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(I): 10”.“?! yin..." \ \vstudivannn. . . .tcn‘hfifl‘ul J0 ...I..H..r.voxl1-lfi\ - \o... . .. ....Ju~ ov $1}. .. . . n a .. .fiurwul.vlfv bu..u\.Ll\:.§-o.\ltk‘bu , . v 11 f}. u 0 ‘0’3‘. ”1.5075 «3410‘ ~ 3‘" s .1! 9“; . III. '1‘ I {\Hlv I'llu‘n‘to I t‘ .. . i.! I nuns.“ ‘ 0 III! t In ‘ ‘ 'fll‘u inlaivallJtoOUov.vll’1l.t . .o———~~ “ LIBRARY Michigan Stat. [ U niversity, {HE-15‘s wr— _I' This is to certify that the dissertation entitled Economic Development and the Structure of the Kuwaiti Labor Force presented by Ali Ahmad Al-Tarrah has been accepted towards fulfillment of the requirements for Ph.D. degreein Sociologl ' 7 Major professor Date June 30L 1983 MS U is an Affirmative Action /Equal Opportunity Institution 0- 12771 fiwwfi L 31223 1952931513 MSU RETURNING MATERIALS: . Place in book drop to LIBRARIES remove this checkout from your record. FINES will be charged if book is returned after the date stamped below. W- .37" in??? i i Vii/1 7 '37“ ‘Wd ' db ‘7 “"1 W‘ % W WWW W 127'? or?” ECONOMIC DEVELOPMENT AND THE STRUCTURE OF THE KUWAITI LABOR FORCE BY Ali Ahmad Al-Tarrah A DISSERTATION ,f. ' Submitted to ‘ ' , Michigan State University in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHX Department of Sociology 1983 7 .4 ABSTRACT ECONOMIC DEVELOPMENT AND THE STRUCTURE OF THE KUWAITI LABOR FORCE BY Ali Ahmad Al-Tarrah As a historical socioeconomic analysis of the prob— lems of the Kuwaiti labor force, the central issue investi— gated in this study was the factors that have contributed to uneven distribution of the indigenous labor force since the discovery of oil in Kuwait. More specifically, the study examines two major interrelated factors that have shaped the structure of the labor force: the position of Kuwait in the world capitalist system as a supplier of single primary pro— duct and, the effects of the class structure in Kuwait, on the domestic labor market. The socioeconomic structure of Kuwait in the pre-oil period and then the contemporary economic structure are ex— amined, with special emphasis on the nature of the oil econ- omy and its effects on internal environment. Demographics and social structure are examined in order to understand the major components of the demographic structure that arose after the discovery of oil. Labor force structure is scrutinized, as well as the educational system that has tended to perpetuate A Ali Ahmad Al-Tarrah current labor conditions. The political economy of employ- ment is examined in an effort to comprehend the under— utilization of indigenous labor and the function and role of migrant labor. The major finding is that Kuwait's position in the world capitalistsystem has generated certain forces that have shaped the economy and affected the distribution of. the labor force. Employment of the indigenous population has become a means for redistributing the oil wealth. This has accelerated dependence on foreign workers who have be- come essential components in Kuwait's economy and its pre- vailing social structure. . ~ I t " -' v , A '3 o 'l " lu " ' "4' . . . . . . - 1‘ “\ . I? o I m' v , . u, i.\ DEDICATION To my wife Huda and our lovely daughter maternit- can: ' :7 ’. . Hem-um ACKNOWLEDGEMENTS Social science research in the so-called, "Third World” is a very difficult task, one that required encourage- ment and sincere interest to produce an objective piece of work. This research could not have been done without the support and direction of good friends and respected scholars. I owe the greatest debt of gratitude to my dissertation director, Professor James McKee, for his assistance and spiritual encouragement throughout my work with him. It was an honor to have Professor John Useem on my committee, I am very proud to have worked with him and owe him special thanks for his wise advice and generous assis- tance during my stay in East Lansing. My greatful respect and appreciation to my other com- mittee members, Professor William Faunce and Professor William Ewens and Professor Subbiah Kannapan, who served as a dean's representative from the M.S.U. Economy Department. I also wish to acknowledge the helpful comments of Professor Chris Vanderpool. Many persons in Kuwait provided assistance during the data collection for my research. I am especially grate- ful to Professor Mohamed al-Rumaihi of the Sociology Department iii A at Kuwait University who reviewed the dissertation and pro— vided valuable comments. The work could not have been done without the help of those who provided me with basic mater- ial in the Ministries of Education, Planning and Social Af- fairs. I thank them sincerely. I feel special debt of gratitude and love for my wife, Huda al—Helal, whose patience, tolerance and encouragement enabled me to undertake and complete my work. Finally, I wish to acknowledge the assistance of my colleagues and friends at Michigan State University and wish them well. iv TABLE OF CONTENTS CHAPTER I. INTRODUCTION ....................... . ........ The Research Problem ...... ..... ........... .. Research Questions... ........... . ........... Methodology and Data Collection ..... ... ..... Theoretical Discussion and Review of Literature ................. . ....... . ....... Oil and Development ...................... Education, Labor and Economic Development. II. THESOCIOECONOMIC STRUCTURE OF PRE-OIL III. KUWAITI SOCIETY ............................. British Policy in the Gulf .................. The Economy ................................. Pearl—Diving. ............................ Fishing and Agriculture .......... . ....... Ship—Building.. ......... . ................ Trade and Commerce.... .......... . ........ The Class Structure ......................... The Ruling Family ........ . ............... The Merchants... ......... .. .......... .... The Divers.. ......... . ............... Social Impact of the Traditional Economy.... Transition Period ........................ ... OIL AND THE ECONOMY OF KUWAIT............... Political Economy of Oil ........... ......... Oil Price ....... .. .............. . ...... International Monetary System ............ Recycling Petro- Dollars .................. The Economic Structure of Kuwait's Oil-Based Economy ................ .... ..... . .......... Government Role in the Economy .............. Development of Financial Oligarchy ....... Capital Accumulation and Uneven Development. PAGE CHAPTER PAGE IV. VI: VII. DEMOGRAPHIC AND SOCIAL STRUCTURE ............. 91 Population Growth ............................ 91 Educational Status... .............. . ...... 96 Social Divisions .......................... 98 Social Structure.. ........................... 104 THE LABOR FORCE ..... . ........................ lll Structure of the Labor Force ....... ... ....... 111 Background ................... .. ........... 111 Age Structure .................. . ...... .... 114 Educational Status ............ . .......... 114 Economic Distribution of the Labor Force ..... 118 Employment in the Government Sector....... 123 Employment in the Industrial Sector ....... 128 Occupational Structure.. ...... . ......... ..... 137 Women in the Labor Force. ................... . 140 Education and Manpower... ............. ....... 144 POLITICAL ECONOMY or EMPLOYMENT ....... . ...... 152 Marginalization of the Indigenous Workforce..-1152 The Role and Condition of Imported Labor..... 159 The New Trend: Asian Workers.... ......... . 155 SUMMARY, CONCLUSIONS, RESEARCH ASSESSMENT AND AREAS FOR FURTHER RESEARCH... ............ .... Summary........... .......... .......... ..... .. 176 Conclusions..... ....... ...... ...... . ...... ... 179 Policy Implication............... ............ 185 Research Assessment ....... .._. ......... ..... 187 Area for Further Research...... ..... ......... 189 BIBLIOGRAPHY.... ..... . ..... ......... ......... 191 vi TABLE LIST OF TABLES Kuwaiti Foreign Trade, 1820- 1905.. ....... .. The Ruling Family of Kuwait.. ..... . ...... Growth Rates of Oil Consumption (%) ....... . Distribution of OPEC Foreign Assets (U. S. Billion) ................... ......... Sectoral Contributions to Kuwait's GDP 1968/9-1975/6 (%) ........................ World Energy Consumption: Percentage Contri— bution by Source 1965—1979... .............. Economic Sectors by Contributions to GDP and Employment...... .................... .. Ratio of Domestic Consumption Covered by Domestic Manufacturing Output, By Major Industries (Million U.S. S), l972.......... Domestic Expenditures for 1973/74, 1976/66 and 1979/80 (In Kd Million, one KD dinar = $3.50) .................................... Current Expenditure on Public Services 1971/72—1979/80 (In Thousand Kd) ........ .. Government Oil and Non- Oil Receipts (Per— cent of Total Receipts).. ..... ...... ....... Establishment Classified by Form of Economic Activity, 1973 (%). .............. Investment Companies' Consolidated Balance Sheet. ................................ Oil Revenues and Value of Imports (Million Kd)....... ............ .... .............. Kuwait's Population Growth (Kuwaiti and Non— Kuwaiti) for Selected Years 1957- 1980.. Distribution of Kuwait Population by Age and Sex, 1970 and 1975...... ............. Kuwait's Illiterate Population by Sex for 1957 and 1975 (10 years and over)..... ..... Educational Status of the Kuwaiti and Non- Kuwaiti Populations in Kuwait in 1975 (10 years and over)... .................. .. Kuwait's Migrant Community by Country of Origin for 1965,1970,1975 ................ Kuwait Pre-Fiscal Income Distribution in 1972-73, by Component Shares (In Percent).. Labor Force and Manpower 1965—1975 (In Thousands) ........... . ........... . ...... ... PAGE 39 56 66 70 71 72 74 78 79 80 84 86 89 93 95 97 99 102 109 114 ...—. —-——._—-.—.-._——___—_ TABLE Ratio of Labor Force to Total Population, By Nationality and Sex, 1965-1975 ........... Distribution of Labor Force by Age, 1975.... Ratio of Labor Force (%) To Total Popula- tion in Each Age Group, 1975 ................ Kuwaiti and Non—Kuwaiti Labor Force by Educational Attainment (%) For 1965,1970, 1975 ..................................... .. Labor Force by Economic Sectors in Census Years 1957 and 1975 ........................ . Indigenous Labor Force, by Economic Acti— vity, 1957 to 1975.... ...................... Percentage of Kuwaiti and Non-Kuwaiti Em— ployment in Each Economic Activity, 1975.... Employment in Kuwait's Government and Private Sectors, 1975 ...................... Employment in the Government Sector by Educational Attainment, 1975 (By Percentage) Government Employees by Occupation 1975 by Percentage) ....................... ...... Employment in Kuwait Oil Company (K. O. C. ), 1966 (The Five Highest Grades) .............. Indigenous Labor Force in Major Industries, 1957-1975 .................................. Indigenous Labor Force in Major Industries Compared to Total Employment in Each Indus- try by Percentage .............. ........... Employment in Selected Industries, 1974..... Labor Force in 1975 by Occupational Category (According to the International Standard Classification of Occupations).............. Labor Force in 1975 by Occupation Group (According to Birks and Sinclair Classifica- tion). ........ .... ......... .... ...... Labor Force by Selected Occupation, 1975.... Kuwaiti Women in the Labor Force, by Economic Activity, 1975......... . . ...... Student Enrollment by Various Fields In Kuwait University (%) 1980/81............... Student Enrollment in Technical and Voca— tional Institutes (1980/81)..... ........... Dropouts from Technical and Vocational Education ......... ...... ................... Projected Manpower Requirements for 1985.... Operating Establishment by Economic Acti— vity, Number of Laborers and Average Monthly Wages (In Kd), 1974 ....... .... .............. viii PAGE 115 115 116 117 120 122 124 125; 127 129 132 134 135 136 138 139 141 143 148 148 149 151 153 TABLE PAGE 6.2 Work Permits for the First Quarter of 1981, by Economic Activity and Occupation.. 157 . 6.3 Work Permits by Nationality for the First 1. Quarter, 1981............. ............ 169 3 6.4 Migrant Workers to Arab Gulf States, , 1970, 1975 159.. CHAPTER I INTRODUCTION The changes which have been taking place in the Arabian Gulf oil states present a rich field for scholars interested in studying the nature of development resulting from the discovery of oil, which has transformed these states from the poorest among the nations of the world to the rich— est.l Such transformation has led to a number of social, economic, and political problems. Development programs currently in effect in Kuwait have created great demand for migrant labor and affected the demographic structure of the society——a matter of con- siderable concern among the native population. The impor— tation of foreign labor was initiated as a strategy for augmenting indigenous labor but has accelerated to dominate the country and place Kuwait in a position of economic de— . 2 pendence on a foreign work force. lM.W. Khouja and P.G. Sadler, The Economy of Kuwait: Development and Role in International Finance. (London: The Macmillan Press, Ltd., 1979). 2Stanford Research Institute, (SRI) Social and Economic Impacts of the Kuwaiti Government Compensation Increases of 1971—72 and Recommended National Policy. (Menlo Park, CA: SRI, 1974), p.39. 1 _ ~__N...=._.I-_-._...H Kuwait's oil producing—exporting economy exhibits certain characteristics of the "rentier state," demonstrated by Mahadavy in Iran and First in Libya.3 But the most im— portant feature in the case of Kuwait is that the money rent—-a large financial return-—has not been utilized ef— fectively for building a productive economy. Current de— velopment policy is oriented more toward reinforcement of consumption patterns, and increasing dependency on the world capitalist system.4 In spite of the huge quantity of capital available, the Kuwait economy still exhibits some aspects of under— development.5 One of the most important is its heavy de- pendence on a single, depletable resource that is not in- tegrated with other economic institutions. Dependence on a foreign labor force is another iden- tifying feature of the underdevelopment present in Kuwait. Its oil revenues enable the country to purchase foreign labor 3See Mahadavy, "The Patterns and Problems of Economic Development in Rentier States: The Case of Iran," in M.A. Cook, Studies in the Economic History of the Middle East from the Rise of Islam to the Present Day.