Sections
Rentier State Theory
Arabian Gulf Social Contract
Economic diversification matters
Labour market productivity issues
This page discusses the Arabian Gulf Social Contract (AGSC), an analytical framework useful when investigating regional sociocultural and political-economy matters. The AGSC is something of a counterpoint to the more ahistorical and deterministic modes of Rentier State Theory. The region’s “Ruling Bargains”–a key tenant of AGSC–fundamentally impacts on the bloc’s labour market structures and economic diversification attempts.
Rentier State Theory
The “Rentier Mentality” — a dated discourse
Despite the fact that ‘rent’ underpins both Rentier State (RS) and Resource Curse (RC) theses, external factors that help shape perceptions of it and determine its value, are rarely factored in. To explain the default and long-standing utilisation of the RS/RC paradigm across the social sciences—in spite of the frequent need to detour around contrary data—this page will point firstly to the way in which rent is now popularly perceived (from logically grounded, to excessively unwarranted) and secondly, to the fact that ‘oil’ lies at the paradigm’s heart. It is a commodity that various Western polities once had unfettered control over; no other depletable natural resource in the past century has held such global economic significance (external actors clearly have a vested interest).
In several academic publications I have underscored my viewpoint that there is a need for a reappraisal of the RS/RC analytical framework, some data are presented that demonstrate that the GCC countries have not, comparatively speaking, suffered the deleterious consequences that the paradigm stipulates.
Rentier State Theory relates in particular to the “oil-rich, labour-poor” countries of the Arabian peninsular. Kamrava (2014, p.22) The emergence of a model of the patron state par excellence, based on particularly robust ruling bargains underwritten by massive state wealth, was particularly notable in the Arabian Peninsula among the oil-rich, labour poor economies
Throughout the Persian Gulf there emerged what Giacomo Luciani calls “the Gulf consensus,” whereby the state plays a direct role in the emergence and continued growth of a nascent bourgeoisie. This has been achieved through a variety of state initiatives, such as the allocation of government contracts and procurements, and by creating an alliance between foreign investors and local partners. Laurie Brand draws a distinction between a “rentier state,” in which rent revenues accrue directly to the state, and a “rentier economy,” in which rent revenues are smaller and come mostly from expatriate remittances or other sources, and in which the state has less of a role as a recipient and dispenser of rent income. In rentier states, particularly of the kind found in the Persian Gulf, “the state is expected to provide a certain level of economic security, in exchange for which society grants state leaders considerable political autonomy,” and “state–society relations seem predicated on the principle of ‘no taxation, no representation.’”
Arabian Gulf Social Contract
Rentier State Theory
Arabian Gulf Social Contract
Economic diversification matters
Labour market productivity issues
The Arabian Gulf Social Contract (AGSC) is an analytical framework that I have been seeking to develop and articulate for a number of years now. It encompasses the Ruling Bargain concept and the impacts of the Kafala system (the systems in place that related to the importing and sponsoring of expatriate labour).
“Ruling Bargains”
The term “Ruling Bargain” was first used within the regional context by Mehran Kamrava in 2005. In his work, The Modern Middle East: A Political History since the First World War Kamrava suggests that a robust scholarship has emerged on the durability of authoritarianism in the Middle East and the remarkable resilience of the region’s political regimes. Much of this work is based on rigorous analysis of the patterns of socio-political behavior in the Middle East, both at the regional level of analysis and at that of individual states, and in particular on the carefully crafted “ruling bargains” between regimes and their citizens.
Kamrava (2014) argues that Both in the Middle East’s monarchies and in the many presidential republics, a ruling bargain emerged between the governed and those governing that aimed to consolidate state–society relationships and maintain various forms of authoritarian rule. In broad terms, the implicit bargain underlying the nature of political rule in the region has required citizens to surrender their political and social rights to participatory government. They are expected to accept the legitimacy of the ruling regime, however grudgingly, and are rewarded with a variety of goods and services in return, most of them tangible but some also intangible, as well as socio-economic benets. The scope of state munificence extended to the citizenry was dependent on the state’s financial capacity, making the ruling bargain stronger in some states and weaker in others, or at least in relation to some citizens more than others.
The Kafala system
Non-national labour has been instrumental to the transformation of “desertscapes into modern metropolises” in short order (Diop, Johnston, & Le, 2015, p. 117). Indeed, the kafala (non-national labour ‘sponsorship’) system has shaped the structure of the region’s domestic economy and particularly its labour markets since the 1970s. The now infamous kafala system, whereby national businesses and households essentially ‘own’ and ‘control’ non-national labour, to no small degree has shaped the region’s economic trajectories and fundamentally so, labour market structures and impact on society at large. Saudi Arabia, with its national population of around 19 million, has some four million domestic helpers (cooks, gardeners, maids etc.), mostly from Asia and Africa, currently working and residing in the country (Government of Saudi Arabia, 2024).
The overreliance has long permitted domestic private sector businesses which are mostly owned by citizens, to hire cheap labour—there is no minimum wage, no trade unions, no mobility within the market etc.—at volume. This has meant many firms had little incentive to invest in labour-saving technology. It has also enriched many citizens (for it is perfectly legal and indeed encouraged, for public sector employees to set up small businesses on the side and for these to be managed and staffed by non-nationals) and explains why many have a vested interest in the system’s continuance (e.g., Al-Salim, 2023; Diop et al., 2015; Lopesciolo et al., 2021). The system too has led to the growth of the domestic economy based on non-tradables and private consumption. While nationals are not attracted to most of the employment created by such activities, many of the businesses catering for such consumption are Saudi-owned but staffed by non-nationals (Tzannatos & Sfakianakis, 2024).
Economic diversification matters
Rentier State Theory
Arabian Gulf Social Contract
Economic diversification matters
Labour market productivity issues
The importance placed on economic diversification — the process of spreading out a country’s economic activity across a variety of sectors and market (i.e., on the Arabian peninsular, seeking to reduce one’s dependence on the oil industry) — by the regions’ ruling elites cannot be understated; neither though can the difficulty of achieving it. At the heart of the matter is oil and “oil-rent.” All of the Arabian Gulf’s transformative economic visions centre on economic diversification and the envisaged creation of attractive employment opportunities for nationals that such an economic transformation should generate (Moshashai, Leber, & Savage, 2020). That is, job offerings in areas other than “the classic public sector” that are well paid and not too manual, menial or servile (Rutledge & Al Kaabi, 2023).
Labour market issues
Rentier State Theory
Arabian Gulf Social Contract
Economic diversification matters
Labour market productivity issues
The region’s labour markets are
References
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