bureaucratic management is much different than management in the market economy. In his 1944 work, Bureaucracy, Mises stated:
"It is important to realize that our problem has nothing at all to do with the necessity of preventing the manager from the criminal abuse of his power. We assume that the government or the municipality has appointed an honest and efficient manager and that the moral climate of the country or city and the organization of the undertaking concerned offer a satisfactory protection against any felonious misprision. Our problem is quite different. It stems from the fact that every service can be improved by increasing expenditures. However excellent a hospital, subway system, or water works may be, the manager always knows how he could improve the service provided the funds required are available. In no field of human wants can full satisfaction be reached in such a way that no further improvement is possible. The specialists are intent upon improving the satisfaction of needs only in their special branches of activity. They do not and cannot bother about the check which an expansion of the plant entrusted to them would impose upon other classes of need-satisfaction. It is not the task of the hospital director to renounce some improvement of the municipal hospital lest it impede the improvement of the subway system or vice versa. It is precisely the efficient and honest manager who will try to make the services of his outfit as good as possible. But as he is not restrained by any considerations of financial success, the costs involved would place a heavy burden on the public funds. He would become a sort of irresponsible spender of the taxpayers' money. As this is out of the question, the government must give attention to many details of the management. It must define in a precise way the quality and the quantity of the services to be rendered and the commodities to be sold; it must issue detailed instructions concerning the methods to be applied in the purchase of material factors of production and in hiring and rewarding labor. As the account of profit or loss is not to be considered the criterion of the management's success or failure, the only means to make the manager responsible to the boss, the treasury, is to limit his discretion by rules and regulations. If he believes that it is expedient to spend more than these instructions allow, he must make an application for a special allotment of money. In this case the decision rests with his boss, the government, or the municipality. At any rate the manager is not a business executive but a bureaucrat, that is an officer bound to abide by various instructions. The criterion of good management is not the approval of the customers resulting in an excess of revenue over costs but the strict obedience to a set of bureaucratic rules. The supreme rule of management is subservience to such rules."
Now my father is one of the most honest people I know, and I realize that he has nothing but honorable intentions in accepting this job. Yet bureaucracy is the environment in which he will find himself. There will be certain rules he must follow — and his success will be judged by how well he follows them. His superiors will not be looking for a profit, as they did in his private sector occupation. Instead they will have some preconceived notions of what they want to accomplish, and they will want my father to help them accomplish their objectives. Because the objectives will not be in-line with oil consumers, there will be much less efficient production of the oil than had free market firms moved in and sought profit. At the very best, the industry will operate in a semi-privatized state, but still subject to regulation and all the hampering that comes to any business when the Government wants a piece of the pie.
But Dad knows all this — that is why he is accepting the position. He will have the oil industry privatized and this problem will go away. Well if this is true, why would the US Government need his position in the first place? Couldn't they just sell off the oil assets to private firms and leave Iraq?
The answer seems obvious, but the US Government will not allow it to be privatized. In addition to the fact that the US Government and its allies took the Iraqi oil fields by force, and therefore would not be a legitimate party to a lawful exchange, the last 80 years of Western involvement in Iraq have shown that the US and Britain want to assure themselves that Iraqi oil will be secure from falling into the wrong hands. The idea of security alone for Iraqi oil means that it cannot be privatized. Privatization implies that oil will be produced by the highest bidder for the raw materials, regardless of whether that bidder is Exxon or Al-Quaeda. Now Al-Quaeda may be an extreme example, with most people correctly seeing them as a bunch of criminals. However, the Government, because it has access to a large amount of information that must be held secret from the public, could assert that any private, non-Western firm, has ties to Al-Quaeda or any other terrorist group, and prevent the development of oil production by firms not specifically approved by the Government. Government approval of firms is not the free market — it is mercantilism.
From the beginning of war preparations for Iraq, the Administration has told the American people that the revenue from Iraqi oil will help defray the expenses of the war. Now with the costs of the war escalating at the rate most government programs do after initial estimates are made, it is hard to believe that the government will turn the operation of a potentially huge revenue source over to private firms, especially to firms in an industry that is so reviled by other government bureaucrats, the news media, and the public at large — especially in these times of high gas prices.
Perhaps if my father really wanted to privatize a country's oil industry, he should start with his own. The Bush Administration, who will be signing his paycheck, has their own ideas on how America should use its energy. In a long document, published on the White House website, it spells out the policy for America. There was much debate in the formulation of this policy centering on how the Vice President was having secret meetings with oil companies and devising policy without the requisite transparency. Yet the critics were actually criticizing the idea that their interests would not be represented in the bureaucratic process that Mises discussed above. The oil policy will be governed according to the rules of the bureaucracy. The only matter up for debate would be who determines the rules. If the Bush administration truly wanted a free market in energy, they would not have to have any meetings, because the only rule would be the rule of profit. There would be a multitude of energy policies formulated by private managers, not one overriding policy that will be followed by people such as my father.
So Dad have I convinced you? The people who are putting you in this position have created the bureaucracy through war and coercion, which is the antithesis of the free market. They have shown no indication that they would be interested in privatizing the Iraqi oil industry. I do not want you to have to find this out the hard way.