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Source: http://www.nytimes.com/2008/07/13/opinion/13pollack.html
Arab States Awash in Oil Money, Will It Destroy Them?
[ New York Times] Kenneth M. Pollack - In the 1970s and '80s, during the first great oil boom, the Middle Eastern producers largely squandered their wealth. This time around, some Middle Eastern oil producers are trying to be smarter. They are investing billions of dollars at home, building industries, repairing roads and factories, and expanding social services. This has led regional elites and many in the international financial community to proclaim a new era in the Middle East. If this sounds unlikely, it's because it almost certainly is. More oil money is being re-invested in the region, but it is not being spent where it is most needed. As a result, it is having little impact on what really matters, and is even creating problems. In addition, much of the money is being re-invested in projects intended to produce quick profits for investors rather than long-term political and economic gains. A great deal of it is going into nonproductive sectors like real estate and oil refining. The industries that create lots of new jobs, like tourism, agriculture and construction, import workers from southern and southeastern Asia rather than hire locals. Both the rise in energy prices and the flood of oil revenues have stoked inflation. Qatar's current rate is 14 percent, up from 2.6 percent in the 2002-04 period. The rise in global food prices has also hit the Middle East hard. Bread riots have convulsed Egypt and Yemen. Money pouring in but not trickling down tends to create a dangerous social imbalance. The writer is a senior fellow at the Brookings Institution's Saban Center for Middle East Policy.