Week 1 (Topic 1): What is development? How to measure it?
Is income a good indicator of development? Why or why not?
The income is not a good indicator of development. Income is measured in terms of money which is a medium of exchange and a method of calculating value. The income does not tell us where or how the producer spent it. In addition, it does not consider inflation and exchange rate at the domestic market.
Describe GNP vs. GDP, real vs. nominal GDP, and GDP per capita, as well as PPP adjusted income.
GNP is the total value of the final output produced by the residents within a country regardless of the source of income whereas GDP is the total value of the final products created within the boarder of a country regardless of whether the income earners reside within the country or not. The real values and nominal value differ in the sense that real values are adjusted for inflation while nominal measure changes in quantities of goods and services. The purchase power parity compares how many goods and services a given unit (exchange rate) of money can purchase different countries. GDP per capita measures the rate at which a person contributes to economic output in a country.
What other factors should be adjusted for and taken into consideration when looking at income (e.g. environment, inequality)? Why?
Factors to be considered during adjustment include environmental destruction and non-market production. Environmental destruction disrupt production process since the society take a lot of time and resources to reduce toxic substances in water and deforestation instead of engaging in activities promoting people’s welfare. Non-market production also affects the income the government generates since they cannot be accounted for.
What is the HDI? What are its strengths and weaknesses?
HDI measures the knowledge, longevity, and decent standards of living. The strengths of HDI are that it gives information on the level of wealth, education, and health of a population and the government can use the HDI index to plan for the resources. Its weaknesses include the data might not be reliable and difficult to confirm and it does not measure unequal distribution of wealth in a country.
What other indicators for development are there? Which one do you agree with?
Other indicators include measure of economic welfare, poverty index, and genuine progress indicator. I agree with HPI since it gives information on the standards of living of the people in a country.
How does the GCC score on the above indicators? Why?
The GCC score is favourable given it is more than 0.1 for the economic indicators.
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Week 2 (Topic 2): The History of Global Economic Development
What is a mode of production? What is a feudal mode of production? What is a mercantilist mode of production?
The mode of production involved the use of materials of an organization to achieve economic, social, and political objectives. Feudalism, as a mode of production was agricultural-based where hierarchical systems were organized around manors. This mode ensured labor of serf remained tied to the land. Therefore, there were fewer urban settlements, primitive technology, small-scale artisans, and extensive growth of output and population. The mercantilist mode of production focused on trade between colonies and nations. The state regulated and licensed the companies undertaking the trade activities.
What is a capitalist mode of production? What was so unique and innovative about it?
The mode of production in capitalism involved the production of commodities and items for market. The kinship organizations were offered the mandate to market the commodities for profit. The most innovative and unique system was the emergence of technology which improved production and efficiency.
What is the role of colonialism in development?
Colonialism was crucial in establishing civility in the society. Many independent nations use the development policies of colonial powers to advance their post-colonial societies. To-date, the colonialism effect continues to be evident across the world including the GCC region where slavery and severe demographic challenges are evident. The rights of foreign workers are abused while the existing institutions remain destroyed.
How important is path dependency in development?
Path dependence has ensured that the history continues to shape the path of change. This implies that the historical events like colonialisms defined the future of a nation. The historical events have cumulative causation including institutional inhibition and constructive institutions.
How did primary vs. manufactured production impact development?
The primary production ensured the inputs or natural resources were made available for industrial use. In fact, the manufactured production depended on the primary production to produce commodities. This processes required advanced techniques and improved manpower leading to development.
Is dualism important? Why?
Dualism allows nations, farmers, and organizations to use a multi-sector system including pre-capitalist, transitional form of production and modern capitalist systems to maximize production. For example, a famer may engage in multiple economic activities including peasant farming artisan, trading activities, petroleum fields, large industries, and other activities to earn high income.
Topic 3: The Economy of the Arabian Gulf Pre-Oil
Describe the economic mode of production in the region before oil? Pay special attention to “entrepot” and pearl industries.
In the pre-oil period, the GCC relied on the peal industry, entrepot trade and mercantilism. The British imperialism never rewarded them because the colonial authority controlled maritime trade routes. Therefore, the GCC region relied on piracy to earn business rights and positions.
What role did the Arabian Gulf and Peninsula play in British imperialism?
The Arabian Gulf and Peninsula acted as marine trade routes for the British to India. The British used the region to control foreign relations including commerce and politics.
What is the strategy of divide and rule? Give examples.
Divide and rule was a strategy which the births used to control politic international relations. It involved using the locals to rule and gain access to their trade interests. For example, the local chiefdoms and rulers were used by the British to acquire slaves and stem their authority in the colony.
What was role and effect of drawing borders and sovereignty in the region? Explain using concept of path dependency.
Path dependency involves the use of historical practices or boundaries to define the borders of countries. For example, the 1922 Al Uqair conference led to the drawing of borders (Hausner 15). The borders drawn defined the regions or state. The path dependency marked the creation of boundaries between states or interstates. For example, in the GCC countries, each country has its distinct borders based on the historical border drawn.
What were the opposition and nationalist movements in the region in 1920s-1960s? What were their aims? What happened to them? Give examples.
