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Abstract
The literature maintains that oil creates a curse on development in countries with weak national institutions at oil discovery, but offers little guidance on the specific institutions that help leaders avoid the curse. We trace rent distribution in Kuwait and Oman, apparent outliers that experienced development despite their weak national institutions at oil discovery. Unlike other examples of the oil curse, Kuwait and Oman contained a strong informal institution that compelled rulers to spend oil revenues on human development: a balance of power between leaders and their domestic rivals. Because informal balances of power are also present in countries with strong formal institutions that avoid the oil curse, this article suggests that the presence or absence of informal balances of power may help account for whether oil is a blessing or a curse.
Notes
1 De Mesquita and Smith, “Leader Survival, Revolutions, and the Nature of Government Finance”, American Journal of Political Science 54.4 (2010), pp. 936–50; Morrison, “Oil, Nontax Revenue, and the Redistributional Foundations of Regime Stability”, International Organization 63.1 (2009), pp. 107–38; Robinson, Torvik, and Verdier, “Political Foundations of the Resource Curse”, Journal of Development Economics 79.2 (2006), pp. 447–68; Luong and Weinthal, Oil Is Not a Curse: Ownership Structure and Institutions in Soviet Successor States (2010). An exception is: Stijns, “Natural Resource Abundance and Economic Growth Revisited”, Resources Policy 30.2 (2005), pp. 107–30.
2 Amundsen, “Drowning in Oil: Angola’s Institutions and the ‘Resource Curse’”, Comparative Politics 46.2 (2014), pp. 171–2. See also: De Oliveira, “Illiberal Peacebuilding in Angola”, The Journal of Modern African Studies 49.2 (2011), pp. 287–314.
3 Many scholars have documented an oil curse on development in oil-rich regions, such as the Gulf, but with a different definition of the oil curse. They define it as the lack of either democracy or diversification in the economy. See, for example: Ross, The Oil Curse: How Petroleum Wealth Shapes the Development of Nations (2012). Here, we define it as the lack of investment in basic services and human development. Thus, while all of the cases we discuss may suffer from an oil curse on democracy and economic diversification, they vary in the extent to which they invest in human development.
4 UNICEF, “Oman: Country Program Document 2012–2015” (2011), p. 2; World Bank, World Development Indicators (2015). On infant mortality’s correlation with other development metrics, see: Ross, “Is Democracy Good for the Poor?”, American Journal of Political Science 50.4 (2006), pp. 860–74; Gerring, Thacker, and Alfaro, “Democracy and Human Development”, The Journal of Politics 74.1 (2012), pp. 1–17.
5 By extractive institutions, we refer to institutions that “concentrate power in the hands of a small elite and create a high risk of expropriation for the majority of the population” [Acemoglu, Johnson, and Robinson, “Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution”, The Quarterly Journal of Economics 117.4 (2002), p. 1235].
6 For a review of the economic history of modern-day development, see: Nunn, “The Importance of History for Economic Development”, Annual Review of Economics 1 (2009), pp. 65–92. Our argument builds on scholarship on the roles of colonial and indigenous institutions in economic development. See: Acemoglu, Johnson, and Robinson, “The Colonial Origins of Comparative Development: An Empirical Investigation”, The American Economic Review 91.5 (2001), pp. 1369–401; Arias and Girod, “Indigenous Origins of Colonial Institutions”, Quarterly Journal of Political Science 9.3 (2014), pp. 371–406.
7 Andersen and Ross, “The Big Oil Change: A Closer Look at the Haber-Menaldo Analysis”, Comparative Political Studies 47.7 (2014), pp. 993–1021.
8 Karl, The Paradox of Plenty: Oil Booms and Petro-States (1997); Ross, “The Political Economy of the Resource Curse”, World Politics 51.2 (1999), pp. 297–322.
9 Beblawi, “The Rentier State in the Arab World”, Arab Studies Quarterly 9.4 (1987), pp. 383–98; Ross, “The Political Economy of the Resource Curse”, pp. 297–322.
10 De Mesquita and Smith, “Leader Survival, Revolutions, and the Nature of Government Finance”.
11 For an example of how indigenous economic interest groups constrained the executive in Botswana, see: Acemoglu, Johnson, and Robinson, “An African Success Story: Botswana”, In Search of Prosperity: Analytic Narratives on Economic Growth, ed. Rodrik (2003), pp. 80–119.
12 Arias and Girod, “Indigenous Origins of Colonial Institutions”.
13 Ibid.; Acemoglu, Johnson, and Robinson, “Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution”.
14 Carapico, “Arabia Incognita: An Invitation to Arabian Peninsula Studies”, Counter-Narratives: History, Contemporary Society, and Politics in Saudi Arabia and Yemen, ed. Al-Rasheed and Vitalis (2004), pp. 11–35.
