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Abstract
Oil has seriously impacted the institutional development of the state in the Arabian Peninsula. More specifically, the sudden and unprecedented acquisition of massive oil revenues resulted in the freezing of the state’s formal and informal institutions, at the point at which petrodollars were injected into the state’s coffers. From then on, state leaders were able to deploy the state’s wealth to dictate the pace and direction of institutional change. Over time, any institutional change has been directed towards enhancing regime security, and the pace of change has been calculated and deliberately slow. Any political opening has been dictated by the logic of state power maximization (in relation to society). At the same time, partly to ensure its popular legitimacy and partly through the vision of its leaders, the state has deployed its massive wealth both to foster rapid economic and infrastructural development, and to enhance the living standards of its citizens. In other words, whereas oil may have stunted institutional development –– i.e., an institution’s curse –– it has been an economic blessing.
Notes
1 Elbadawi and Soto, “Resource Rents, Political Institutions and Economic Growth”, Understanding and Avoiding the Oil Curse in Resource-Rich Arab Economies, ed. Elbadawi and Selim (2016), p. 188.
2 Ibid., p. 188.
3 Schmidt-Hebbel, “Fiscal Institutions in Resource-Rich Economies: Lessons from Chile and Norway”, Understanding and Avoiding the Oil Curse in Resource-Rich Arab Economies, ed. Elbadawi and Selim (2016), p. 228.
4 Humphreys, Sachs, and Stiglitz, “Introduction: What is the Problem with Natural Resource Wealth?”, Escaping the Resource Curse, ed. Humphreys, Sachs, and Stiglitz (Citation2007), pp. 8–9.
5 Elbadawi and Selim, “Overview of Context, Issues and Summary”, Understanding and Avoiding the Oil Curse in Resource-Rich Arab Economies, ed. Elbadawi and Selim (2016), p. 8.
6 As Jeffrey Sachs points out, a successful development strategy needs to have at least three components: public investments suited to national circumstances; a policy framework that supports private sector economic activity; and a political framework to ensure rule of law and macroeconomic stability [Sachs, “How to Handle the Macroeconomics of Wealth”, Escaping the Resource Curse, ed. Humphreys, Sachs, and Stiglitz (Citation2007), p. 178].
7 Ibid., p. 174.
8 Soto and Haouas, “Has the UAE Escaped the Oil Curse?”, Understanding and Avoiding the Oil Curse in Resource-Rich Arab Economies, ed. Elbadawi and Selim (2016), p. 373.
9 Foley, The Arab Gulf States: Beyond Oil and Islam (2010), p. 144.
10 Sommer, et al., Learning to Live with Cheaper Oil: Policy Adjustments in Oil-Exporting Countries of the Middle East and Central Asia (2016), p. 18.
11 Davidson, “The Dubai Model: Diversification and Slowdown”, The Political Economy of the Persian Gulf, ed. Kamrava (2012), pp. 195–220.
12 Anon., “Qatar: Managing the Limits of Economic Growth”, Gulf States News 37.956 (2013), p. 11.
13 Sommer, et al., Learning to Live with Cheaper Oil, p. 7.
14 Ibid., p. 11.
15 Araar, Choueiri, and Verme, “The Quest for Subsidy Reform in Libya”, The World Bank Policy Group: Research Working Paper 7225 (2015), pp. 3–4.
16 Karl, The Paradox of Plenty: Oil Booms and Petro-States (1997), pp. 62–3. Contrary to what Karl maintains, there is no evidence to suggest that, at least in the Arabian Peninsula, oil abundance “delayed the development of a modern consciousness of ‘the state’” (Karl, The Paradox of Plenty, p. 62). In fact, oil appears to have further facilitated such a consciousness by helping political leaders deepen the state’s practical and symbolic presence in people’s daily lives.
17 For an accessible history of oil in the Persian Gulf region see: Askari, Collaborative Colonialism: The Political Economy of Oil in the Persian Gulf (2013).
18 Karl, The Paradox of Plenty, p. 49.
19 Ibid., p. 61.
20 Sachs, “How to Handle the Macroeconomics of Wealth”, Escaping the Resource Curse, ed. Humphreys, Sachs, and Stiglitz (Citation2007), pp. 174–5.
21 Ross, The Oil Curse: How Petroleum Wealth Shapes the Development of Nations (2012), p. 225.
22 Ibid., p. 196.
23 Menaldo, The Institutions Curse: Natural Resources, Politics, and Development (2016), p. 11. Menaldo is adamant that “there is no resource curse and oil is not the devil’s excrement.” Indeed, there is ample evidence that “natural resources wealth improves infrastructure, investments, living standards, helps improve the quality of political and economic institutions, strengthening the state, democracy, and the rule of law” [Menaldo, The Institutions Curse, p. 3]. While there is much to be said about the blessings of resource abundance, linking it to democracy and the rule of law may be somewhat of an analytical stretch.
