Oil is a finite
resource. It is tantamount to capital in the
ground and is thus apart of a country's capital
stock. In most countries,
all valuable depletable
resources - such as oil, natural gas, copper,
platinum, gold, uranium, diamonds emeralds and
more - belong to the state, in other words to all
citizens, with the implications that it should be
depleted and managed in such a way as to benefit
all citizens of this and future generations. The
United States and a few other countries around the
world are the exception to the rule and assign
resource ownership to the landowner.
In
the Middle East, the ownership of oil and natural
gas is unquestionable - it is the patrimony of all
citizens of all generations. This is explicitly
recognized in every oil-exporting country of the
region, in the constitutions of countries that
have constitutions and, even more importantly, it
is a well-known, undeniable and absolutely
indisputable teaching of Islam, the religion that
all these countries profess, with or without a
constitution.
In Islam, natural resources
(such as raw land, water, and mineral deposits)
are considered to be a gift bestowed to humanity
by Allah. Because humans did not create any of the
world's natural resources, they cannot exert
unequivocal ownership over them.
Property
rights are at the foundation of Islamic economics.
The most important principle of property rights is
the permanent, constant, and invariant ownership
of all property by Allah. Another principle
acknowledged, in consonance with the Quran, is the
transfer by Allah of the right of possession to
all of mankind. A third principle acknowledged
equal opportunity of access by all to the natural
resources provided by the Creator, to be combined
with their labor to produce goods and services.
Accordingly, and to ensure the community
of property rights for all members of society,
property rights over purely natural resources
(such as mines) were placed in trust of either the
state, to be used for the benefit of all, or in
the hands of society at large as commons (for
example, surface and underground water). Humans
may only privately own anything they produce with
their work or gain through legitimate investment
and inheritance.
At the same time,
equity and social and economic justice are at the
center of Islamic teaching and are also important
considerations for countries with large oil and
gas resources. Economists have long ago addressed
the issue. Robert Solow in his famous article
concluded by saying:
The finite pool of resources (I have
excluded full recycling) should be used up
optimally according to the general rules that
govern the optimal use of reproducible assets.
In particular, earlier generations are entitled
to draw down the pool (optimally, of course!) so
long as they add (optimally, of course!) to the
stock of reproducible capital.
What if
countries cannot, or will not, optimally add to
the stock of reproducible capital? The clear need
is to find an alternative to Solow's prescribed
optimal draw down and optimal addition to
reproducible capital. In a future article, we will
detail our proposal to achieve this goal by
creating a fund to address issues of equity and
many of the other economic management problems
associated with oil depletion, especially issues
that are important in Islam.
Because
anything under ground belongs to society at large,
a number of provisions follow; all citizens should
have an equal share in the fruit of what is under
the land; this incorporates both current
and all future generations. As minerals are
depleted, governments must make sure that they use
their revenues in such a way that all citizens
today and for all future time receive similar real
benefits. Oil should benefit all members of the
current generation equally (with optimal depletion
and optimal compensation for depletion), with the
implication of relatively even distribution of
income given the overwhelming role of oil (as
opposed to hard work and sound productive
investments) in these economies, and that these
benefits should be similar for all
generations to come.
These unequivocal
admonitions of Islam are largely ignored in the
oil-exporting countries of the Middle East. Oil
revenues are squandered to finance current
consumption and vast and wasteful military
expenditures, and most egregiously in the Persian
Gulf many of the ruling families take a
significant portion of the revenues even
before it becomes available for public
benefit.
Rulers in Saudi Arabia, in Qatar,
Oman and the United Arab Emirates take whatever
they wish from oil revenues, as if the oil
belonged to them and they were generously
sharing with their people. It is tantamount to
state-sponsored theft by the ruling families.
Not only do Western governments, notably
the United States, say nothing, but they also
support the ongoing pillage of national patrimony.
They treat these rulers as if they were elected
representatives of their people who upheld the
laws of their land. It will one day be
acknowledged and recorded as the biggest theft in
the history of man. Is it then surprising that
there is so much domestic dissent in these
countries? Is it surprising that there is so much
anti-Western sentiment? Is it surprising that
everywhere in the region the masses are craving
Islamic dominated governments, not as interpreted
and practiced in Iran, but as outlined in the
Quran and practiced by the Prophet Mohammad in
Medina centuries ago.
Libya's Colonel
Muammar Gaddafi and his family took what they
wished from the state and foreign leaders, and the
international media said nothing of it until he
was overthrown. Iraq's Saddam Hussein arguably
robbed his people even more than the four
family-ruled countries mentioned above; and today,
though not family ruled, Iraq is almost as bad as
before because of widespread corruption. [1]
Although the Iranian constitution
recognizes state ownership of the country's
depletable resources, because of widespread
corruption the benefits of oil and natural gas are
lost on the majority of citizens and there may be
little, if anything, for future
generations.Conditions in Kuwait are somewhat
better when it comes to the beneficiaries of oil
depletion.
Though different, and to
differing degrees, theft of oil and natural gas is
the order of the day in the Middle East. In the
family-ruled countries, the rulers openly take
from their national treasuries as they wish (or
even before it gets into the treasury) and in the
rest of the countries corruption is so extensive
that the end result is almost the same.
Citizens and future generations are
loosing their birthright to a greedy few. But as
we shall see in later articles, the end result is
even worse than the theft. Rulers, no matter who
they are, have no incentive to develop good
institutions that would check their theft. Thus
corrupt institutions that invariably lead to
sub-par economic performance, heavy military
expenditures largely to keep the citizenry in
check, intrastate conflicts and often followed by
interstate conflicts and wars, all combine to
provide a gloomy outlook for the future.
All the while, democratic leaders from
around the world say nothing. The International
Monetary Fund and the World Bank write their sound
technical papers but say nothing of the
mismanagement of oil resources, namely the ongoing
theft of oil revenues in these countries and the
importance of institutions that would check such
abuses. The international media hardly utters a
peep when these leaders and governments are firmly
in power but quickly "unearths" their abuses as
they are on their way out.
As we shall
see, positive change will only come about when and
if there are concerted and simultaneous economic
and political initiatives on a number of fronts.
Note:
1. This paragraph corrects an error introduced during the editing process.
NEXT: What oil-based economies
need as policies
Hossein Askari
is Professor of Business and International
Affairs at the George Washington University.
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