15 “Asia & Muscat & Persia & Turkey-Memo. British Interests in the Persian Gulf”, 1908, FO 881/9161, p. 3.
16 “Persian Gulf British Interests in Oil Supply”, 1961, POWE 33/2517, pp. 22–23.
17 Owen, “One Hundred Years of Middle Eastern Oil”, Middle East Brief 24 (2008), p. 1; “Persian Gulf British Interests in Oil Supply”, 1961, POWE 33/2517, p. 27.
18 “Persian Gulf British Interests in Oil Supply”, 1961, POWE 33/2517, p. 18.
19 “British Advisers in Muscat, Kuwait and Bahrain”, 1948, FO 371/68319, p. 7.
20 “Persian Gulf British Interests in Oil Supply”, 1961, POWE 33/2517, p. 21.
21 Ibid., p. 30.
22 Ibid., p. 21.
23 Ibid., pp. 29–30.
24 Ibid., p. 78.
25 Ibid., p. 31.
26 Crystal, Oil and Politics in the Gulf: Rulers and Merchants in Kuwait and Qatar (1990), p. 2.
27 El-Katiri, Fattouh, and Segal, “Anatomy of an Oil-based Welfare State: Rent Distribution in Kuwait”, The Kuwait Programme on Development, Governance and Globalisation in the Gulf States 13 (2011).
28 Crystal, Kuwait: The Transformation of an Oil State (1992), p. 12; Askari, Collaborative Colonialism: The Political Economy of Oil in the Persian Gulf (2013), p. 12.
29 Askari, Collaborative Colonialism, p. 12.
30 “Asia & Muscat & Persia & Turkey - Memo. British Interests in the Persian Gulf”, 1908, FO 881/9161, p. 17.
31 Askari, Collaborative Colonialism, p. 13. The British did not see Kuwaiti autonomy as a threat since its rulers did not impinge on British maritime interests, and Kuwait was a small and relatively stable state that did not attempt to challenge the regional status quo. See: Crystal, Kuwait, p. 12. For further background on Kuwait’s position in the region and how it fit into British colonial ambitions, see: Askari, Collaborative Colonialism; Crystal, Oil and Politics in the Gulf; Owen and Pamuk, A History of Middle Eastern Economies in the Twentieth Century (1999); Khalaf and Hammoud, “The Emergence of the Oil Welfare State: The Case of Kuwait”, Dialectical Anthropology 12.3 (1987), pp. 343–57.
32 Crystal, Kuwait, pp. 13–4.
33 Askari, Collaborative Colonialism, p. 13.
34 Crystal, Kuwait, p. 14.
35 Ibid., pp. 18–9.
36 Ibid., pp. 25–6.
37 Ibid., pp. 25–6.
38 Khalaf and Hammoud, “The Emergence of the Oil Welfare State”, p. 351. ʿAbdallah also exiled shaikhs with rival policy agendas. Crystal, Oil and Politics in the Gulf, p. 12.
39 Crystal, Kuwait, pp. 61–2.
40 Crystal, Oil and Politics in the Gulf, pp. 10–1; Crystal, Kuwait, p. 23; Salih, “Kuwait: Political Consequences of Modernization, 1750–1986”, Middle Eastern Studies 27.1 (1991), pp. 46–66.
41 Khalaf and Hammoud, “The Emergence of the Oil Welfare State”, p. 351.
42 “Persian Gulf British Interests in Oil Supply”, 1961, POWE 33/2517, p. 41.
43 Crystal, Kuwait, p. 17, 22.
44 Joyce, “Preserving the Sheikhdom: London, Washington, Iraq and Kuwait, 1958–61”, Middle Eastern Studies 31.2 (1995), p. 283.
45 Crystal, Kuwait, pp. 24–5; concerning British strategies for using advisers to maximize their influence over Kuwaiti politics without alienating local elites, see: “British Advisers in Muscat, Kuwait and Bahrain”, 1948, FO 371/68319, pp. 13–16.
46 Ashton, “A Microcosm of Decline: British Loss of Nerve and Military Intervention in Jordan and Kuwait, 1958 and 1961”, The Historical Journal 40.4 (1997), pp. 1069–83; Smith, “The Making of a Neo-Colony? Anglo-Kuwaiti Relations in the Era of Decolonization”, Middle Eastern Studies 37.1 (2001), pp. 159–72.
47 Smith, “The Making of a Neo-Colony?”, p. 167.
48 Ibid., pp. 167–8.
49 As a 1963 letter from the British Ambassador to Kuwait indicates, the British believed that Kuwaiti leaders were aware both of Britain’s declining position, and of the need to continue to be seen as independent of excessive imperial influence in order to maintain credibility. Smith, “The Making of a Neo-Colony?”, pp. 168–9.
