In the fall semester 2024, Dr. Ziad Daoud, Senior Fellow at the Middle East Initiative and Chief Emerging Markets Economist at Bloomberg, led a study group of fifty members of the Harvard community (students, fellows, and staff) examining the economic and political forces affecting the Middle East and its relations with the rest of the world.
Oil Revenues and Rents
A recurring theme in the series was the role that oil revenues have played in shaping the economies and social contract in the region. The group learned how the Middle East countries have become “rentier” economies, heavily influenced by the management of oil revenues and other sources of income such as international aid and land sales, which are received and distributed by the government.
Oil also shapes the Gulf countries’ relations with the rest of the world. The group learned how the Gulf countries are rechanneling their oil revenues into Sovereign Wealth Funds to create long term investments at home and abroad. SWFs have provided a vital source of funding for the rest of the world, helping to reduce borrowing costs and increase capital for infrastructure projects, and are being used for domestic investment to diversify the Middle East’s economies into new areas such as tourism, finance, and technology.
Nour Beshir, MBA 2025 said: “I came into the study group thinking I knew a lot about the role Sovereign Wealth Funds in the economies of different countries in the region but learned that their mere creation does not guarantee an economy’s diversification if oil remains the main source of SWFs’ capital. Diversification ultimately depends on the SWF’s strategy and the other reforms that countries undergo to unleash economic activity in other sectors.”
A select group of participants debated opposing views on whether decarbonization, global economic growth, and declining demand for oil would result in a drastically lower oil price in the future.
The study group discussed some of the benefits and challenges of using a universal basic income as an alternative way of fulfilling the social contract to distribute government revenues. The group discussed some of the challenges that could arise from some people losing government jobs and their associated salaries, but also how smaller government sectors could enable more economic dynamism.
Polina Kempinsky, MPP 2025, said: I joined the study group because I was interested in the intersection of the Middle East and economics. “Our discussion on the potential transition to a universal basic income to reduce the region's dependence on oil was thought-provoking and encouraged me to look at these challenges from a fresh perspective.”