Social Studies July 2006

Not a Gas Tax—a Gas Pact

Here's an idea for President Bush: propose an international treaty whose signatories would agree to eliminate gasoline from their transportation systems.

Dear President Bush,

Your Social Security initiative is dead. Your immigration reform is divisive. Tax reform is a yawn. Iraq is a mess. Fairly or otherwise, you are widely viewed abroad and at home as a leader who disdains internationalism, snubs the environment, shills for oil interests, and rarely rises above partisanship.

Good news, sir. You could reinvigorate your leadership, transform your image, and wrong-foot your adversaries with a proposal that would bolster security, promote democracy and development, improve the environment, and embrace enlightened internationalism. The idea would attract support among hawkish Republicans and green Democrats, in Europe and Japan as well as the United States, and from Dick Cheney, Al Gore, and Kofi Annan all at once. It also has the advantage of being smart.

Here is the idea: Propose an international treaty whose signatories would agree to eliminate gasoline from their transportation systems by a date certain—say, in 30 years. Seek initial support from Europe and Japan, but open the treaty to any country that cares to join. Specify only that the treaty should allow signatories to reach the goal in any fashion they please and that it should allow for tradable credits against whatever interim targets it sets. That way, countries can act at different speeds and in different styles. Then let the negotiations begin.

You are no stranger to the theme of energy security, Mr. President. In your State of the Union address this year, you declared: "America is addicted to oil, which is often imported from unstable parts of the world." You announced an Advanced Energy Initiative aimed at replacing more than 75 percent of the country's oil imports from the Middle East—about 5 million barrels a day—by the year 2025. The way to get there, you said, would be by "incredible advances" in technology, especially ethanol, a gasoline substitute made from corn and other plants.

All well and good, but you set the bar low. According to the Center for American Progress, saving 5 million barrels a day would reduce oil imports by only about 25 percent in 2025, and overall U.S. demand by only about one-sixth.

No wonder the initiative was lost in the fine print. "Reduce oil imports by one-fourth in two decades!" is not an inspirational rallying cry.

In any case, the problem is not oil imports; it is oil. Because oil is a fungible commodity, shortages anywhere affect prices everywhere. Even if the United States imported no oil at all, it would feel a severe economic jolt if Iran closed the Strait of Hormuz. Still, if the country were to halve (say) its consumption of oil, it would, other things being equal, also halve its vulnerability to Iranian antics.

The potential benefits of decreasing reliance on oil only begin there, however. What economists have called "the curse of oil" turns out to have manifold dimensions.

Oil sustains and aggrandizes some of the world's most mischievous regimes, and within those regimes it often encourages the most mischievous tendencies. In Iran, the windfall from high oil prices is helping an alarmingly belligerent president to buy political support and prop up the mismanaged economy. Saudi Arabia has spent something like $90 billion of oil money, according to former CIA Director James Woolsey, exporting the jihadist ideology of Wahhabism, to America's very clear detriment.

Oil wealth is empowering Venezuelan President Hugo Chavez, an authoritarian populist, to set himself up as a U.S.-bashing regional bully. In Russia, writes New York Times columnist Thomas L. Friedman in Foreign Policy magazine, President Vladimir Putin "has used his oil windfall to swallow (nationalize) the huge Russian oil company, Gazprom, various newspapers and television stations, and all sorts of other Russian businesses and once-independent institutions." And, of course, it was oil that made a two-bit thug named Saddam Hussein both dangerous and relevant.

The nexus between oil and rogues is not happenstance. A growing literature suggests that oil wealth emboldens autocrats, fosters corruption, retards economic development, and undermines democratic accountability. Though Friedman is probably exaggerating when he posits that "the price of oil and the pace of freedom always move in opposite directions," it does seem that oil wealth distracts states from building diversified modern economies, establishing accountable governments, writing sensible tax codes, and investing in human capital. Oil states, notes The Economist, "fare worse on child mortality and nutrition, have lower literacy and school-enrollment rates, and do relatively worse on measures like the U.N.'s Human Development Index."

Presented by

Jonathan Rauch is a contributing editor of The Atlantic and National Journal and a senior fellow at the Brookings Institution.

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