Nationalism is a social movement or economic ideology focusing on promoting the interests of the population. The 1920s -1960s was a profound ideological, ethnographic, and political transformation period in the region. The aim was to realize independence and gain self-rule. Because of these efforts, many Middle East countries gained their independence and control of their resources. For example, Kuwait established its national assembly based on the political movement (Herb 3).
When was oil discovered in the region and in the different countries? What effect did oil have on the locals and on the imperialist powers’ aims and goals?
Oil discovery began in Bahrain in 1931 and later spread across the region. The locals wanted to control this recourse while the imperialists had the ambition of control the resources.
Hausner, Jerzy. Strategic Choice and Path-Dependency in Post-Socialism: Institutional Dynamics in the Transformation Process. Aldershot u.a: Elgar, 1995. Print.
Herb, Michael. “The Origins of Kuwait’s National assembly.” LSE, March, 2016. <http://eprints.lse.ac.uk/65693/1/39_MichaelHerb.pdf>
Topic 4: Oil and the Rentier State
What is rent? What are the characteristics that define a rentier economy?
Rent is an income earned from land rates, especially from mineral extractions, agriculture, and real estate. On the others, rents are viewed as an income beyond the minimum requirement of a production factor (Yates et al. 13). Rentier economy has many characteristics. For example, state is the principle recipient of the rates or rents. Similarly, the majority of the citizens focus on the redistribution and consumption of rents instead of production. Therefore, the foreign countries are the source of the rents. Rentier economy is also evident where rents have to the major economic activities as evident in the GCC countries. What are the characteristics that define a rentier economy?
Explain what a rentier state is. How did the rentier state change the relationship between the rulers and the other segments of societies?
The history of oil is complex because it demonstrates how oil was used to establish dynasty. The rentier states are the states which predominantly rely on oil to drive their economy. In these countries, the oil revenues were channeled to the government thus making possible for the states to avoid over-depending on taxes. The civil society activities diminished because the state influenced all the activities hence changing the relationships between rulers and civil societies.
What is the “rentier mentality”? Give examples. Do you agree?
Rentier mentality is a behavior where the society activities are focusing on rent seeking (Luciani 85). In fact, it breaks the links between rewards and efforts. Rentier mentality ensured that rent-seeking and political considerations determined one’s monetary success. I completely agree with this position because in most cases, individuals who succeed in these GCC countries must have political links with the authority. The rent-seeking mentality is evident where oil dependency is high, income per capital is high, and the economy is experiencing pearl diving.
What are the main ways rent is distributed in a GCC country? E.g. Kuwait?
Oil wealth has transformed many GCC countries including Kuwait. These countries use different channels to distribute rents (El-Katiri et al. 6). The resource-rich nations have established a sovereign wealth fund where they save part of the recipient’s rents. The sovereign wealth fund is used to distribute the wealth to the future generation. Therefore, the distribution is done through the “domestic public investment, land purchases, public transfer payments and pensions, subsidies, and public employment” (El-Katiri et al. 7-19). Kuwait also transfers the rents to business sectors, foreign investments, and Kuwaiti investment abroad (El-Katiri et al. 21-23)
How did the state and its institutions and apparatuses develop and grow under the rentier state? E.g. employment, ministries, laws, businesses?
Upon the discovery of oil in the region, the state nationalizes the industry. This made it possible for the state to earn high oil revenues because increased oil prices in the global market. it created protectionist policies to protect its unqualified citizens who were guaranteed state jobs and privileges. It created a rentier mentality political and rent-seeking factors were used to guarantee citizens monetary success. The state and institutions depended on oil than other systems leading to high income per capita. However, conventional industries in the region died and new ones emerged. The rent-seeking mentality reduced the productivity of citizens and government. The government ensured that the major oil revenues went to its coffers. This increased the influence of the states and weakened civil society’s influence.
Are high incomes from oil and government expenditures in a rentier state “development”? Explain.
The high incomes from oil and government expenditures in rentier state can never be viewed as development because development can be evaluated on the basis of performance and productivity. With the state over-depending on oil revenues, their productivity and performance have declined. In fact, the distribution of rents is founded on political inclination thus making the development skewed.
El-Katiri, Laura, Bassam Fattouh, and Paul Segal. “Anatomy of an Oil-Based Welfare State: Rent Distribution in Kuwait.” LSE, 2011. http://eprints.lse.ac.uk/55663/1/__lse.ac.uk_storage_LIBRARY_Secondary_libfile_shared_repository_Content_Kuwait%20Programme_Fattouh_2011.pdf
Luciani, Giacomo. The AraB State. University of Carlifonia Press, 1990. Print.
Yates, Douglas A. The Rentier State in Africa: Oil Rent Dependency and Neocolonialism in the Republic of Gabon. Trenton, NJ: Africa World Press, 1996. Print.
Topic 5: The Economic Challenge
What is the productive-economic challenge in the GCC?
