Qatar has had a “remarkable” transformative effect on the society and welfare of citizens by judiciously using petrodollars for building inclusive institutions, according to James Robinson, a world-renowned economist.
“Oil wealth can be enormously valuable to a society. Sitting in Qatar, you can see the fruits of it,” Robinson, Professor at Harris School of Public Policy Studies, University of Chicago, yesterday told the Middle East Economic Association (MEEA), which was inaugurated by HE Prime Minister Sheikh Abdullah bin Nasser bin Khalifa al-Thani.
He was delivering the keynote address at the 15th international conference of MEEA, organised by the Doha Institute for Graduate Studies (DIGS).
“The oil wealth has had an incredible transformative effect on the society and welfare of the citizens. It has allowed institutionalisation and provides enormous amounts of services and public goods to citizens,” said Robinson, who is the co-author of “Why Nations Fail”.
One can discuss many types of specific policies and sovereign wealth funds but the message is that having inclusive political institutions seems to be the best recipe for utilising oil wealth in the interests of society, he said, adding oil rents in the Gulf region, for example, have allowed for both for state formation and for massive investment in socially desirable things as education, infrastructure and health.
Rejecting the notion of ‘rentier’ state (oil dependence leads to a weak state) in Qatar, he said there was no evidence to prove that hypothesis here. In general, he said not only does the evidence suggest that inclusive institutions are beneficial for long-run growth, they are also important for dealing with shocks. On the Middle East and North Africa (Mena), Robinson said the real issue is how to build inclusive political institutions, which are critical for the sustainability.
“Mena is a very diverse region, but the challenge for many of the large oil and gas producers is how to build inclusive institutions while respecting their individual heritages. Their success so far is based on this modernisation of tradition and it is a good model for the future,” according to him. Inclusive economic institutions provide powerful incentives and opportunities which encourage investment (crucial role for well-defined and enforced property rights), unleash the power of markets (better allocation of resources, entry of more efficient firms and ability to finance firms), and generate broader participation in the economy (education, free entry and broad distribution of property rights), he said.