Re-negotiating the Social Contract in the GCC: State-Business Relations and Reforms in the Oil-Rentier Gulf Monarchies

This project concerns the dynamics and implications of the economic and social transformations in the Gulf Cooperation Council (GCC) states [Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, UAE] over the last decade. The GCC states are of global geopolitical importance (40% of world oil reserves), they are at the heart of the Arab world's economy, and it is here that the Arab world's most significant bourgeoisie has arguably been emerging. It examines the evolution and position of the GCC's business community, its relations with 'state' and regime, and its perceptions of and roles in the reforms attempted in the region. By the same token, it investigates the impact of these reforms on the fortunes, composition and roles of the business community in these polities, including on state-business relations.

The social contract established by the ruling families during the 'rentier' period in the 20th Century - redistributing oil rent through free education, health care, housing, and well-paid government jobs; granting key positions to historically important tribes/families and economic monopolies to nationals; and legally subordinating expatriates to nationals - implied in return the non-interference of nationals and civil society in domestic politics. Fears over future oil revenue, globalisation and population growth & expectation reduced the viability of the oil-rent model of development, and brought an unprecedented awareness by GCC elites of the need to rethink their states' socio-economic structures. While past high oil prices arguably reduced the pressure to diversify, the latest period of high prices has instead coincided with sustained liberalising reforms, including changes in the role of the state, economic diversification policies, labour market reforms, health and educational reforms - all alongside fledgling political reforms. The current raft of reforms, affecting the definition of the welfare model, the structure of economy, and the sociology of business in these states, also have global implications. At the same time they represent a prima facie paradox, and a range of unanswered questions, for Rentier State Theory and the study of political and economic reform. The business elite has had a decisive role in supporting the established socio-political order and shaping political legitimacy, alongside its related economic role - even if these roles underwent important shifts. The nature, extent and implications of the current shift is the central subject of this project, including the role this 'bourgeoisie' might play in a broader socio-political evolution of these systems.

The subject will be approached primarily through the economic reforms and those that relate to it (governance, education and judicial): investigating the reforms themselves, the mutual impact between them and the business community, and what this tells us about changing state-business relations. But the aim is also to interpret what these dynamics tell us about the wider questions of the social contract and the future of political liberalisation vs. authoritarianism. A key hypothesis is that the proximity or distance of these economic elites vis-à-vis the ruling elite decisively affects the orientation, implementation and effectiveness of each state's economic reform policies.

At a wider level, investigating state-business relations in the Gulf monarchies in this critical period of re-negotiation of the social contract throws light on three broader issues: (1) the role of the economic elite in the decision-making process and in the liberalisation/ consolidation of post-colonial authoritarian regimes; (2) the social changes occurring in this region, where new generations, directly affected by these policies, call into question the inherited social model and impose new dynamics in societies usually seen as monolithic and traditional; (3) the dynamics of economic liberalisation processes as studied in other regions and in other social contexts.

The GCC's socio-economic dynamics and transformations have a growing impact on the global economy. Changes in economic leadership or priorities in the Gulf have consequences for the Middle East and beyond; dynamics here can tell us much about wider prospects for development and change in the Arab world as well as the big conceptual questions on political and economic change. The academic, commercial, and policy audience interested in the results of this project is therefore very broad, not least considering the questions thrown up by the 'Arab Spring' sweeping the region in early 2011. Indeed, the project's timing fortuitously gives the researchers the opportunity to observe significant changes and their impacts first hand.

The growing share of the Gulf business elite and investment funds in financial and industrial assets in OECD economies and beyond is such that solutions to the global economic downturn of necessity included the Gulf investment funds and business families. Nationalization policies of employment in the Gulf's private sector, targeting foreign (including Arab) workers, are crucially relevant for the wider Middle East economy and beyond: expatriates' contribution to their native country's GDP can exceed that of tourism. Similar dynamics connect economic reform and employment policies in the Gulf with South Asia.

The project's wider subject - economic reform in the South - is a key topic in contemporary debates. While most Middle East regimes, whether 'capitalist' or 'socialist', relied on a state-centred economy until the 1990s, all have since been driven to consider the need to open up to the private sector, not least under the impetus of international financial institutions and the WTO. Finally, the project promises a significant contribution to debates on Middle East authoritarianism, through enabling a better understanding of business elites' relations with the state.

By enhancing our understanding of the impact the changes in the rent-based welfare state model are having on the social contract in these states, the project promises a significant advance in UK-based research on the Gulf's political economy. It aims to do so while (1) fostering an international network of academic and policy-related expertise ; and (2) producing research outputs that are of direct practical importance to decision-makers and business in the UK, the Gulf and elsewhere, and engages those audiences in a two-way process.
(1) Given our comparative and multi-disciplinary approach, the direct beneficiaries of the research include the worldwide community of analysts focusing on contemporary Gulf politics or the political economy of reform and the link between economic change, social contracts and the political legitimacy and stability in the Middle East. The project is designed to stimulate synergies among experts looking at Middle East reforms, to develop new ideas on correlations between state-business relations and successful reforms. Concomitantly it aims to bring new perspectives to assessing the stability and durability of authoritarian regimes in the Middle East, by exploring the challenges to political legitimacy induced by the current structural reforms.
(2) Given the global impact of transformations in the Gulf, the project will be of direct relevance for UK, EU & US policy towards the Middle East. It will enable a better understanding of the changing economic balance of power and locus of economic decision in these countries, and help inform policy on addressing political and economic risk and, for UK and international business, on how to seize and improve opportunities in the Gulf. Its findings should also be relevant to GCC governments, civil society organisations and business groups, in illuminating the changing dynamics of decision power and its influence on the implementation and outputs of public policies.
For the instruments and outputs through which this impact will be realised, see Pathways to Impact.