Oil countries: What kind of capitalism?

Paldam, Martin and Saadaoui, Jamel (2025): Oil countries: What kind of capitalism?

Abstract

The paper considers 18 OPEC countries that were low-income countries when oil was found. Oil has given the countries a special path to high income. Normally wealth leads to democracy, but in oil countries it leads to a consolidation of the previous authoritarian rule. Thus, in most cases, oil wealth leads to a conservative political and economic system. Especially the six oil countries on the Arab Peninsula have conservative socio-cultural values, and they are staunchly authoritarian. However, this does not mean that OPEC countries are oriented toward free market policies. They score poorly on legal quality and protection of property rights and consequently, they have some corruption. This gives centralized economic systems dominated by the ruling group. It is a capitalist system, but it is a special oil type of political capitalism.

• Item Type: MPRA Paper
• Language: English
• Keywords: Oil; Capitalism; OPEC.
• Subjects: P - Economic Systems > P1 - Capitalist Systems > P16 - Political Economy; P - Economic Systems > P2 - Socialist Systems and Transitional Economies > P26 - Political Economy ; Property Rights; P - Economic Systems > P2 - Socialist Systems and Transitional Economies > P28 - Natural Resources ; Energy ; Environment

References

Corden, W.M., 1984. Booming sector and Dutch Disease economics: Survey and Consolidation. Oxford Economic Papers 36, 359–380.

Eldabawi, I., Makdisi, S., 2017. Democratic Transitions in the Arab World. Cambridge UP, Cambridge UK

Epstein, D.L., Bates, R., Goldstone, J., Kristensen, I., O'Halloran, S., 2006. Democratic transitions. American Journal of Political Science 50, 551-69.

Krueger, A.O., 1974. The political economy of the rent-seeking society. American Economic Review 64(3), 291-303

Mansfield, E. D., & Snyder, J. (2002). Democratic transitions, institutional strength, and war. International organization 56, 297-337.

O’Reilly, C., Murphy, R.,H., 2025. Freedom from unit roots? The time series properties of democracy and economic freedom. Journal of Comparative Economics, https://doi.org/10.1016/j.jce.2025.02.003.

Paldam, M., 2013. The political economy of Dutch Disease: A survey. Chapter 10, p 179-196 in Cabrillo, F., Puchades-Navarro, M.A., eds., Constitutional Economics and Public Institutions. Elgar, Cheltenham.

Paldam, M., 2021. The Grand Pattern of Development and the Transition of Institutions. Cambridge UP, New York.

Paldam, M., 2024a. Income, Growth, and Democracy. Looking for the main causal directions in the nexus. European Journal of Political Economy 83, 102532.

Paldam, M., 2024b. The OPEC/MENA/Arab nexus and the missing democratic transition. Http://martin. paldam.dk/GT-Main2.php

Paldam, M., 2025. The long-run path of the democratic transition. The inevitable collapse of the three pillars model. To appear in Kyklos. Http://martin.paldam.dk/GT-Main2.php.

Ploeg, van der, F., 2011. Natural Resources: curse or Blessing? Journal of Economic Literature 49(2), 366–420.

Rodrik, D., Wacziarg, R., 2005. Do democratic transitions produce bad economic outcomes? American Economic Review 95, 50-5.

Roy, D., Cheatham, A., 2024. Venezuela: the Rise and Fall of a Petrostate. Council on Foreign Relations, available from https://www.cfr.org/backgrounder/venezuela-crisis.

Soto, de H., 2000. The Mystery of Capital. Why Capitalism Triumph in the West and Fails Everywhere Else. Bantam Press, London.

Takriti, A.T., Safieddine, H., 2022. Arab Socialism. Chapter 21 pp 474-516 in Linden, van der, M., The Cambridge History of Socialism vol II. Cambridge UP, Cambridge U.K.

Vahabi, M., 2024. Islamic revolution and Anfal. Public Choice 200, 383–401.