24 Ibid., p. 18.
25 Ibid., p. 11.
26 Ross, The Oil Curse, p. 234.
27 Schmidt-Hebbel, “Fiscal Institutions in Resource-Rich Economies”, p. 225.
28 Elbadawi and Selim, “Overview of Context, Issues and Summary”, p. 3.
29 Stiglitz, “What Is the Role of the State?”, Escaping the Resource Curse, ed. Humphreys, Sachs, and Stiglitz (Citation2007), p. 25.
30 Humphreys, Sachs, and Stiglitz, “Introduction”, pp. 5–6.
31 Karl, “Ensuring Fairness: The Case for a Transparent Social Contract”, Escaping the Resource Curse, ed. Humphreys, Sachs, and Stiglitz (Citation2007), p. 257.
32 Humphreys, Sachs, and Stiglitz, “Introduction”, p. 10.
33 Sachs, “How to Handle the Macroeconomics of Wealth”, p. 173. Perhaps the most extreme example of a resource-dependent country in which overconsumption led to depletion of the resource on which the economy depended, is that of Nauru, where the once-prosperous Pacific island nation was on the brink of becoming a failed state following the collapse of the country’s phosphate industry. See: Connell, “Nauru: The First Failed Pacific State?”, The Round Table 95.383 (2006), pp. 47–63.
34 Karl, The Paradox of Plenty, p. 7.
35 Sachs, “How to Handle the Macroeconomics of Wealth”, p. 185.
36 Dutch Disease can be overcome, or at least lessened, by properly investing oil proceeds as part of a national development strategy. Oil income should be turned into public investment rather than private consumption [Sachs, “How to Handle the Macroeconomics of Wealth”, pp. 176–7, 184].
37 Diop and de Melo, “Dutch Disease in the Services Sector: Evidence from Oil Exporters in the Arab Region”, Understanding and Avoiding the Oil Curse in Resource-Rich Arab Economies, ed. Elbadawi and Selim (2016), p. 100; Elbadawi and Selim, “Overview of Context, Issues and Summary”, p. 6.
38 Diop and de Melo, “Dutch Disease in the Services Sector”, p. 100.
39 In South Asia, by contrast, it is the ICT and finance industries that predominate in the sector [Ibid., p. 85].
40 Martinez, The Violence of Petro-Dollar Regimes: Algeria, Iraq and Libya, trans. Schoch (2012), p. 41.
41 Menaldo, The Institutions Curse, p. 12.
42 Ross, The Oil Curse, p. 6
43 Karl, “Ensuring Fairness”, pp. 264–5.
44 Humphreys, Sachs, and Stiglitz, “Introduction”, p. 13.
45 Jarzabek, “G.C.C. Military Spending in Era of Low Oil Prices”, MEI Policy Focus 2016–19 (2016), p. 4. In 2016, Saudi Arabia’s total defense budget was estimated at $82 billion and was set to rise to $87 billion in 2020, and the UAE’s was set at $15.1 billion in 2016 and estimated to reach $17 billion in 2020 [Carvalho, “Gulf States to Maintain Defense Spending Despite Oil Price Slump”, Reuters, 18 Feb. 2017. See also: Farzanegan’s contribution in this issue].
46 Ross, The Oil Curse, p. 145.
47 Ibid., p. 59.
48 Humphreys, Sachs, and Stiglitz, “Introduction”, p. 4.
49 Mitchell, Carbon Democracy: Political Power in the Age of Oil (2011), p. 253.
50 Ibid., p. 8.
51 Karl, The Paradox of Plenty, p. 54.
52 Mitchell, Carbon Democracy, p. 254.
53 Schmidt-Hebbel, “Fiscal Institutions in Resource-Rich Economies”, p. 227.
54 Ross, The Oil Curse, p. 71.
55 Humphreys, Sachs, and Stiglitz, “Introduction”, pp. 12–3. Luis Martinez makes a related argument, maintaining that control over oil revenues enabled former colonies –– beset by “a deep sentiment of revenge against the former colonial powers” –– to vent their bitterness on their neighboring states, such as Kuwait and Iran in Iraq’s case, Morocco in Algeria’s case, and Chad in Libya’s case [Martinez, The Violence of Petro-Dollar Regimes, p. 42]. Warfare, and more broadly the “rally around the flag” effect, make demands for democratization more difficult.
56 Herb, Wages of Oil: Parliaments and Economic Development in Kuwait and the UAE (2014), p. 192.
57 Ross, The Oil Curse, pp. 65–6.
58 Kamrava, Inside the Arab State (2018), pp. 166–70.
59 Sachs, “How to Handle the Macroeconomics of Wealth”, p. 191.
60 Collier, “Savings and Investment Decisions from Natural Resource Revenues: Implications for Arab Development”, Understanding and Avoiding the Oil Curse in Resource-Rich Arab Economies, ed. Elbadawi and Selim (2016), p. 286.