indoor skiing in the desert in Dubai

The great historian and Middle East expert Bernard Lewis quotes a telling statistic: “According to a World Bank estimate, the total exports of the Arab world other than fossil fuels amount to less than those of Finland, a country of 5 million inhabitants.”

From The Arab World and  Its Discontents by Andrew B Wilson in the online May 2011 American Spectator

Wilson explains further:

Economists call it the “Resource Curse.” There is a large body of economic literature on the subject. The basic idea is commonsensical: If people are suddenly rich because of skyrocketing oil prices or some other anomaly of that kind, it produces “income effect” (i.e., they work less); and it eliminates the pressure to produce useful exports to pay for imports. Bubbles then develop as people bid up the price of real estate and other assets of a purely speculative nature. In the case of real estate, this has the perverse and harmful effect of making it harder for young couples to afford housing.

HKO comments:

Israel , with few natural resources has been a stunning economic success. Little of the rest of the middle east with its vast and valuable oil resources has produced much to be envied.  The “resource curse” referred to by Andrew Wilson does not explain the failure of the Arab countries to build modern productive societies as much as their culture and leadership.  Perhaps if they has been ‘forced’ to produce something the world wants with their brains rather than by drilling a hole in the ground they may have been different.  But with all their oil wealth they still act like the victims of life’s lottery.  Rather than focus on their own culpability they take the lazy route to find demons, whether it be the colonializations from 100 years ago or the tiny Jewish state in their midst today.

But the suggestion that a vast source of wealth like oil can overwhelm the social ability to use it wisely and in the end become a great detriment does little to explain why other countries with such wealth have avoided this outcome.  It says much more about the inability of the society to make good use of such wealth.