Why has the 'Free Market' doctrine not been as successful in the Middle East as elsewhere?

[zoid]

I’m admittedly starting from a point of ignorance so bear with me.

Even if the majority of revenue a country has comes from a single resource, don’t you still need a lot of people to manage that resource? And don’t those people need basic things like grocery stores and even consumer goods like cell phones? So why does oil prevent a free market in things like cell phone providers, and grocery stores, and restaurants, and clothing shops and all the other stuff people want?

[Leaffan]

@Ryan_Liam

I don’t see how Islamic Banking could be done in a way which doesn’t conflict with the main tenets of free market capitalism, in fact, I’m pretty sure they conjured up financial instruments to do that.

We didn’t car pool today. I’ll run this by my buddy on Monday.

[Simplicio]

@zoid

I’m admittedly starting from a point of ignorance so bear with me.

Even if the majority of revenue a country has comes from a single resource, don’t you still need a lot of people to manage that resource? And don’t those people need basic things like grocery stores and even consumer goods like cell phones? So why does oil prevent a free market in things like cell phone providers, and grocery stores, and restaurants, and clothing shops and all the other stuff people want?

Well, they do, to some extent anyways. Its not like there’s no private ownership in the Middle East. But since a naturally occurring resource makes up 60% of their GDP, that means the gov’t is going to control 60% of the production in the economy, either directly (by having a state-owned firm extract the oil) or indirectly (by selling the rights to a private firm).

So in places like Qatar, the productivity of the economy is basically a political decision (how much oil are we going to pump this year), it doesn’t depend on how hard everyone worked, or how much innovation there was. As a result there’s no point in divying up the money thus produced by productivity, as would happen in a free market. Who gets what is a political decision. And since there’s so much wealth thus produced, pretty much all the citizens see a larger chunk then they could get by working anyways (hence all the foreign workers).

[rogerbox]

@Leaffan

Islamic banking

I’m pretty sure that has a lot to do with it.

Beat me to it, good post. I’ve seen some articles that say Islamic banking regulations work well at the small level but it’s easy to see why they won’t ever experience rapid growth (which depending on how you look at it might be a good thing).

[bump]

I think a large part is that most Middle Eastern nations don’t really have much to export outside of oil.

They don’t have robust manufacturing sectors, they don’t have much in the way of serious agriculture, at least in an export sense, and they don’t have a lot of educated people to do stuff like outsourcing in the same way that India does.

So a free market seems kind of pointless in that situation, where somewhere else like India or China, they have a lot of things to offer.

Combine that with relatively large populations, and you have a situation of poverty and prospectlessness that is fertile ground for Islamist agitators and fringe movements. (off topic, I know, but it’s worth pointing out)

[Ibn_Warraq]

@puddleglum

Free market does not mean democratic or that it treats foreigners like “citizens”. Quatar has the rule of law and respects private property. It has very low levels of corruption, low taxes, and a business friendly regulatory environment. Here is the Heritage foundation’s profile of Quatar’s economy.
The same is mostly true of UAE.

Oil wealth does not translate into a growing economy for most countries. Oil rich countries tend to grow slower than other countries because of higher levels of corruption.

Er… define “foreigner” please.

Also, how many generations does one have to live in a country before they stop being considered a “foreigner”?