The Oil Curse: Forty Years of Arab Economic and Social Failure

Oil is a curse. Especially for poor countries with backward political and social institutions. Oil-rich Arab countries are near perfect exemplars of the "resource curse" in which countries with abundant natural resources are actually likely to be worse off than countries where such resources are scarce. Cursed with vast revenues from exploiting oil, governments can simply buy what they need from abroad without bothering to invest in their people or encourage the development of wealth-creating activities. The consequence is an economic hollowing out. As the Arab Human Development Report for 2009 declared:

Overall, the Arab countries were less industrialized in 2007 than in 1970, almost four decades previously.

Yesterday, the Washington Post published data showing that per capita GDP (oddly the chart is not available online) has actually fallen in many Arab countries since 1981, e.g., Saudi Arabia's per capita GDP is 6 per cent lower than it was in 1981.

Meanwhile since 1981 many other developing countries not blessed with resource abundance have dramatically boosted their per capita incomes: China by neary 2,000 percent; South Korea by 1,000 percent; Indonesia by 360 percent; India by 350 percent; Brazil by 660 percent, and even Mexico which also suffers from the oil curse boosted its GDP per capita by 180 percent.