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Wealth Sharing in the GCC and Its Effect on living Standards

Date: 2016-05-17

Symposium | | 2016-05-17

"On the 17th of May 2016, The King Faisal Center For research and Islamic Studies held a lecture titled: “Wealth Sharing in the GCC and Its Effect on living Standards

Associate Professor at the Department of Government in the London School of Economic and Political Science : Dr. Steffen Hertog explained in his lecture the motives behind the generosity of wealth sharing policies in the GCC countries. He discussed how generous public services came about and were shared in Saudi Arabia and other GCC countries.

 The wealth sharing policies in the oil rich GCC states, he argues, were developed as a reaction to the rise of Arab nationalism. Specifically when Gamal Abd ElNasser began spreading his quasi-socialist message across the Arab region, calling for Arab unity (and revolution) through the Cairo based radio station, Sawt al-Arab. The rise of what is labelled as leftist-nationalism posed a threat to the conservative monarchs of the GCC. The reactionary monarchs, implemented policies that allowed wealth sharing in order to curtail the leftist wave in the region, and gain momentum. In a conversation with a UK colonial officer in 1967, Sheikh Rashid of Dubai said: “King Faisal had said that revolution comes from poverty. If the smaller states were not developed there would be a source for revolution.”  Many Arab rulers shared Kings Faisal’s view of wealth sharing to prevent revolutions. Sheikh Zayed removed Shakbout in 1966 in order to prevent subversion. In Oman, Said was removed by Qaboos since he was not willing to share wealth with the population.

Stephen Hertog draws on the similarities between Equatorial Guinea and The Republic of the Congo and the GCC. He states that both are oil rich countries, just as rich as the GCC Arab countries. However, since they lacked exposure to leftist subversion, their policies were not affected. In fact, oil became a curse in those countries since the state withdrew from public services completely.

Therefore, he reiterates wealth sharing has created many positive outcomes. For example, it has led to the development of the health sector and its services in the GCC. He adds, child mortality in GCC countries is now reduced to levels matching developed counties. Nevertheless, wealth sharing has created economic distortions across the GCC. State employment and expansive subsidies are not sustainable. The odds of male Saudis being employed in the public sector are ten times higher than in other countries. This is problematic since it is unsustainable, costly, and unproductive.

Hertog suggested incentivizing young Saudi males to join the private sector, systematically preparing them through quality education to have the skills needed to join it, and reduce government employment guarantee in order to stop young Saudi males from queuing up for public employment. In his concluding remarks, Hertog suggested converting energy subsidies to direct cash grants as a new sustainable way of wealth sharing with nationals.



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