Dubai as Rentier State
United Arab Emirates Political Economy The success of the United Arab Emirates come directly from its high revenue made from oil exports. This country was a desert region that turned into an economic boom in the recent years. According to CNN World News, “Abu Dhabi, the capital of the United Arab Emirates [is] the richest city in the world. The Emirate’s citizens, who sit on one-tenth of the planet’s oil and have almost $1 trillion invested abroad, are worth about $17 million apiece. Because of this factor, the UAE is considered one of the wealthiest countries in the world. However, turmoil struck the country with the recent global recession in 2008 that led to contradictions in their global oil wealth. Now that the country is recovering from this down point, the state infers global oil position will recover in sales on a slow but steady pace. In this research paper, I will demonstrate how the United Arab Emirates functions under a rentier economy and the country has not built the political stability they intended which led to challenges faced by the people and government.
The rentier model of the United Arab Emirates depicts the stability of the political economy from its high oil revenues. A unique characteristic of the prosperity of the country stems from the fact of the discovery of oil. What oil production really means is a natural resource taken from the earth and not an existing good that is produced through sales. What distinguishes a rentier economy from other countries is the oil profits and its high dependence on one necessity for foreigners. A rentier is a group or entire state that profits on income from property or investments, and in such a case oil from the UAE.
The rentier is not involved with the making of the incentive, but is entitled to a high amount of the money. In his journal, “The Rentier State in the Arab World,” Beblawi explains what a rentier economy is based upon. He claims, “There is no existence of a real rentier state. Every rentier economy is an economic structure with the backings of external rent coming into the funds” (Beblawi). This rent is vital to the measurement of success in a rentier economy. This is the key factor in holding the economy together without a domestic sector. Also, a entier economy doesn’t have many hands involved with the generation of the wealth. The creation of such wealth is maintained and kept within a small number of elites. The governance of the country is able to rely on the discovery of oil mines to external profit being it is a main factor in the county’s high success rate. Previously, this money would have to come from the population, such as merchants and artisans, but now it can be received precociously from dependent revenue provided by the oil. The settlement between the social group and the workers create a social contract.
About seventy to eighty percent of the lower to middle class, also known as the labor force, participates in the production of oil in the United Arab Emirates. Whereas a large percentage is involved in the production, a small fraction of society partakes in the distribution, and benefits of the revenues. According to the Financial Times, “Due to the high volume of oil distribution and price increase, the early 1970’s began an era of investments in industry, services, public works, and investments in infrastructure.
Because of these investments, a high demand for a workforce grew which surpassed the demand of supply” (Chazan). This chain reaction led to a foreign workforce that would interfere with the national workforce. It became such a huge development that the foreign workforce evolved into the primary workforce in all sections of the economy. Developing the infrastructure system was one of the main fields where the Emirates sought improvement through other investments. Works such as roads, highways, airports, telecommunication networks, and governmental ministries were built.
They revolutionized the states from a barren into a highly developed country. The Arab monarchs then invested in another industry so they could ensure a long term source of income in a time where oil prices constantly changed. The last investment was an investment in social needs and services. These services included health care, educational improvement, and even housing facilities. The three areas of investment was designed for one purpose. That purpose is for a smoother more easy form of oil transportation, which would lead to a boom in the economy.
The wealthy Arab monarchs spared no expense as they imported laborers from many countries. The countries in which they imported labor were India, Pakistan, Great Britain, Germany, and even the United States of America. Despite the heavy importation of laborers, it was only meant to be temporary, as the Monarchs believed the national population would serve as the workforce and take over where the foreign labor force left off. The Monarchs thought wrong as the national population were not too fond of taking manual labor jobs that were unpleasant or difficult.
This created a problem of social structure within the Emirate people of the UAE. The population didn’t want to take on these manual jobs after the federation set up a system of other high industry incomes. This led to influx of millions of foreign labors who remained in the country, which the government had no intention for tending to. A short term plan turned into a drawn out problem for the country. The astonishing detail of the United Arab Emirates is that they were able to create an oil revenue that provided the rulers with an upper hand.
This country has built an entire welfare state in which it doesn’t have to extrapolate tax from it’s subjects. According to The New York Times, “Oil is the mainstay of the UAE economy and the driving force behind it. If there were to be a negative development in the country’s financial situation or on the policy of the state, the country will be faced with direct implementation due to these factions. ” The oil prices have always been unsteady in the global market which has created a myriad amount of oil revenues. Certain common citizens are allowed to own their own portion of oil.
But unfortunately, some of the oil revenues are given out in the federal government through high Emirate elites which hinders on the country’s aptitude of generating their own in-housed wealth. The Emirate of Abu Dhabi earns the sanction of creating more than 90% of the total contribution to the oil market to secede in their country’s fortune (CIA World Factbook). Dubai also contributes to this fund as well. The government structure of UAE, known as a federation system, do not procure ownership in the federal profits of oil so this makes the country highly susceptible to the dependence of the ruling family of Abu Dhabi.
This ultimately makes the oil revenuers indirectly dependent. What toughens the situation for the country are the changing oil prices constantly that is not controlled by government or elite officials. State planning is hard to carry out under such circumstances. This is bound to stem from state profit being relied upon oil revenue that isn’t promised for today and tomorrow’s plans. This creates a setback from the people of the Emirates who cannot be supported by the federal budgets of such an economy thriving on the oil industry.
There is an annual deficit of millions of dirhams (UAE currency) because of this fluctuation in oil prices. The focus of this essay has been to analyze how the United Arab Emirates try to obtain political firmness as a rentier state and not follow through with it successfully for the inhibitions of the people. The rentier theory points out that loyalty in politics is rooted in economic motivation. Economic welfare is meant to go hand in hand with political opposition. Yet, the economic welfare of the people are closely linked to oil revenue of the United Arab Emirates in the world market.
The problem of foreign labor plays a part in the state’s welfare policy as well. The importation of foreign labor was vital for the economic growth that started as a result of the oil price increase. The government thought that the national population would be able to give the needs to fill the workers’ place. This assumption turned out to be wrong. This essay has shown that the rulers’ welfare policies have made nationals skeptical in their choice of labor. In addition, this essay has depicted how the rentier model can exult the explanation of Abu Dhabi’s leading role within the federation.
These facts have strengthened the assumption that the rulers use the oil economy as an instrument in securing stability but not to the country’s best ability. Bibliography Beblawi, Hazem. “The Rentier State in the Arab World. ” Politics of the Middle East (2009). Web. 5 May 2012. Chazan, Guy. “Oil: Finally Aligning Strategic Plans. ” Financial Times. 16 Apr. 2012. Web. “Economy of UAE. ” CIA World Factbook. 12 Apr. 2010. Web. Gared, Davidson. “Economy and Financing Projecting the UAE. ” The New York Times. 16 Mar. 2011. Web. Gimbel, Barney. “The Richest City in the World. ” CNN World News. 12 March 2007.
