The Wages of Oil: Parliaments and Economic Development in Kuwait and the UAE by Michael Herb (review)

In his book, The Wages of Oil, Michael Herb extends an analytical framework to understand the interaction between the economic and political dynamics of the Gulf monarchies. While essentially providing an assessment of the economy and politics of the United Arab Emirates and Kuwait, he also draws comparisons with the other Gulf Arab countries, distinguishing the extreme rentier states — the UAE, Kuwait, and Qatar — from the middling rentier states — Oman, Bahrain, and Saudi Arabia. He argues that the rentier structure has facilitated the establishment of distorted economies in the extreme rentiers of the Gulf Cooperation Council (GCC), within an economic structure where non-nationals outnumber nationals, yet are, in general, more disadvantaged in the labor market. Herb asserts that the high political participation in Kuwait has distinguished it from the two other extreme rentiers of the GCC in two main characteristics: the structure of the labor market and the extent of economic development and diversification. Despite being an extreme rentier, the Kuwait National Assembly (KNA) acts as a mechanism preventing the ruling elite from the autonomous control of the economy that has occurred in Qatar and the UAE — especially Dubai — and that has resulted in a significant demographic imbalance, characterized by nationals in these two states becoming a small minority, yet which has brought significant economic success. However, this has meant that Kuwait’s economy has not experienced the growth and diversification that characterizes the UAE and Qatar.

Herb’s book adds to a growing, and much needed, body of literature on the political economies of the GCC states. As Oman and Bahrain face an imminent future of declining oil reserves, Saudi Arabia an ever-increasing population, and Kuwait’s economic development grows increasingly divergent from that of the UAE and Qatar, rentierism can no longer account for the changing dynamics in these states. Therefore, this book attempts to provide a new analysis to account for the diverse trajectories of the GCC economies. Essentially, Herb emphasizes that in the rentier economies of the GCC, the majority of the national population is not invested in the private sector, resulting in “a divorce between the private sector and the bulk of citizenry, leaving most citizens without a strong reason to care about the level of profits in the private sector” (p. 26).

Herb lays out his argument by assessing the structure of the labor markets of the GCC states and the structural impediments prevalent in their economies. He asserts that the distorted labor markets in the extreme rentiers produce two types of citizens: capitalists and public sector employees, the former with an invested interested in the success of the private sector, the latter relying on oil rents that fund their salaries and services. According to Herb, citizens of these extreme rentiers, dissociated from the private sector, are employed by the state at wages above market value, while foreigners constitute the majority of the private sector workforce at significantly lower labor prices. While this assessment may appear reasonable when examining the overall private/public sector divide, it does not accurately describe the labor markets. While in the UAE, for example, expatriates earn less than nationals overall, this situation is not necessarily true for the higher earning Western or Western-educated professionals. Moreover, nationals may have higher wage potentials in the public sector, but this is perhaps only true for lower skilled/educated employees at lower employment grades, as nationals with advanced education (particularly those who are Western educated) or better skills have a greater earning potential in the private sector. Moreover, in Kuwait, nationals employed in the private sector are paid a company wage plus an additional supplement from the government, thus with an earning potential higher to what they might earn in the public sector. Herb also fails to consider the impact of the structure of the private sector, where all businesses (except those in free zones) must be at least 51% owned by...