Is Oil a Blessing or a Curse for the Middle East - Essay Example

?Introduction: Although many less-developed nations might wish themselves to be so resource rich as some of the nations within the Middle East, the reality of the matter is that nations that typically experience a high level of valuable natural resources, such as oil, ultimately suffer as a result of their existence. This irony has long been the topic of a series of governmental, sociological, economic, and policy related research projects that have sought to understand and define this unique dynamic as it exists within some of the most resource rich, but developmentally depressed nations in the world. The reality that many nations face with regards to being nearly entirely dependent upon their natural resources as the basic foundation of their economies is referred to as both “renterism” and the “Dutch disease”. The first term, renterism has to do with the fact that these nations ultimately rent out the access to their resources in exchange for direct payments for such an agreement. Similarly, the term Dutch disease is with regards to the Dutch nation’s dependence upon the revenues from the natural gas fields in the 1960’s and 1970’s. For purposes of this brief analysis, the issue of the resource curse will be viewed within the prism of seeking to understand it as it is exhibited within the nations of Saudi Arabia and Iran. These two nations have been selected due to the fact that they are both regional powers that have defined their economies around the oil wealth that they possess; albeit through slightly different means. Moreover, even though a similar economic stance has been taken with regards to a centrally planned economy in both nations, the overall levels of extreme wealth and pervasive poverty, social divisions, non-democratic forms of governance, problems with radical forms of Islam, and a host of other byproducts of the uneven economic development that oil wealth dependence portends crates a great deal of similarity between these two nations. History and Background: Prior to the discovery of oil in Saudi Arabia and Iran, both of these regions were seeking to integrate at a rather rapid rate with the rest of the world by developing their economies and seeking to industrialize. Although it is not fair to say that these nations were particularly backwards as compared to their neighbors, they exhibited a relatively low level of growth and change as compared to Western Europe and parts of Asia at that time. It can be noted that within both Iran and Saudi Arabia, there existed and much more decentralized understanding of governance and power. Although it is not the purpose of this analysis to go into a great deal of defining the means by which resource wealth encourages further levels of despotism, it should be understood that once a high level of valuable resources are located within a given region, it necessarily encourages individuals within government to more fully and completely exert their control over these resources as a means of promoting sovereignty, stability, and deriving profitability; both for themselves and for the nation in general. A byproduct of this increased level of centralization and control is necessarily the loss of specific civil liberties and freedoms. Aside from the collapse of the Ottoman Empire and redefining the post-colonial borders, the discovery of oil and natural gas resources has had the most profound impact upon the course of development, politics, war, and even radical forms of Islam. With respect to the actual discovery of oil within the Middle East, Iran was the first in 1908 (Neilberg, 2012) followed by Saudi Arabia in 1923 (Jones, 2012). Oil came to be an even more coveted resource to which all developed nations sought to procure. Accordingly, it was not abnormal to merely take over another country as a means of extracting its mineral wealth and diverting it back to the homeland. Such a model was utilized for nearly 25 years as the British extracted oil wealth from Saudi Arabia and Iran (Mainuddin, 2007). The ways in which key actors within both Iran and Saudi Arabia sought to protect their national interest and these resources differed (Chaudhry, 1997). A series of uprisings against existing forms of governance and failed regimes resulted in Iran whereas Saudi Arabia initially set out to tax petroleum companies extracting oil from their land at 50% of revenue (Vidyasagar, 2005). It was soon determined by the reader that a more equitable and reasonable approach by the Saudis was the total and complete nationalization of the oil and petroleum industries within Saudi Arabia. Moving further down the road towards integration incorporation with the new dynamics of the world economy, Saudi Arabia and Iran were both primary signatories of the 1960s OPEC agreement (BRESSER-PEREIRA, 2012). Originally, OPEC was signed in Baghdad, Iraq by the nations of Iran, Iraq, Kuwait, Venezuela, and Saudi Arabia (Boschini et al, 2013). Its ultimate goal was of course the regulation and price-fixing that these countries would agree to within such a cartel. Oil and Natural Gas – Blessing versus Curse Prior to delving into a running list of the ways in which oil wealth can be detrimental to a given economic system or nation, it should be understood that nearly every negative externality that arises from dependence upon oil exploitation is the ultimate result of the mismanagement of the wealth that is derived from it. Accordingly, one of the first realities of it equitable and imbalanced spending of money derived from oil resources is with regards to the stereotypes that exists about much of the carefree lifestyle that a small percentage of the population of these nations enjoys while the remainder live in near abject poverty (Saad-Filho, 2013). This is somewhat surprising due to the level of public works, infrastructure improvement, and development monies that it been poured into both of these nations. However, when one stops to consider the reality of how oil and natural gas resources develop a nation’s economy, this comes as little or no surprise. For instance, if one considers the situation of Saudi Arabia, rather than training their own people as oil workers and hiring them out to the nationalized oil firms that they themselves are ultimately in control of, the Saudi Arabia and government chooses instead to import workers from around the globe and pay these workers salaries that are many times greater than the average salary that a Saudi national would enjoy (Herb, 2005). As such, this is a primary exemplification of how the so-called “Dutch disease”, referenced within the introduction constricts the nation’s ability to produce its own goods and makes it ultimately reliant upon the exportation and sale of its natural resources as a means of deriving economic sustenance. Similarly, one cannot analyze and discuss the issue of resource dependence and its impacts upon an economy or