Further, ever-increasing oil prices pose their own challenges for the Gulf Arab states. First of all, oil prices have historically had strong boom and bust cycles, and they are unlikely to stay high indefinitely. While alternative energies such as nuclear, wind and solar power are unlikely suddenly to unseat the primacy of hydrocarbons, new technologies are quickly bringing massive new supplies of natural gas to market and making accessible previously inaccessible oil deposits. Combined with a potentially sluggish global economic recovery, global oil demand could soften-or the rate of growth could slow. Despite the recent uptick in crude prices, many economists foresee a softening of prices in the medium term, potentially endangering the additional spending that the governments have embarked upon.
If pressure on spending coincided with a generational change in leadership, as may happen in Saudi Arabia and Kuwait, among other states, the internal politics could become trickier. Robust deposits of foreign cash will allow these governments to coast for some time, but a sustained drop in prices, combined with a growing restiveness brought on by ongoing political change in the Levant and an increasingly agitated young population that feels out of touch with their leaders, could represent a perfect storm for many of these governments.
None of this is to suggest that it is time to bet against the GCC governments. Upwards of 90 percent of many national workforces work for their governments, and governments possess powerful tools with which they can co-opt and coerce their populations. Still, governments' short-term responses to unrest in the Levant and North Africa deepen many of their longer-term problems with training and motivating young populations, boosting workforce productivity, and escaping from deepening patterns of entitlement. Democracy is not an easy fix here; in Kuwait, for example, the parliament has become a powerful voice for boosting pay and increasing subsidies, and it has slowed development projects because of concerns over official corruption. Authoritarianism is no fix either, as protesters increasingly demonstrate fearlessness throughout the region.
In point of fact, serious domestic reform has come in the Gulf when oil prices were low and there were few alternatives to it. Scant dollars (and by extension, dinars, dirhams and riyals) forced hard choices about government spending and hard choices about governance.
Adjusting expectations about government responsibilities-and creating a workforce that can create value-will take time. Regional governments are starting now. The challenge is not only to reach their goals; but also to reach them in time. And no one knows how much time they will have.
