Security and Foreign Policy

The Need for a New Social Contract in the Energy Kingdoms of the Arabian Gulf

With bloated bureaucracies, burgeoning unemployment rates and continued budget deficits, the challenges facing the governments of the Arabian Gulf are great. Dr. Sophie Olver-Ellis argues that it may be time for the energy kingdoms to pursue and write a new social contract that will help diversify their economies towards a more sustainable footing.

BY: DR. SOPHIE OLVER-ELLIS

A social contract is generally understood as defining the relationship between the rulers and the ruled. Quite simply, it outlines the socio-political and economic obligations of both state and society and their role within their country. In the case of the Arabian Gulf, with vast oil wealth and relatively small national populations, with the only exception being Saudi Arabia, their social contract is unique. For more than half a century, the Gulf States have used their oil revenues to fund substantial subsidies and welfare provisions for its citizenry, whereby they have enjoyed exceptional electricity and water subsidies, low prices at the petrol pumps, free education, free health care and guaranteed lifelong public sector employment. There has also been no implementation of a tax-based system on their income and real estate. The social contract that has underpinned the state-society nexus in the Arabian Gulf therefore, has been built upon the rulers securing legitimacy and general support by distributing oil wealthto the national citizenry, who have largely been disengaged from the political arena and policymaking process. With regional socio-political instability and continuous global oil-price volatility, it may be time for the energy kingdoms of the Arabian Gulf to pursue and write a new social contract. 

Over the last decade, two major events have struck the Arab world and brought into question the sustainability of the social contract that has underpinned the state-society interplay for over five decades. In 2011, the region deteriorated into widespread socio-political instability, with the national citizenry taking to the streets to oppose the longstanding authoritarian rule that pervaded the region’s governments, widespread corruption and the unequal distribution of oil wealth. One of the biggest determinants behind the eruption of socio-political instability, however, surrounded the demand from the citizens for better employment opportunities, higher wages and for the region’s governments to address the burgeoning unemployment rate, especially amongst the youth. Indeed, the issues that underpinned the 2011 Arab Spring were not new, or sudden. Because over the decades, alongside great oil-induced prosperity, the rentier states of the Arabian Peninsula have been subject to a fluctuating economy which has undergone numerous boom and bust cycles, a burgeoning unemployment rate and a largely absent society within the region’s authoritarian based regimes. Despite hopes running high that ‘the Arab Spring’ would unseat the region’s autocratic rulers and usher in a new era of democratic rule,little changed in terms of governance systems. Especially as old ruling bargains were drawn upon to quell dissent, and higher salaries, more public sector employment, increased housing assistance and university scholarships were part of the aid packages rolled out to pacify the region’s national citizenry.These distributive mechanisms were only feasible due to high global oil prices and would therefore, be undermined by any extreme fluctuation in the oil market. 

In 2014, the second major event occurred, where a collapse in the global market made oil prices plummetand threatened the very foundation of the governance system that has informed state-society interplay for more than fifty years. Of which, the general ethos between these actors was the more subsidies and jobs the government could provide, the better because it helped buttress support from society towards the ruling elite. But instead of creating genuine and economically productive employment opportunities in the private sector, the public-sector evolved into the employer of choice for the national citizenry and in doing so, created a segmented labour market between the public and private sector and between the national and migrant workforce. As a result, with low oil prices, it becomes an extremely arduous task for the region’s governments to fund the distributive based social contract, especially in regards to providing subsidies and public sector employment. Quite simply, in the era of low oil prices, the region’s governments can no longer afford to pay vast subsidies and be the primary employer of its citizenry. Against the backdrop of bloated bureaucracies, burgeoning unemployment rates, especially amongst the youth demographic, and continued budget deficits, the challenge facing the region’s governments is great because the fundamental component of the social contract is coming undone due to its unsustainability. 

Of course, the region’s governments have sought to address their fracturing social contractby adopting new development Visions that seek to wean the region off oil rents and diversify their economic base towards a private sector driven knowledge based economy. A central component of these economic reforms is to reduce subsidieson fuel, water, electricity and to empower the citizens to become active agents of socio-economic transformation by encouraging them to productively participate in the private sector. Quite simply, these Visions are attempting to restructure the political economies of the Arabian Gulf by redrawing the social contract. To wean society off of state largesse and narrowing the social safety net, this could also potentially translate into society calling for greater participatory platforms in the political arena. Thus, as the governments seek to adjust their economies towards a more sustainable footing, for society to embrace these reforms, the political elite will have to reconfigure the social contract to include some form of participatory politics.Attempting to rewrite the social contract in the Arabian Gulf comes with risks but in an era of constant oil price volatility, for the long term socio-economic stability of the region, redrawing the role and state-society interplay will be the only way to diversify their economies towards a more sustainable footing. 


Dr. Sophie Olver-Ellis is a political economist and works as a Research Officer for the Kuwait Programme at the London School of Economics Middle East Centre. Her research focuses on the transforming political economies of the Arabian Gulf with particular emphasis on the changing social, political and economic structures and emerging dynamics of the Gulf Cooperation Council States in the post-oil dependent era.

Please note that opinions expressed in this article are solely those of our contributors, not of Political Insights, which takes no institutional positions.

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