The Brookings Institution's Middle East Youth Initiative is following the developments of the global economic whatever-we-are-calling it in a series called Food, Fuel and Finance: How Will the Middle East Weather the Global Economic Crisis? Slipping Oil Prices: is the Oil-Rich Middle East Prepared?, the first installment, offers a brief history of oil revenues over the last 20 years in the Persian Gulf. It's conveniently arranged in Q and A format, which helps if you are someone who (like me) feels a strong temptation to let their eyes glaze over when they start to see a series of words like “revenue” and “inelastic demand” one after another. Politics, however, always capture my attention, and I want to draw attention to one crucial point that the report makes in this arena:
For these countries, bringing their economies to a soft landing may prove much easier than managing the downsizing of expectations without a political backlash. Leaders in the region have offered scant warning to their citizens regarding the end of the petro-boom. Even after the global financial crisis had begun, mega projects were being announced in the GCC as if to defy the reality of what the global downturn will do the region's economies.
The Gulf countries’ generous spending has kept citizens relatively happy – textbook rentierism – and as spending is curtailed because of falling oil prices, there will be a backlash in public sentiment.
The one bright spot in all of this is that hard times make the case for policy reform more persuasive. The oil rich countries have a list of policy options before them, including reorienting education away from mere seeking of formal degrees toward acquisition of skills, transforming the search for government jobs into a search for careers in the public or private sector, and giving the youth a greater voice in shaping their own destiny.With the oil feast all but over, the time has come to set the incentives for the region's youth to become tomorrow's productive middle class.
This may be true. The relative weakness of the Gulf states’ militaries make total-police-state-mode to stifl uprisings unlikely. (Although this weekend's piece in the New York Times magazines drew some clear lines between the Emirates and Iran, and this wouldn't be first time the United States stepped in to contain a popular uprising against a government they consider convenient). It's naive, though, to think that threatened and weakened Gulf governments’ first responses will be to open up their political systems on their own. Egypt's Hosni Mubarak doesn't seem to have any trouble maintaining a corrupt and undemocratic regime on a shoestring budget. Bashar al Assad is still around. Ali Abdullah Saleh might control only a small corner of his country, but he's still president. Seeing political reform as an inevitable consequence of economic failure sounds to me like a “birth pangs of the new Middle East” argument. (To be clear, I don't think that's precisely what Salehi-Isfahani is arguing here). He's right that the case is more persuasive when the governments can no longer purchase their citizens’ loyalty. And the Gulf countries may arrive at that conclusion on their own. Then again, some may not. I would approach any framing of a global economic meltdown as an “opportunity” skeptically.