‘ (London: Oxford”TfifiQ___ versity Press, 1970) and R. First. Libya: The Elusive Revolu— tion, (New York: Holmes and Meier Publishers, Inc., 1975). 4A. Kuwari, Oil Revenues in the Gulf Emirates: Pat— terns of Allocation and Impact on Economic Development,4TColo— rado: Westview Press, 1978), p. 187. 5s.12.1., p.l. .—._.~._... to work for native people. Thus, although there is a short- age of trained manpower in the economy, a large segment of the indigenous manpower is underutilized. Sinclair and Birks project from this underutilization, eventual deterioration. "Indigenous human capital in oil-rich states is actually deteriorating, despite the increasing educational attain— ment."6 This study has focused on analyzing the indigenous labor force, as compared with the non-Kuwaiti labor force, in relation to the economic development of the country. The Research Problem The researcher has examined the socioeconomic struc— ture of Kuwait society and its impact on the existing struc- ture of the labor force. In this respect, the research goal has been to investigate and specify factors that affect the distribution of the indigenous labor force among various sectors of the economy, as well as factors which prevent the development of a productive indigenous labor force. 6C. Sinclair and D. Birks, Arab Manpower: The Crisis of Development, (London: Croom Helem, 1980), p.350. -1 In this sense, the study of the structure of the labor force in Kuwait has been done in a global context. The position of Kuwait in the world capitalist economy is investigated in terms of its impact on the development and distribution of the indigenous labor force; so also are such internal dimensions of the social structure as class structure and the structure of the labor force. These two dimensions of the social structure-—external and interna1——are interrelated and inseperable. Even though the study has been oriented more toward studying internal factors that affect the distribution and development of the indigenous labor force, accounting for external factors has allowed for more accurate analysis of manpower development in Kuwait. The external dimension has had its greatest im- pact on the existing class and power structure within which development policy is made. Analysis of the structure of the labor force, in terms of its composition, its relationship to the overall./’ population, and its distribution within the economy has r” provided a clear picture of the role of the indigenous labor force in the course of Kuwait's economic development. The labor force in any given society reflects, more than any other structure or institution, its degree of economic de— velopment. Therefore, it can be used as one of the important indicators in determining the success or failure of a de— velopment program. Harbison and Myers assert that a country A is underdeveloped when more than half of its high-level manpower is non—indigenous.7 This is but one face of the coin in Kuwait: the country exhibits a shortage of both high level and low level manpower. In capital surplus countries such as Kuwait, labor is a crucial factor in determining the nation's economic future. If carried out appropriately, development of Kuwait's human resources would be the most readily available means for alleviating the country's heavy reliance on imported labor. Such development needs to be undertaken for a coun— try to develop human abilities in order to accumulate cap- ital, to discover new resources, and build effective social, political and economic institutions. As Harbison states, "Clearly a country which is unable to develop the skills and knowledge of its people and utilize them effectively in the national economy will be unable to develop anything else." According to the 1980 census, Kuwait's population is fewer than 1.5 million people. Kuwaitis are a minority in their own country: the percentage of indigenous Kuwaitis in the total population today is only 41 percent and repres- ents a decline from the 1975 figure, when Kuwaitis were 47.5 7F. Harbison and C. Myers, Manpower and Education: Country Studies in Economic