Oil and Development in the Middle East

Oil and Development in the Middle East

Oil and Development in the Middle East

Oil and Development in the Middle East

Excerpt

A witticism about Saudi Arabia a decade or so ago was that the kingdom was leaping headlong from the twelfth into the sixteenth century. In the new era of high-priced oil, this interpretation is obsolete; in some respects, Saudi Arabia is moving into the twenty-first century, while, in others, it is still mired in traditionalism. This uneven pattern of development is representative of the other Middle Eastern oil states and is evident to a lesser degree in the other Middle Eastern countries as well, as all are experiencing the stresses that accompany imbalanced social change. *

Thinly populated oil states have abundant capital, while the larger, more densely populated countries, relying on traditional agriculture and trade for income, face chronic capital shortages and foreign payments deficits. Manufacturing, aside from petroleum-related activities, is underdeveloped, and economic structures remain lopsided. Aside from Israel, modern skills are scarce relative to the population, but they are most conspicuously lacking in the capital-rich oil states. Natural conditions and human foibles contribute to these problems. An adverse climate and inelastic supplies of arable land make growth in agricultural productivity slow and costly. Further, rapid population growth impedes human resource development and capital formation by stimulating present consumption. Military spending complicates the process of redressing factor imbalances by draining away resources that otherwise might be used for investment in equipment or in the creation of skills. The tendency toward excessive centralization of decision making constrains innovation and hampers the technological adaptation needed for viable industrial development.

Since the oil price revolution, the process of redressing the region's imbalances has accelerated. Capital is flowing from the oil states to the poorer states, while the flow of labor from the poorer states to the oil states has increased. Even so, the general scarcity of modern skills means that redressing the region's fact or-imbalance problem will probably be expensive and time consuming.

In studying these varied topics, the difficulties of inadequate statistical information are magnified by the large geographic size of

*By development, I mean structural and institutional changes that increase worker productivity and improve the incomes of the lower economic classes, while widening the range of choice for all.

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