Peace and political reform in th Gulf: the private sector.

• Author: Hess, Andrew C.
• Position: Persian Gulf - Continuity and Transformation: The Modern Middle East

Some scholars have argued that the dawn of democracy in the Gulf is visible, noting that there is evidence of its presence in nearly every country in the region.(1) Once one gets past the rhetoric about fundamentalism in Iran, democratizing trends can be detected in the ability of a few social groups to resist the state. In Iraq, following the spectacular defeat of the Iraqi army in the Gulf War, major segments of the population expressed violent dissatisfaction with their political regime in the form of the Shi'i and Kurdish revolts. In response to the pro-democracy movements of the 1980s and early 1990s, Kuwait bravely revived parliamentary life, resulting in a resurgence of public criticism directed at powerful individuals, the government and the character of public life. Meanwhile, a more conservative Saudi Arabia took bold steps toward institutionalizing consultative government, while tolerating a freewheeling expansion of the Saudi Arabian Chambers of Commerce.(2)

Social and political conditions during the two decades between the oil-price shock of 1973 and the recovery of Kuwait from the 1990 Iraqi invasion were hardly conducive to the emergence of a new bourgeoisie that could promote the practices of competition and conciliation associated with democratic institutions. A flood of petrodollars enabled some oil-producing states to maintain authoritarian forms of government. In Iran, however, the resulting transfer of wealth greatly complicated the management of the oil monarchy. State officials lost control of society and an Islamic elite led the Iranian revolution of 1978 to 1979. The regional instability produced by this political explosion contributed to the most destructive of all Middle Eastern wars, the 1980 to 1988 Iran-Iraq War, and its aftershock, the Iraqi invasion of Kuwait in 1990. By the middle of the 1990s, the extraordinary human and material costs of managing the transition to modern life and ensuring security in Gulf nations has thoroughly exposed the limitations of the authoritarian state.(3)

Given the Western origins of modern technology and the crucial role that bureaucracies played in the early stages of development in the West, Western-educated economic elites were expected to be a vanguard for broad institutional change in Gulf societies, as they had been in the West. At the same time, the collapse of the Soviet Union and the extraordinary demonstration of American military technology during the Gulf War elevated Western models of economic and technological power. In view of the key role played by the private sector in the ascent of the West, scholars began to examine whether the private sector in the Gulf could perform in a similar manner. This inquiry found support in two recent publications. First, on the eve of Iraq's invasion of Kuwait, Jill Crystal published Oil and politics in the Gulf: rulers and merchants in Kuwait and Qatar, where she underlined the social and economic power of Kuwait's merchant community.(4) Second, at the end of the Gulf War, Augustus Richard Norton served as the guest editor for the spring 1993 edition of The Middle East Journal, which was devoted to examining the emergence of civil society and democracy in the Middle East.(5) Although both authors are aware of the ethnocentrism involved in applying Western models to the history of the Middle East, they cast the Gulf s private sector in the role of economic innovator for future Middle Eastern development, in accordance with models expounded by such organizations as the International Monetary Fund.(6) In so doing, they fed the assumption that the private sector could check the power of the state, encourage the growth of civil society and serve as a model for modem political development in the region.

In Kuwait, for instance, politically independent merchants and a boisterous associational life would suggest a window of opportunity for the private sector to effect institutional change. Crystal's history of the rulers and merchants of Kuwait and Qatar points to the existence of a politically conscious and organized merchant elite long before the arrival of the oil industry, at which point the Kuwaiti merchants worked out a mutually satisfactory arrangement with the royal family under which they traded political power for wealth. Despite these terms, which left government in the hands of the royal family and state bureaucrats, the merchant community was able to exert political influence through any one of numerous voluntary associations, of which the merchants' diwaniyya is a prominent example. While the Kuwaiti royal family has occasionally limited the freedoms of these private associations, it has also tolerated their opposition and permitted political reforms that could ultimately limit its own ruling powers.

Three years after the publication of Crystal's book, the decision of the editor of the Middle East Journal to devote the entire spring 1993 edition to the subject of the future of civil society in the Middle East added to the discussion of the creative role that the private sector might play in effecting political change in the Middle East. Part of a larger study under Norton's direction, the articles examined the participation of the Middle East in the global wave of political liberalization. For example, economist Alan Richards pointed out how the imperatives of international business after the Cold War favored regimes with powerful private sectors and pluralistic politics.(7) Modernization at the end of the 20th century would require exactly the opposite forms of political and economic authority considered necessary when the region first undertook industrialization.

Along these lines, political scientist Raymond A. Hinnebusch has offered evidence of the exhaustion of the centralized state and a resurgence of the bourgeoisie in Syria. There, bureaucrats are no longer able to control the political and economic arenas through state monopolies, the distribution of rents, clientelism and a large police establishment. When the inefficiencies of the state-directed economy became apparent, the government needed the private sector's economic agency, and thus encouraged the limited expansion of its business activities, its access to decision makers in government and its independence of central-government regulation.(8) It is this trend in the Middle East, spurred on by the Gulf states' fiscal constraints, that will force the state to increase the political space available to the private sector, through which this group can establish a market economy, foster pluralistic politics and, in time, form a true civil society.

In view of the important role that the private sector is expected to play, it is essential to define what the term "private sector" means in the context of the Gulf. The private sector, like the rest of Gulf society, is based on kinship relations. Indeed, the great private-sector firms are still largely run by extended families: the al-Ghanim in Kuwait, the al-Muayyid in Bahrain and the Olayan in Saudi Arabia, for example. The private sector is also characterized as a small and highly educated elite that is mostly urban and has an increasingly cosmopolitan view of the world. As is the case in the West, the phrase describes those individuals, companies and organizations who compete with each other and foreign institutions on the basis of free-market principles in the non-governmental sector of the economy. However, the fairly recent arrival of modem capitalism and its associated technologies in the Gulf has resulted in the state defining the private sector to exclude small-scale, non-modern business establishments whose economic activities do not contribute to the state's modernization projects. The state's commitment to rapid modernization also explains its generous financial assistance to the private sector.(9)

However encouraging these trends may be, the Gulf has a well-established tradition of authoritarian politics and weak institutional linkages between state and society. Without formidable pressure from new social elements, old politicians and revolutionaries could easily resurrect the past in the name of public order, cultural authenticity or national defense. The fate of the Shah's bureaucrats in the late 1970s and the abrupt dismissal in October 1986 of Saudi Arabia's prestigious oil minister, Ahmad Z. Yamani, are just two examples of the power of authoritarian ruling classes over any transformative political power the technocrats might possess.(10)

This article will argue that the private sector in the Gulf has neither the power nor the inclination to force major changes in the non-democratic political regimes and state-dominated economic systems. There are three basic reasons for this: Political instability in the region discourages long-term investment, turning private-sector attention abroad; the persistence of an authoritarian political tradition prevents the institutionalization of democratic practices; and the state control of economic power in oil-producing states impedes the establishment of pluralistic politics and market economies. Therefore, it is not the private sector that will determine whether democratic institutions will be created and nurtured; rather, the state itself will be forced to reform political institutions in order to respond to the political and economic challenges of modernization.

To understand how the forces outlined above define the role of the private sector in the Gulf, this article will examine the continuing effects of regional violence, domestic politics and oil-related development.

REGIONAL SECURITY

Security issues loom large in the minds of regional investors, because the geopolitical importance of the Gulf intensifies regional struggles for power. Throughout history, struggles for control of the land and sea routes that converge on the Gulf have led to serious conflicts between major regional states. In the more distant past...