Dubai as Rentier State

Topics: United Arab Emirates, Petroleum, Abu Dhabi Pages: 5 (1540 words) Published: November 18, 2012
United Arab Emirates
Political Economy

The success of the United Arab Emirates come directly from its high revenue made from oil exports. This country was a desert region that turned into an economic boom in the recent years. According to CNN World News, "Abu Dhabi, the capital of the United Arab Emirates [is] the richest city in the world. The Emirate's citizens, who sit on one-tenth of the planet's oil and have almost $1 trillion invested abroad, are worth about $17 million apiece. Because of this factor, the UAE is considered one of the wealthiest countries in the world." However, turmoil struck the country with the recent global recession in 2008 that led to contradictions in their global oil wealth. Now that the country is recovering from this down point, the state infers global oil position will recover in sales on a slow but steady pace. In this research paper, I will demonstrate how the United Arab Emirates functions under a rentier economy and the country has not built the political stability they intended which led to challenges faced by the people and government.

The rentier model of the United Arab Emirates depicts the stability of the political economy from its high oil revenues. A unique characteristic of the prosperity of the country stems from the fact of the discovery of oil. What oil production really means is a natural resource taken from the earth and not an existing good that is produced through sales. What distinguishes a rentier economy from other countries is the oil profits and its high dependence on one necessity for foreigners. A rentier is a group or entire state that profits on income from property or investments, and in such a case oil from the UAE. The rentier is not involved with the making of the incentive, but is entitled to a high amount of the money. In his journal, "The Rentier State in the Arab World," Beblawi explains what a rentier economy is based upon. He claims, "There is no existence of a real rentier state. Every rentier economy is an economic structure with the backings of external rent coming into the funds" (Beblawi). This rent is vital to the measurement of success in a rentier economy. This is the key factor in holding the economy together without a domestic sector. Also, a rentier economy doesn't have many hands involved with the generation of the wealth. The creation of such wealth is maintained and kept within a small number of elites. The governance of the country is able to rely on the discovery of oil mines to external profit being it is a main factor in the county's high success rate. Previously, this money would have to come from the population, such as merchants and artisans, but now it can be received precociously from dependent revenue provided by the oil. The settlement between the social group and the workers create a social contract.

About seventy to eighty percent of the lower to middle class, also known as the labor force, participates in the production of oil in the United Arab Emirates. Whereas a large percentage is involved in the production, a small fraction of society partakes in the distribution, and benefits of the revenues. According to the Financial Times, "Due to the high volume of oil distribution and price increase, the early 1970's began an era of investments in industry, services, public works, and investments in infrastructure. Because of these investments, a high demand for a workforce grew which surpassed the demand of supply" (Chazan). This chain reaction led to a foreign workforce that would interfere with the national workforce. It became such a huge development that the foreign workforce evolved into the primary workforce in all sections of the economy. Developing the infrastructure system was one of the main fields where the Emirates sought improvement through other investments. Works such as roads, highways, airports, telecommunication networks, and governmental ministries were built. They revolutionized the states from a...
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