Middle East and Africa (chap 11) Flashcards
What is OPEC?
Oil producing countries of the Middle East
OPEC-Organization of Petroleum Exporting Countries
What conditions the members of OPEC must satisfy?
- Demand must be inelastic
- the members must be able to agree on production quotas
- Mechanism to enforce the agreed upon prices and quotas
When was the first oil crisis ?
1973
what happen in 1973 ?
-October War / Kippur War
- Embargo to oil importer countries that back up Israel
(USA, Portugal, Netherlands)
In the first oil crisis , what action where taken by OPEC members ?
- Cut in production of 20%
- Prices rose by 400% in months, average rate of + 20%
- Little attempt at conservation, demand fell by 6%(Inelastic Demand).
what incentive the Second Oil Crisis( 1979)?
- The islamic revolution in Iran (1979) disrupted oil supply
From the First Oil Crisis to Second, what had change?
- The previous increase in price in 1973 had made it worthwhile for new producers outside of OPEC to enter the market.
- Attermp at conservation
- Central Banks became more concerned about inflation , therefore, tougher monetary policies cause a severe recession.
which crisis generated more revenue ? 1973 or 1979?
1973 was the most successful in transfer of wealth to producing states
wha happens with the non-oil exporting countries?(Middle East)
Economic Decline since 1970
What problems faced the non-oil exporting countries?
- Demographic changes
- Import Substitution policies (industrial)
- Financial instability and market labour instability.
- Political instability
What demographic change happens to the non-oil exporting countries?
A combination of declining infant mortality and rise of life expectancy cause a surge in the population (demographic bulge),
Higher youth unemployment
what policies took the non-oil exporting countries?
Import Substitution policies with regulation, high tariffs and low levels of foreign investment
why the non-oil exporting countries had finance problems?
The oil rich states : finance to non- oil exporters and import labour
all base on the oil world prices
why the non-oil exporting countries were unstable?
-the prevalence of authoritarian regimes and popular resistance increases the possibility of an abrupt political transition.
what indicators of economic and social problem showed the non-oil exporting countries?
- Total factor productivity
- Income Inequality
- Education
what happens with the total factor productivity in the Middle East?(after WW2 to 2000)
The TFP performed well average as other developing countries in other regions (after WW2)
- in the 80’s , it slow down but no more so than other regions
- in the 90’s , it rebound in most regions in the world but not in the Middle East.
What is TFP?
-Total factor of productivity refers to growth in output due to improvements in technology and organization
How unequal is the Middle East?
- According to Gina Coefficient, is very high in oil exporting countries, for non-exporting countries is lower
- Gini is actually higher in Latin America and sub-sharan Africa than the non-oil countries in the Middle East
What is Gini?
Is a commonly used statistical measure of inequality in the distribution income. it range from 0 (total equality) to 1 (total inequality).
how is the education and employment the Middle East?
- Education improved substantially in the non oil producing countries.
- the rate of unemployment are higher than other regions
what economic and social problems of the Middle East are attributed to institutional structures?
- Demographic transition
- Religious rules on economic activities
- Legal systems
what demographic transitions happen in the Middle East?
labor force in the non-oil countries is growing at 3% per year (too rapidly for all new entrants to be employed)
- the oil producer countries alleviate this by importing labour , however, the demand is base in oil prices, causing economic and political instability.
How religion contributed to the economic malaise in the Middle East?
- Koranic induction agains Riba ( usury -charge of interest as unethical)
- other religious teachings restricted the use of some financial instruments (options, futures insurance)
- Concern about this led to the creation of islamic banking (finance + Sharia -religious law of islam)
what characteristics have the legal system in the Middle East?
- Mostly based on either British common law or French civil code
- some countries commercials law take into account Sharia law
- in term of law enforcement there is corruption but is no worse than other developing countries in the world.
What is the Arab Spring ?
Refers to a wave of protest, riots, and civil wars which swept throughout the Arab countries
why did the unrest break out at that time and spread so quickly ? (Middle East and north Africa)
- presence of authoritarian governments
- they were able to maintain power through a combination of economic redistribution and political repression
- oil sales financed economics redistribution to oil exporting countries and subsidies to the non- exporting countries allowed them redistribution policies
- if it wasn’t enough the gov used policies state policies
- 21 st century had been less effective the redistribution’s and repression
what allow the Arab spring ?
- information technology
- increase unemployment
- improvement in education
how the information technology allow the Arab spring ?
-Information technology makes it easier to suppress news and make it easier for rebels to coordinate
what is the connection between education and Arab spring ?
as many countries improved their educated population , political instability increase , duo the gap between young people and jobs