nation without discussing the way in which resource dependence ultimately leads to an undiversified economy. Even though the efforts taken by nations such as Saudi Arabia and Iran have helped to build the infrastructure that is required to develop different types of industries and services within these nations, the necessity to do this is nonexistent (Beblawi, 1987). Due to the fact that the government is able to generate massive amounts of revenue on an existing cash cow, little emphasis is placed upon encouraging the development of different types of industries within these nations. Instead, what is been seen as a situation in which the governments are oftentimes focused and intent upon laying the groundwork (building the roads, acquiring the communications network, improving the health care system, and revolutionizing the educational system); as such, they are somehow hesitant to directly invest and encourage the businesses and services which could ultimately provide a degree of sustainment for the economy in the eventuality that the natural resources are finally depleted (Sayigh, 1975). Moreover, another clear issue that arises with regards to the curse of natural resources is the overall level of misdirection, misappropriation, and corruption that takes place within nations that experience at high level of natural resource dependence. With regards to the Corruption Perception Index, Saudi Arabia scores a 66 with Iran scoring a 133 (Nesbitt, 2013). To put these numbers into perspective, Saudi Arabia’s score is comparative to nations such as Niger, Kenya, and Mali whereas Iran’s score is reflective of nations such as North Korea, the Russian Federation, Turkmenistan, and Burma. Naturally, Iran’s score is much worse than Saudi Arabia’s; however, neither nation should be understood to fall within moderately uncorrupt standards (Schwartz, 2008). Combined with this level of corruption and poverty that have previously been defined and described, the reader can and should integrate with an understanding of the means by which such a situation can often foster societal discontent; oftentimes by violent Islamic extremism (McFerson, 2009). This is of course not to say that oil wealth leads to Islamic extremism; rather, the dependence upon natural resources such as oil and gas leads to a situation in which a very large number of people are disenfranchised from the runaway success that others are experiencing (Rahnema, 2008). This in turn encourages them to turn to many movements that they otherwise might not consider as a means of providing some definition and meaning to an otherwise extraordinarily difficult existence. Naturally, in addition to just poverty, literacy rates, and the overall human development index for both Iran and Saudi Arabia are extremely low and can most directly be compared to some of the least developed nations of the world (Akarue.net, 2013) Another adverse effect that oil wealth has contributed to the nations in question is with regards to the decline in regional cooperation and pan-Arabism that has resulted. Whereas such a level dependence and relationships have been born from the postcolonial era, the nations that experienced a high degree of natural resource wealth soon began to drift apart due to the fact that they felt they no longer needed such a cooperation in order to achieve strategic or regional interest. Similarly, the demographics of the nations began to shift as a result of the increasing level of wealth and development of the government reflect population growth as a function of the optimistic bubble that such wealth generated within the national consciousness. As a function of this, many of the nations with the Middle East have demographic bubbles and societies that are unevenly distributed between old and young. For instance, within the nations of Saudi Arabia and Iran, it is estimated that nearly 35 what percent of the entire population is aging between 14 to 25 years old (Nazih, 1996). Whereas it is typical for society to be comprised of approximately 15 to 20% of individuals within this age group, such an uneven representation shows that the over optimistic outlook served to create an unrealistic expectation for the means by which such societies could continue to provide for their people. This oftentimes gives way to rapid population growth, immature and unstructured political systems, and an unpredictable demographic that my demand revolution (Hilson & Maconachie, 2009). Conclusion: As a result of the preceding factors which have been analyzed, the reader can note that that curse of oil resources far outweigh the blessings. Rather than utilizing the oil and natural gas to provide a rapid and effective improvement of the economic diversity and industrial strength that a given nation can provide, the resources are almost always employed with regards to ineffective and oftentimes wasteful projects that do little to improve the abysmally low Human Development Index (HDI) and poverty that is so pervasive within such systems (Busse & Groning, 2013). Although there are several benefits that can be derived from the great wealth that oil brings, on the whole, society is at a net disadvantage because of its existence in ample reserves). As a function of the greed, corruption, lack of development with regards to the human considerations of the populations within Saudi Arabia and Iran, the reader can come to the realization that the existence of oil and natural resource wealth within these nations creates a situation in which the government and economy becomes dependent upon the quick generation and easy access to capital. As in the classic case of the child raised in the lap of luxury, these governments display a fundamental lack of concern for the development issues plaguing their own people and are of the misinformed belief that the revenues from oil and gas generation will continue to exist indefinitely; regardless of the fact that many analysts point the fact that these resources will one day be exhausted. Accordingly, rather than viewing the wealth of natural resources as a net benefit and aid to the nations in question, it should be noted that they act instead as a net detractor to both the economic and developmental integrity of the systems that have been discussed. References Akerue.net (2013) Has oil wealth been a blessing or a curse for the Middle East? | Ben West. [online] Available at: http://akerue.net/blog/academic/2010/10/has-oil-wealth-been-a-blessing-or-a-curse-for-the-middle-east/ [Accessed: 1 May 2013]. Boschini, A, Pettersson, J, & Roine, J 2013, 'The Resource Curse and its Potential Reversal', World Development, 43, pp. 19-41, Academic Search Complete, EBSCOhost, viewed 2 May 2013. BRESSER-PEREIRA, L 2012, 'A graphic explanation on how a Dutch disease without costs exporters', Political Economy, 32, 4, pp. 700-702, Academic Search Complete, EBSCOhost, viewed 2 May 2013. 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