No Representation Without Taxation
People only have a stake in the system when they are forced to pay for it.
As the world moves toward increasing democracy, we must ensure that it is also accompanied by giving democratic publics a stake in their own politics. Paradoxically, this stems not just from representation but also from taxation. Let me explain. The situation under which a state does not tax its citizens but instead relies on revenues from the sale of the national patrimony is debilitating — and increasingly common. When this happens, representative institutions never take hold, profits are expatriated rather than invested to diversify the economy, and government officials allocate virtually all contracts. Populist demagogues everywhere adore this system. It provides them with a constituency who believes that other countries are responsible for their poverty by the very act of buying their resources. It keeps the people in thrall to handouts and prevents countervailing democratic institutions from arising. It undermines the rights of property and the rule of law, because the state, not the people, is the ultimate lawgiver.
The populations of many of the world’s countries have been duped. They have been led to believe that private wealth is the enemy of the people’s wealth because private fortunes are so often derived from corruption. They may think the government is taking care of the people, but in fact it is only the people’s wealth that is being distributed (usually after some hefty "administrative expenses"). Most insidiously, they are told that wealth comes at the expense of poverty — that wealth creation is a zero-sum game — distorting the politics of the society, and even its international relations. What they don’t realize is that their disadvantageous position is built into the fabric of their political and economic systems, for there can be no "representation without taxation."
This unfortunate system has most recently materialized in Iraq. The new Iraqi constitution failed to give every Iraqi an equal, inalienable share in a private holding company endowed with the society’s oil and gas assets. Rather than requiring the state to then tax the people to fund state assets, the constitution endows the state directly with Iraq’s oil revenues. This will have profound implications for corruption, low economic performance, and weak representative institutions. In the end, it will cripple the democracy for which they and we have suffered so much.
Iraq is simply the latest country to prove that there can be no effective representation without taxation. If Iraq — and any other resource-rich but struggling state — is to have any hope of developing a representative, honest, and transparent state in which all citizens have a stake, it would do well to consider revising its current constitutional composition. Only by paying into the system, sharing the burden and opportunities of the country’s wealth, and demanding accountability will democratic publics finally move control of their country back where it belongs.