Middle Eastern Governments Plan to Spend Huge Oil Profits on the Poor

Sources:

The Daily Beast: High Oil Prices to Benefit Poor

FT: Sovereign Wealth: Spending Stays Close to Home

San Francisco Chronicle: OPEC’s $1 Trillion Cash Quiets Poor on Longest Ever $100 Oil

The University of Pennsylvania Wharton School: To Stave off Arab Spring Revolts, Saudi Arabia and Fellow Gulf Countries Spend $150 Billion

Many oil-rich countries in the Middle East will see unprecedented profits thanks to high oil prices and have pledged to invest much of these profits in programs designed to alleviate poverty. Countries like Saudi Arabia, United Arab Emirates, Kuwait, and Qatar plan to spend billions on food aid, increasing civil servant salaries, and, to a lesser extent, on infrastructure improvements.

Substantial domestic investment is a new trend in the region, likely spurred by uprisings. In the past, many middle-eastern countries preferred to invest oil profits overseas. The recent political unrest throughout the region, however, has forced governments to pay more attention to the basic needs of their population. Citizens in Libya, Egypt, Tunisia, Bahrain, Syria, and Yemen have started protests and even civil wars against their current governments in the past several months. Many of these incidents resulted from citizens who feel their governments are oppressing them and neglecting their basic needs. In some countries, the uprisings have ousted long-standing leaders– a result none of the region’s leaders want to see in their own country.

Some experts feel the governments’ new investments are not the solution to these region’s problems. Much of the relief, such as food and cash handouts, will only have a short term effect. The governments are spending very little on projects that will support economic development in the long-term. Therefore, when the relief is gone, the poor will be in the same position they were before the handouts. Despite observers’ opinions that the countries should spend money on long-term investments that will support economic activity for years to come, citizens seem satisfied.

Regardless of the motivation for- or longevity of- the relief, increased domestic investment is a positive step for the Middle East. Oil wealth has been the source of some of the most dramatic inequality in the world as dictators and oil barons have kept oil profits for themselves for decades. The vast majority of the population lives in poverty. Unfortunately, many feel the financial disparity between the rich and the poor of these countries is just one characteristic of an oppressive culture in which citizens have little say in their government. The governments’ new domestic spending is the first sign of hope for the poor in these countries and may lead to increased political voice for the underrepresented group.