In "oil rich" countries, not all are rich

Jeff Tyler Feb 24, 2011

In "oil rich" countries, not all are rich

Jeff Tyler Feb 24, 2011


Kai Ryssdal: Traders at the New York Mercantile Exchange backed off oil today. Crude actually closed down for the first time all week — after topping $103, although it still is in the mid-90s — and things still aren’t going well in Libya. There are reports as much as half of Libya’s especially desirable kind of crude — light, sweet and more easily refined — has been shut down.

Libya and a lot of other countries in the Middle East are often described as being “oil rich.” And somehow leaders always find ways to enrich themselves. But what about the average citizen?

We asked Marketplace’s Jeff Tyler to what it really means to be “oil rich.”

Jeff Tyler: Libya has had steady income from oil for 60 years. Dartmouth College professor Dirk Vandewalle has studied the results.

Dirk Vandewalle: For the average Libyan, oil has not really been an enormous blessing. There hasn’t been the kind of real trickle-down effect that you would expect.

You might expect oil money would benefit everybody. But in both Libya and Saudi Arabia, Vandewalle says oil wealth has mostly been used by the elite to consolidate power.

Vandewalle: Seventy-five percent of Libyans work for the state. That does provide an enormous amount of patronage and power to the state.

What about Saudi Arabia? I asked Toby Jones with Rutgers University: Is Saudi Arabia anything like Alaska, where every resident gets a check with a cut of the state’s oil largess?

Toby Jones: No, Saudis don’t have a direct deposit into their checking account. But everybody in the kingdom understands that what they’re after is a little slice of that oil revenue that comes into the kingdom, and they’re entirely dependent on the royal family to make sure they get it.

Patronage takes different shapes. It could mean a government job, or health care, or subsidized water. Saudi Arabia has spent billions of dollars on infrastructure — building airports, highways, hospitals and ports. But in terms of diversifying the economy?

Tom Lippman with the Council on Foreign Relations has been visiting Saudi Arabia for 30 years.

Tom Lippman: That’s how long I’ve been hearing conversations about diversifying the economy. They’re really just beginning to do that.

King Abdullah has ambitious plans to build new, business-friendly cities where economic development could thrive. But nothing has been completed. Lippman says oil wealth has undermined any national sense of industrial drive.

Lippman: It’s the same reason you don’t want your child to inherit $5 million on his 15th birthday, let’s say. I mean, you get rich overnight, you get lazy.

That might not sit well with Saudi job-seekers facing unemployment rates as high as 25 percent. Meanwhile, this oil-rich nation imports about six million foreign workers to do the jobs Saudis can’t or won’t do.

I’m Jeff Tyler for Marketplace.

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