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Blue Social Model in the Gulf

The blue social model is getting too expensive and inefficient for the United States, these days. That is not true everywhere.  As the FT reports:

It must be nice to be a Qatari bureaucrat. The country’s government recently gave salary and pensions raises of between 50 and 120 per cent to public sector workers – something other employers are wholly reluctant to hand out these days. […]

But the pay raises, like the additional spending elsewhere in the GCC, conflict with governments’ simultaneous efforts to develop the skilled local workforce needed to wean their countries off their dependence on expat workers. The vast majority of working Qataris do so in the public sector, while the private sector is filled with foreigners, a pattern found in much of the Gulf.

Programmes to encourage the private sector to hire more locals, known as Qatarisation, have had limited success. Employers balk at hiring skilled nationals whose expectations are shaped by government employers who generally offer higher pay, better job security, and less demanding workloads than the private sector.

With enough oil, you can afford almost anything, though even in the Gulf the blue model has its drawbacks.

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  • Jim.

    Isn’t this known as “Dutch disease” or “The Resource Curse”? I believe it’s when the export of one high-value commodity makes it difficult or impossible to attract labor and capital to anything other than that industry, and the export of that commodity sends currency values so high that your exports get priced out of competitiveness.

    Great for the few who control the high-value commodity; not so great for anyone else.

  • Paul

    I believe that the labels “Dutch disease” and “resource curse” refer to different, though related, concepts.

    Jim describes the Dutch disease, in which a society puts all its eggs in one productive basket, and is then particularly vulnerable to any changes in the value of its primary product. (The effects of credit- or fiat-currency exchange that he mentions are ancillary, and should not be over-emphasized.) But even in this case, the society is at least investing the majority of its labor and capital in something, albeit something that may not turn out, or that may suddenly become more plentiful (and hence less valuable) due to external developments.

    The resource curse refers more specifically to conditions which encourage the growth of what might more precisely, though rather clumsily, be defined as “extraction-rent statism.” In this situation, a particular society occupies the physical territory in which a certain resource is located. Though that society lacks not only the capacity to effectively extract that resource itself, but also the purpose (usually in the form of technology) for which such it might develop such a capacity, another society possesses both. The state ruling the society which happens to occupy the territory declares that it owns the resource which it lacks the capacity to use, and derives economic rent from this ownership. This rent is of such magnitude that the state can both enrich its members and provide the society at large with sufficient largesse (in the form of sinecures, subsidies, or simple payments) to purchase acquiescence. In this scenario, the entire society is put in the position of a wealthy landowner’s wastrel sons, and like them, its members concern themselves either with hedonism, eccentricity, or struggles to wrest control of the resource and its rents for themselves. The habits of mind encouraged by such a situation are not truly favorable to capitalism or individualism. Though the society can purchase the trappings of modernity, because they were not earned or developed internally, it is inherently backward.

    But what happens to the society if the resource declines in value, or runs out? Unlike the wastrel sons, its members cannot even scrape out a living as subsistence farmers — not on an oil field — even if they were willing to do so.

  • Jacksonian Libertarian

    According to the CIA world fact book, Qatar has the highest per capital income in the world at $147,000 last year. Single product economies never thrive in the long run.

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