Oil is an important commodity in the GCC countries. It remains the strategic commodity and these countries uses it a source of foreign exchange or export. Since 35% of the global economies demand energy from oil constituent, Gulf remains the major supply of this product because it holds about 50% of the oil reserves. The country experience economic challenge regarding this product because income is unrelated to productivity. This has made most of the activities to be based on rent-capturing and redistribution. Internationally, the global market demand seems to determine the production qualities not local factors (EIU 2). Therefore, the inability by the GCC to control production quantities and prices surmounts to productive-economic challenge.
How is the economic challenge to the three other challenges?
The economic challenge defines other challenges. It has an indirect dependence on nearly all sectors the economy. The economic challenges depend on external factors hence raising the issues of security (Mabro 8). In fact, with the use of expatriate for this production, the demographic challenge emerges. The political challenge is evident where the state uses the rentier state to advance its interests.
What part of GDP, exports and government revenue does oil and gas constitute in the GCC? What does this mean? (EIU report)
Oil and gas dominates the GCC economy because they constitute 75% of the countries’ GDP. With oil forming 80% of the export and government revenue, any constrain would trickle down to other sectors (EIU 2). This implies that oil runs the economy and government of this region.
Why is diversification important? What is the best way of diversifying?
Diversification can save these countries because the local considerations never determine the oil market prices but the international market demands. With the world seeking greener energy, the demand of oil and gas may diminish thus ruining their economy which entire depends on oil. Therefore, diversification will reduce risks, create jobs, prepare the economy to a post-oil age, as well as help these countries to overcome the productive-economic challenge (Mabro 2).
What is the solution to the productive-economic challenge in the GCC? Compare between Norway, Dubai and the rest of the GCC countries.
Diversification is the only solution to the challenges the GCC countries experience. For example, Norway has made oil only to cover its capital expenditures instead of depending it. It has established an oil fund where the rest of oil revenues are safely put (EIU 2). The GCC countries including Dubai should follow suit and diversify to avoid the major challenges.
Economist Intelligence Unit. (EIU). “The GCC in 2020: Broadening the Economy.” The Economist,2010. <http://graphics.eiu.com/upload/eb/AVIVA_%20GCC_to_2020_Economic_diversification_in_GCC_WEB.pdf>
Mabro, Robert. “The Significance of Oil.” Personal.umich.edu, 2010. <http://www-personal.umich.edu/~twod/venezuela/nwaeg_mar07/r_mabro_book_chpt3_0-19-920738-0.pdf>.
Topic 6: The Demographic Challenge and its relationship to the economy
What is the demographic challenge in the GCC?
The GCC has a booming economy. However, this economy relies majorly on the expatriates. In fact, statistics indicate that the expatriates form a third of the entire population. The immigration trend indicates that expatriates form 42% of the GCC’s total population. The Economist Intelligence Unit projected that the population growth in the GCC countries will remain to be 2.6% (EIU 1). Based on the graph, it is evident that foreigners are higher in Saudi Arabia than other GCC countries, especially in the private sector.
How is the demographic challenge caused by and related to the other challenges and the rentier state. Explain.
Apart from demographic challenges, the GCC experiences political, security, and economic challenges. The economic boom in the region has attracted expatriates (Baldwin-Edwards 4). However, the increased rate of local investments requires additional labor. With the GCC citizens granted exclusive privileges and jobs while leaving odds jobs to the expatriates. The presence of expatriates could have escalated the security issues because most of them have unknown backgrounds.
Who benefits and who loses from the demographic challenge? What are the vested interests?
The presence of expatriates benefits the local population who get time to secure public jobs with job security, high wages, social allowances, and retirement benefits (EIU 14). However, most expatriates engaging in the domestic employment loose because of the lack of job security. The vested interest is with the government to grow the economy.
Do expatriates receive adequate rights and benefits in the GCC? How is this related to the Kafala system? Describe.
The rights of expatriates remain compromised. For example, most of the expatriates are exposed to institutional violence. The Kafala system focuses on sponsorship program demonstrating the distinct regulatory framework. The government uses this sponsorship system to achieve its labor market protectionism goals meant to benefit the native and unskilled workers.
What is the “mega real estate” dimension to the demographic challenge? (e.g. dubai)
In all the GCC countries, the percentage of expatriates working in the real estate industry is high. In fact, in UAE, there are 90% of foreign workers in the real estate sector (EIU 16). Generally, the real estate as economic sector employs the majority of foreigners because of the infrastructural projects going on in these countries.
In your opinion what is the best way of solving the demographic challenge.
The GCC is undergoing significant economic modernization. However, the government should streamline its immigration and recruitment management systems. For example, the recruitment should be based on direct government-to-government requests. I think that through streamlining immigration policies, the GCC countries will benefit from the inputs of expatriates.
Baldwin-Edwards, Martin. Labor Immigration and Labor Markets in GCC Countries: National Patterns and Trends. Global Governance, no. 15, March 2011. <http://apmigration.ilo.org/resources/labour-immigration-and-labour-markets-in-the-gcc-countries-national-patterns-and-trends>
Economist Intelligence Unit (EIU). “The GCC in 2020: The Gulf and its People.” The Economist, September 2009. <http://graphics.eiu.com/upload/eb/Gulf2020part2.pdf>.