Economic Adjustment and Reform in the Context of a Rentier State

Oil rents have been central to shaping the political economy of the Gulf Corporation Council (GCC) countries. The basic analytical framework for analyzing the impacts of rents remains the Rentier State Theory (RST) despite some important refinements to this theory over the years. However, an area that has received little attention in the literature is the process of economic adjustment and reforms in the context of a rentier economy, where it is often argued that governments cannot embark on reforms without undermining the social contract between the ruling families and the citizens, increasing the risk of social and political unrest. Yet recent experience shows that in response to the recent sharp decline in the oil price, the GCC countries have introduced some limited reforms/adjustment measures such as increasing energy prices with relative ease and without much public opposition so far. This may suggest that social contract is more resilient than originally thought and extends beyond what is implied by RST. This presentation tries to answer following three questions:

  • How deep have these recent reforms been?
  • Can these reforms be accelerated without the governments facing serious public opposition? Can compensation schemes make the reforms more acceptable?
  • Can these reforms be implemented without greater accountability?

By: Bassam Fattouh

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