IMF, World Bank spineless with Gulf's dictators
By Hossein Askari
It is difficult to understand how the International Monetary Fund and the World Bank can continue to give their run-of-the-mill economic and financial assessments to Persian Gulf oil dictatorships with a straight face.
They have been saying the same things - deregulate markets, cut red tape, reduce corruption, reduce the size of the public sector, cut subsidies, encourage the private sector, adopt rational policies, and so on - and yet no good has come of it. Yes, some of the countries have been superficially transformed with tall buildings and beautiful airports, and there has been some progress in human conditions and development. Meanwhile, rulers, their families and those well connected have become rich beyond belief.
At the same time, these oil exporters have had anemic average annual per capita growth since their oil revenues surged in 1974. Their economies have not been diversified away from oil and thus they export little besides oil, refined products, natural gas and petrochemicals.
Good jobs are in short supply, and with high unemployment the government has absorbed more and more labor that does little productive work. Human development has been sub-par. Conflicts, both interstate and intrastate, have been at an all-time high, with the region recently becoming classified as the world's most conflict-ridden region. And all the while, the limited oil and natural gas resources of the region are being depleted at the expense of all future generations with little hope of a meaningful turnaround.
Under these circumstances, the average citizens of the region are increasingly angry against their rulers and the foreign powers that back them.
The Fund's and the Bank's assessments of the region's problems and constraints miss the central issue. Rulers in these countries have absolutely no incentive to adopt the foundational reforms that are imperative for a turnaround as long as they benefit as they do now and enjoy the support of foreign powers to hold on to power.
If foreign powers, historically the West, continue to support these dictators, conditions cannot change and reforms will not be adopted. Rulers, their families and their cronies benefit from their oppressive rule beyond anyone's dreams. They are taking directly from the sale of oil, from their treasuries and through corrupt business activities.
They have no incentive to change. There is no price to pay for their actions that rob their citizens and impede human, political, social and economic development as long as they have the support of foreign powers who they reward, their companies and their former senior officials, and hire influential foreign lobbyists to secure the needed political support.
The historical practice of colonialists, exploitation, has been turned onto its head, becoming one of collaborative colonialism. And even if regimes are overthrown, those rising to power will do the same, garner foreign support and do as did their predecessors. It is a veritable closed loop. Nothing can change and all is locked in time.
These oil-exporting countries must establish an independent judiciary and the rule of law (equal justice for all). They must establish economic institutions that are effective and are not politically driven. They should declare that oil and gas belongs equally to every citizen (not especially to rulers) of this and future generations and will be managed accordingly. Political reforms, with a clear roadmap and timetable that delineates a path towards political participation and elected and answerable governments, must be set in motion.
Yes, the Fund and the Bank cannot interfere in international and domestic politics, much less tell the important foreign powers that control the Fund and the Bank to keep their hands off. But the Fund and the Bank can promote three policies that might go along way to achieving the same and supporting the peoples of the region:
It is difficult to understand how the International Monetary Fund and the World Bank can continue to give their run-of-the-mill economic and financial assessments to Persian Gulf oil dictatorships with a straight face.
They have been saying the same things - deregulate markets, cut red tape, reduce corruption, reduce the size of the public sector, cut subsidies, encourage the private sector, adopt rational policies, and so on - and yet no good has come of it. Yes, some of the countries have been superficially transformed with tall buildings and beautiful airports, and there has been some progress in human conditions and development. Meanwhile, rulers, their families and those well connected have become rich beyond belief.
At the same time, these oil exporters have had anemic average annual per capita growth since their oil revenues surged in 1974. Their economies have not been diversified away from oil and thus they export little besides oil, refined products, natural gas and petrochemicals.
Good jobs are in short supply, and with high unemployment the government has absorbed more and more labor that does little productive work. Human development has been sub-par. Conflicts, both interstate and intrastate, have been at an all-time high, with the region recently becoming classified as the world's most conflict-ridden region. And all the while, the limited oil and natural gas resources of the region are being depleted at the expense of all future generations with little hope of a meaningful turnaround.
Under these circumstances, the average citizens of the region are increasingly angry against their rulers and the foreign powers that back them.
The Fund's and the Bank's assessments of the region's problems and constraints miss the central issue. Rulers in these countries have absolutely no incentive to adopt the foundational reforms that are imperative for a turnaround as long as they benefit as they do now and enjoy the support of foreign powers to hold on to power.
If foreign powers, historically the West, continue to support these dictators, conditions cannot change and reforms will not be adopted. Rulers, their families and their cronies benefit from their oppressive rule beyond anyone's dreams. They are taking directly from the sale of oil, from their treasuries and through corrupt business activities.
They have no incentive to change. There is no price to pay for their actions that rob their citizens and impede human, political, social and economic development as long as they have the support of foreign powers who they reward, their companies and their former senior officials, and hire influential foreign lobbyists to secure the needed political support.
The historical practice of colonialists, exploitation, has been turned onto its head, becoming one of collaborative colonialism. And even if regimes are overthrown, those rising to power will do the same, garner foreign support and do as did their predecessors. It is a veritable closed loop. Nothing can change and all is locked in time.
These oil-exporting countries must establish an independent judiciary and the rule of law (equal justice for all). They must establish economic institutions that are effective and are not politically driven. They should declare that oil and gas belongs equally to every citizen (not especially to rulers) of this and future generations and will be managed accordingly. Political reforms, with a clear roadmap and timetable that delineates a path towards political participation and elected and answerable governments, must be set in motion.
Yes, the Fund and the Bank cannot interfere in international and domestic politics, much less tell the important foreign powers that control the Fund and the Bank to keep their hands off. But the Fund and the Bank can promote three policies that might go along way to achieving the same and supporting the peoples of the region:
These recommendations essentially take away the special incentives and benefits of dictators and of their foreign supporters. They would initiate a process of foundational reforms that are necessary for a turnaround. In turn, they would reduce discrimination, afford hope to the general population and thereby ameliorate conflicts within and between countries in the region.
Hossein Askari is Professor of Business and International Affairs at the George Washington University and formerly served on the Executive Board of the International Monetary Fund. His numerous publications include Conflicts and Wars: Their Fallout and Prevention (Palgrave Macmillan, 2012). His most recent book, Collaborative Colonialism: The Political Economy of Oil in the Persian Gulf, is due to be published in September 2013.
(Copyright 2013 Asia Times Online (Holdings) Ltd. All rights reserved. Please contact us about sales, syndication and republishing)
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