50 Although Kuwait secured its independence from the United Kingdom in 1961, Iraqi military threats led to a return of British troops shortly afterwards. See: Crystal, Kuwait, pp. 91, 126.
51 “Persian Gulf British Interests in Oil Supply”, 1961, POWE 33/2517, p. 3.
52 According the 2010 Human Development Report, Oman was the country with the fastest increase in Human Development Index globally over the last forty years. See: UNICEF, “Oman: Country Program Document 2012–2015” (2011), p. 2.
53 “Aid Programme in Persian Gulf”, 1967, OD 34/176, pp. 10–11.
54 “Kuwait-Saudi Arabia Partition of Neutral Zone”, 1969, FCO 8/1044, p. 56.
55 Wilkinson, The Imamate Tradition of Oman (1987), p. 274.
56 Valeri, Oman: Politics and Society in the Qaboos State (2009), p. 253.
57 Wilkinson, The Imamate Tradition of Oman, pp. 1–17.
58 Prior to large-scale oil production, British officials described the Sultan as incapable of controlling his country without direct British support. According to a 1951 British government report on the tribes of Oman, the Sultan had “practically no authority over any of the tribes out of the immediate vicinity of Muscat, Sur, Dhofar, and the British coastal towns. In fact, the tribes of the interior regard themselves … as completely independent of his authority” [“Oman Tribal Affairs: Reports on Tribes”, 1951 FO 1016/37, p. 2].
59 Worrall, State Building and Counter Insurgency in Oman: Political, Military and Diplomatic Relations at the End of Empire (2014), pp. 39–44.
60 O’Reilly, “Omanibalancing: Oman Confronts an Uncertain Future”, The Middle East Journal 52.1 (1998), p. 73.
61 Worrall, State Building and Counter Insurgency in Oman, pp. 13–4.
62 According to a 1970 British diplomatic telegraph: “Military measures alone will not pacify Dhofar and must be complemented by civil ones” [1970 “Attitude of Sultan of Muscat Towards Armed Forces”, 1970, FCO 8/1414, p. 36].
63 Worrall, State Building and Counter Insurgency in Oman, p. 221.
64 According to a 1970 British military report: “The coup in July 1970 was received with great popular enthusiasm … . With annual oil revenues of £40 million, the people confidently expected to see rapid improvements to their way of life” [“Relations with Iraq”, 1969, FCO 8/1038, p. 37].
65 According to a British government document dated 11 March 1970: “When I saw the Political Under-Secretary at the Forign Ministry on 7 March, he expressed great anxiety about reports of the present state of Muscat and Oman … . He said that he felt HMG should do something soon to allay current discontent there: if not, he feared that the Sultan would sooner or later be toppled and that undesirable forces would come into power which would be in an admirable position to upset the existing order further up the Gulf. He referred to the influence of Chinese Communists: and also said that he thought the existence of a future Union of Arab Emirates would be very precarious if Muscat were in hostile hands” [“Political Relations between Muscat and Oman and Iran”, 1970, FCO 8/1428, p. 5]. In a 1970 government report on Oman, British officials also assessed the likelihood of Sultan being overthrown by a “‘revolutionary’ left wing regime” with assistance from China and the Soviet Union [ “Rebellion in Dhofar Province”, 1970, FCO 8/1415, p. 136].
66 “Rebellion in Dhofar Province”, 1970, FCO 8/1415, p. 90.
67 Worrall, State Building and Counter Insurgency in Oman, pp. 14–5. According to a British diplomatic report on technical assistance to Oman: “The Sultanate is so backward and its human resources are so limited that if it is to catch up in the next few years with the development of its neighbors it will need the help of several countries including our own” [“Technical Assistance and Aid for Development to Oman from United Kingdom”, 1970, FCO 8/1432, p. 33].
68 Worrall, State Building and Counter Insurgency in Oman, p. 227.
69 “Rebellion in Dhofar Province”, 1970, FCO 8/1415, p. 87.
70 As a 1970 British government report put it: “The change of leadership has brought about a complete reversal of attitudes towards the economic and social development of the country” [“Technical Assistance and Aid for Development to Oman from United Kingdom”, 1970, FCO 8/1432, p. 7].
71 “Political Developments in Muscat and Oman Following Successful Coup”, 1970, FCO 8/1425, p. 100.
72 Valeri, Oman, p. 5.
73 Human Rights Watch, “World Report 2018: Kuwait Events of 2017” (2018); Human Rights Watch, “World Report 2018: Oman Events of 2017” (2018).