The Oil Curse

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Saudi Arabia is a primarily oil-based economy, with oil being the most important component of the nation’s rapid economic development since World War II. U.S. geologists discovered oil in the region in the 1930s, and since exports expanded most notably in the 1960s, production and rich revenues have been seemingly limitless. The amount of oil in Saudi Arabia’s reserves amounts to close to a quarter of the world’s entire oil resources, and today the country produces about 10,000 barrels a day. As a result, the valuable resource currently accounts for 90% of the country’s exports and contributes to 75% of government revenues annually. During the 1970s, following the Arab-Israeli war, Saudi Arabia’s economy was one of the fastest growing in the world due to a sharp increase in the value of petroleum.

Despite its thriving economy, Saudi Arabia today ranks 82nd in the world on the Index of Economic Freedom published annually by the Heritage Foundation and the Wall

Street Journal due to lack of business freedom, property rights, trade freedom, and most notably, freedom from corruption ("Saudi Arabia: Economy"). The nation also ranks 117th out of 150 in democracy (WorldAudit.org). Many scholars and scientists point to Saudi Arabia’s rich oil reserves as the main catalyst in the inhibition of freedom in the state, otherwise known as the “resource curse”. The resource curse is commonly defined as the relationship between a country’s excessive amount of natural resources and slow economic growth and developmental outcomes as opposed to other developing nations with less natural resources. In Saudi Arabia, it is oil that holds this debilitating effect, and like so many other countries plagued by the “resource curse”, the country has s...

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