The way oil revenue is spent has been a source of concern for Gulf elites, with some saying that real development can be achieved only when the price of oil goes down. The diversification of economies away from oil has long been discussed by those who have warned of the probability of a sudden fall in oil prices. These one envisage that one day either oil prices come down or the world discovers a new source of energy that effectively replaces oil — with either situation requiring Gulf states to prepare for the unexpected.
The Norwegian example, where most oil revenues are reserved for future generations, has been one example many have considered emulating.
But most of those voices were not heeded or the argument simply disappeared into thin air. I can refer to hundreds of articles and a number of book on this issue by prominent Gulf writers and observers. People do not like to think seriously about the day after, they abhor having to look to alternatives to what has worked for them so far. They are always short of having a ‘Plan B’. That kind of thinking is premised on the belief that things will last forever.
The present oil price crisis could very well be for a long time. We have been here before quite a number of times. But this time, the financial consequences are much more serious because we are directly or indirectly involved in war.
Some believe that with our past experiences of oil prices falling for a little while before recovering, there’s little to be concerned about. The argument, according to some, is partly true as they argue that even if bearish oil price conditions persist, they will not be able to affect the economies of Gulf states.
Short-sighted view
But this point of view is short-sighted. When one takes into consideration the prevailing conditions in the global economy, the crisis could last much longer than most people expect. As such, it is prudent to use this opportunity to wean Gulf economies from their long-running dependence on oil.
Oil prices remaining depressed for long is good news to some, who have said privately that oil is both a blessing and a curse to Gulf societies. They acknowledge the good that oil revenues have brought about but lament the fact that it has reduced the capacity of Gulf societies to be productive.
Historically, Gulf societies had long depended on their own workforces. But with the advent of oil revenues, the same societies have depended on others to work for them and this has led to laziness as cheap money kept pouring in, resulting in people becoming over dependent on others, sluggish and despising real work. Most of them want to be bosses and to hold a secure government job.
The scarcity of money and its availability in abundance to a nation produce the same result — they are both an obstacle to proper development.
However, the scarcity of money could spur people to work harder while the abundance of money cannot elicit the same reaction.
Development comes with hard work and we can’t get the real benefit of education unless we work hard. This applies to all human activities.
Consumption vs investment
When money is available in its abundance, people often lose sight of its real value and they are inclined to believe it will be there forever. They favour a tendency of consumption rather than investing to grow further.
The new generations in the Gulf today have not experienced the hardships their fathers and grandfathers lived through and as a result, they live dangerously in a consumption-based society — a scenario that cannot be sustained forever.
They know how to spend money on useless commodities but have never mastered how to use resources productively.
Such societies have an overconfidence associated with this time and age. The consumption-led society has its own negative social attributes. The members in such societies start by despising work, especially looking down on blue-collar jobs, which they believe were invented for others and not themselves. The resulting social attitudes towards “others” become negative and this often poisons relations with other individuals or nations. Such attitudes grow to unbelievable proportions.
As Gulf populations grew because of oil, businesses found themselves needing more workers, more buildings were needed to cope with rise in population while the expansion of cities brought with it tremendous pressures on the environment. Some of the side-effects of growth have been a massive spike in air pollution, an additional strain on already scarce water resources, power shortages, a rise in illnesses and diseases related to changing environmental conditions, traffic congestion and a rise in new and sophisticated crimes often related to international criminal syndicates.
So, wealth, especially in recent years, has brought with it very negative social and behavioural side-effects.
What would happen in Gulf societies if the price of oil remains relatively low or rises moderately? First, there will be tremendous benefits, one of them being smaller populations. Both national and expatriate workers will be faced with a competitive job market, forcing the government to try hard to assign jobs to local people instead of looking abroad for talent.
The notion that Gulf jobs are high-paying occupations will disappear and governments will be forced to stop subsidising fuel and other public services that also include paying benefits for those with large families. It will be either work and produce or if you can’t, leave your job to make way for others well capable of performing the same task.
The results will be less demand on water and electricity, as well as other related services such as medical services.
The region will embrace competitive hiring and firing policies that will force people to take their work more seriously. Students will pay attention to their studies as that will be the only way to earn a decent living, and so forth.
Geopolitically, the region’s allure to regional and international powers will be greatly diminished, thus leading to a massive reduction in the kind of wars and conflicts seen over the last four decades.
What the region needs is a serious restructuring that leads to new policies helping Gulf states prepare for a better future — albeit, one with less dependence on oil revenues.
But will this prevail? There’s an old English saying to the effect old habits die hard!
Mohammad AlRumaihi is a professor of political sociology at Kuwait University. You can follow him on Twitter at www.twitter.com/@rumaihi42
