POLI 341 Lecture Notes - Structural Adjustment, Human Capital, Status Quo

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Political Economy. Lecture.
What is the central question?
Oil is a factor in MENA states’ international relations? Between each other or within
factions within? Is it aggrandized? What role might the Gulf states play in the emerging
Middle East? How can we best understand the Gulf Cooperation Council? Is it a security
What is the quick summary?
The economic trajectory of rapid economic growth followed by slowdown was triggered
by the different models used by states. The Welfare state model was a useful vessel to
obtain legitimacy within and without yet it was doomed to fail.
What is the evidence?
There was strong economic growth for a lot of these states in 1950s-1970s
o 1980s, it slowed down. Why?
80s, had the Iran-Iraq war…Iraq-Kuwait war…..a lot of regional
conflict….OPEC oil crisis….Economic disparity (Egypt a good
example)….deficient political system…long term rentier states
50s-70...”Welfare state” Model……State had a strong hand in the economy
(Interventionist and redistributive) Import Substitution Industrialization (ISI)
o Egypt tried to nationalize a lot of their own industry (reduce dependence
on foreign imports) one of their goals was to not become dependent on
either Cold War powers….build up own industry = states generate a lot of
the wealth and they redistribute this
What this does is generate legitimacy and bridge the
disjuncture between state and society
Centralized power..not like the decentralized bottom up economy
It is not a social contract but a complete dependence on the
state…less of an incentive to exercise political voice
Your livelihood is tied to this model…decrease in political
participation, lower in civil liberties…less incentive to challenge
the status quo
Economic Slowdown
Sliding petroleum prices
o New oil sources, global economic downturn….overproduction by OPEC
members OPEC has a cap to keep oil at certain levels
But certain states would overproduce (cheat) for their own interests
(Kuwait and Saudi Arabia)
o Long term…Welfare state model is inefficient…because the state is in
charge of everything and everyone…you have bloated
bureaucracies..People would be employed to do things that were not
Increased government hiring traps human capital (those with
Equity is greater than profit-loss criteria
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