So what can be done? I won't claim to be an expert on military affairs, but on the civilian side of things The New Partisan (God I hate that name!) argues that the Iraqi government can leverage its immense oil reserves to divide the population from the insurgency.
"Iraq’s new government should simply announce that as of a date certain, it will establish a new national investment fund — call it The Iraqi People’s Freedom Trust — which will be credited with a major share of all future Iraqi oil earnings. A popular real world model might be the Alaska Permanent Fund, which grants a share of that state’s oil revenues to every citizen. Revenues directed to Iraq’s Freedom Trust could be invested in Iraqi government bonds, keeping a small cash reserve to provide for cash withdrawals from the Trust by individual Iraqis.
All 27 million Iraqis — men, women and children — would be eligible for an equal, personal account in the Freedom Trust simply by proving Iraqi birth and pledging their allegiance to the government. With assistance from coalition allies, registration for ownership shares in the trust could go hand in hand with registering citizens for the upcoming national elections. Any adult citizen of Iraq would then be free, at any time, to ask for a calculation of their account’s value and withdraw up to their full balance — no questions asked."
My first thought upon reading that was: "Oh great. More oil-based croynism." And it's true that oil has been a death sentence for many countries seeking to democratize. John Judis writes for The New Republic on March 23rd 2003 (sub. only):
"After the colonial powers departed at the end of World War II, oil provided the newly independent governments of the Middle East a veritable windfall--either through concessions or later through outright ownership of their country's oil facilities. With their new income, the states' kings, emirs, and sheiks were no longer dependent on their countries' merchants or workers for tax income. They could finance their governments entirely out of oil revenues. They could also use these oil revenues to buy off the citizenry through social-welfare systems, state jobs, land grants, and lucrative contracts. Their citizens became passive recipients of government largesse--paying no taxes and receiving no representation."
However, upon further reading I became convinced that the New Partisan's plan could dodge these harms.
"For the first time in the history of Iraq, indeed of oil nations generally, the new government would be offering each and every citizen a real, guaranteed ownership share in an asset that has been long since nationalized and regarded as a public patrimony. Establishment of the Freedom Trust would dispel the fantasy that this war was waged by the U.S. to somehow steal Iraqi oil. The Freedom Trust would instantly offer a stark contrast with the Saddam regime’s practice of stealing and wasting oil revenues on weapons, palaces and luxuries for a tiny elite of privileged cronies."
By putting the oil revenue in private accounts, rather than in the control of easily corruptable government bureaucrats, this plan sidesteps the potential for cronyism present in most oil-based democratization schemes. Instead of being dependent on the government for oil largesse, the people gain a direct ownership stake in their society independent of whatever the government chooses to do. By giving them that stake, suddenly the terrorists aren't fighting against the American infidels, they're fighting against the Iraqi future. This, in turn, could take the rug out from under the insurgencies support. And because it can be applied equally to all the ethnic groups in Iraq, it can help mend the secretarian-based divides the insurgency has helped to create. All in all, an intriguing plan.