Thursday, February 14, 2008

Paragraph of the day

The Wall Street Journal the other day ran a piece titled State Funds May Not Bolster Democracy. This sums up what it was about:
Free traders have long argued that expanded trade is a force for political freedom abroad, and point to South Korea and Taiwan as proof.

In both places, exports boosted living standards for millions of workers, while expanded imports and foreign investment helped to break up entrenched elites. Autocratic governments eventually gave way to democracies.

But will sovereign-wealth funds do the same for democracy? Fans of the trade-produces-political-change argument doubt so.
Here's the sentence, though, that really caught my attention:
In many of the nations with sizable wealth funds, the money stuffs the pockets of rulers who spend on patronage or repression. A few years back, Dubai, a part of the U.A.E., gave government workers tradable vouchers, valued at more than $100,000, for discounts on condominiums being erected in massive construction projects, says Marcus Noland, who studies Arab economies at the Peterson Institute for International Economics in Washington, D.C. "The short-term effect is that you buy people off," he says.
There are a couple of points of interest. First - regarding the housing market - was it generally known that the government was in effect pumping up demand for its own building projects? Second - regarding politics - is it possible in the UAE to avoid the development of a democracy? In the case given of South Korea a middle class developed and it demanded political rights and a breakup of the autocracy. In the UAE a middle class made up of citizens is not developing; that role is taken by ex pat workers. UAE citizens are very well off and may have no desire to rock the boat as long as the rulers share the oil wealth as they have.

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Anonymous Anonymous said...

Great post, sharp and accurate observations, although I never heard of the discount coupons for condos thing, to be honest.

Then again, I am not the type to linger at government offices for favors and welfare.

It's not just the middle class. No one is really 'developing' for the reasons described or hinted at in the post.

This is a country where 22 - 23 year old kids with a degree and some fluency in English are elevated to CEO status of supposedly very important and prestigious investment companies.

Twenty-something 'business men' from 'good' families, with nothing more than a degree from the West, and no more than a few months experience at Barclays or PriceWaterhouseCoopers are given Chairman of Board of Directors positions.

The expats are here to stay and more will be coming.

We need them to run our hospitals, banks, and more.

So be bullish Dubai property.

6:27 PM  
Blogger rosh said...

..." UAE citizens are very well off..."

I agree with most views on this post, except the one above. Am not sure how people have this assumption - because, there are a lot of natives (including stateless and Bedouins) who just get by. Have a look at those traffic cops, parking meter attendants and take a drive to Ajman, wherein you shall see DXB cops staying in rented 15K apartments with families.

3:43 AM  
Anonymous Diamond said...

In my opinion everyone must look at it.

8:37 PM  

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