September 14, 2013


How oil poisoned Gulf governance : a review of Collaborative Colonialism: the Political Economy of Oil in the Persian Gulf by Hossein Askari (Robert E Looney, 9/13/13, Asia Times)

Throughout the book, one senses Professor Askari's disdain for the region's callous and often corrupt leaders as he leads us through the grim terrain: with oil financed governments less accountable, the region's populations have experienced more repression and less in the way of freedoms relative to other parts of the world. 

The region has no doubt experienced more wars and conflicts than would have occurred in the absence of oil. Outside interference from the major world powers has eroded the confidence of large segments of populations in their leaders, while radicalizing others. 

With governments deriving large chunks of their revenues from oil, relatively little attention has been devoted to developing a dynamic private sector. In fact, many governments have gone out of their way to discourage entrepreneurship and the creation of private sector wealth on the fear that competing power-base might challenge their authority. 

As stagnant private sectors and governments fail to fulfill their traditional role of employer of last resort, unemployment rates are soaring in countries even as well-endowed as Saudi Arabia. Even individuals that may have benefited from subsidized food and fuel are facing the stark reality that their dysfunctional governments are unable to sustain these handouts and as such are facing the prospect rapidly falling standards of living. 

The associated Dutch Disease (strengthening of the real exchange rate) has impeded economic diversification and decimated agriculture in countries like Iran and Iraq, leaving many of the rural populations little alternative but an uncertain future in a unfamiliar urban setting. Iraq's per capita income today, despite the country having potential oil reserves possibly as large as those in Saudi Arabia, is probably what it was around 1950. 

And despite the mullahs' vow of radically changing the structure of the Iranian economy, little change in this regard has taken place since the shah's day. 

Ironically, the Arab Spring forces sweeping through the region have brought little in the way of fundamental change in the oil countries. Government's large military and security budgets have helped preserve the regimes, while stepped up subsidies and handouts have bought a few more years of domestic peace. In short oil has enabled governments to be unaccountable to their populations, pursue irresponsible and inept policies and deny future generations their rightful legacy. 

Posted by at September 14, 2013 8:56 AM

blog comments powered by Disqus
« WHAT CHILDREN?: | Main | ONE+: »