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#9 - JRL 7135
Financial Times (UK)
April 8, 2003
LETTERS TO THE EDITOR: Russia has taught us the pitfalls of paternalism
From Dr Guy Standing.

Sir, In the early 1990s, working as an economist in Russia, I monitored the catastrophic collapse of living standards that resulted in the premature deaths of several million people. There are lessons to be learned for the upcoming period in Iraq.

In both cases, a discredited state system will have collapsed and ordinary people will have little or no income on which to survive. Beware the aid-givers, multilateral, bilateral and commercial.

Handing out food parcels and diverting aid from elsewhere may be a first reaction. However, to avoid the familiar pitfalls of paternalism, an enlightened policy would be to channel financial assistance in such a way as to provide every Iraqi citizen with a small monthly income without condition, a "restructuring grant" with which to rebuild their lives and communities. This could have been done in Russia in 1991-93, when it would have kick-started a distributionally decent market economy and addressed chronic poverty in an effective way. The same would apply in Iraq.

Moreover, by this means, "hearts and minds" could be won far more decently and effectively than if a similar amount of money were provided in paternalistic measures that have a very high administrative cost and ample scope for petty corruption and distortionary distributional effects - all of which were seen in abundance in the Russian case.

The provision of a basic income could be paid for by a dividend from the sale of Iraqi oil, supplemented if necessary by transfers provided by those purporting to have gone to Iraq as "liberators". Economic liberation is as important as political.

This simple transparent measure would be a way of limiting the enormous danger of transferring national resources into the hands of murky interests inside and outside that blighted country. Let Tony Blair and his European colleagues fight for that.

Guy Standing, Director, Socio-Economic Security Programme, International Labour Organisation, Geneva, Switzerland

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