Development (New York: McGraw Hill, 1965), p.52. F. Harbison, Human Resources as the Wealth of Nations (New York: Oxford University Press, 1973), p.3. A 8 6 percent of a total of 994,837 people. This indigenous labor force in 1975 was 86,971, with 211,444 persons in the non- Kuwaiti labor force. Meanwhile, census data indicated that over 60 percent of the potential manpower (over 12 years old) among Kuwait's citizens was outside the labor force; 87 per- cent of the potentially active Kuwaiti women were out of the labor force. The distribution of the Kuwaiti labor force indicates serious underutilization of Kuwait's native human resources. The great majority of Kuwaiti workers are concentrated in the government sector (76.2 percent). The percentage of Kuwaiti citizens in other economic sectors-—especially in the productive sectors-—is insignificant. In the mining and quarrying sector, for example, Kuwaitis were 4.2 percent of the work force in 1957, and just 2.0 percent in 1975. Kuwaitis in 1975 formed only 2.6 percent of the manufacturing work force. This obvious underutilization of human resources will become more serious in the near future if present trends continue. Thus, the focus of this research has been to inves— tigate why the indigenous labor force is not more equitably distributed among various sectors of the economy. Factors that contribute to such distribution have been identified. The importance of the research problem is evidenced in the knowledge that Kuwait has a huge quantity of capital which could be mobilized to develop the native production A 7 force. The standard of living Kuwaitis' enjoy is a wealthy one, but this wealth was not generated by a productive econ— omy nor are there efforts being made to develop such an econ— omy. Oil revenue, by nature, is external collective rent. The way in which this rent is being channeled by current policymakers reflects the lack of a development policy. Con- tinued failure to address this crucial problem will insure a gloomy future for the country. As the Stanford Research Institute (S.R.I.) indicates, "It has become quite difficult for the Kuwaiti to anticipate what the future will look like. The government is still unclear on this and many other points.I Research Questions The study addresses the following questions, which may be considered primary and secondary. This classifica— tion is intended to reflect a situation in which changes in secondary matters, no matter how crucial, are dependent upon change in the primary socioeconomic situation of Kuwait. Primary Questions 1. How does the position of Kuwait within the world capitalist system affect its internal economic and labor force structure? 9Stanford Research Institute, p. v—15. 9 8 2. How does the existing class structure in Kuwait affect the future development of its indigenous labor force? Secondary Questions 3. How does the exploitation of oil affect the distribution of the indigenous labor force? 4. To what extent has the indigenous labor force been included in the newly developed sectors of the economy? 5. Canthe educational system of Kuwait, in the forseeable future, provide the economy with a trained labor force? In regard to the first question, the study explores the position and role of Kuwait in the world capitalist system, as the producer of a single primary product, namely oil; the effects of this position on its domestic economic structure, and the effects on the distribution of the coun- try's labor force. The second question is related to the first and the researcher has undertaken to examiine the existing class and power structure in which the development of indigenous man— power takes place. James Petray, in Critical Perspectives on Imperialism and Social Class in the Third World, shows the relationship between questions of economic development and class structure in Third World countries: A Beyond the period of transition, peripheral countries face the issue of 'development' but that issue (including questions of priorities, directions, etc.) can be confronted only indirectly or by answering a prior question: what is the nature of the class structure and relations 10 within which development will take place? Therefore, this examination and effort to understand the development of Kuwait's indigenous labor force and the function of its migrant labor force, have been undertaken in the context of the class structure of the society. The third and fourth questions emphasize the effects of the oil economy, introduced by Western powers, on the distribution of the indigenous labor force. More specifically, the ways in which the oil companies have affected the domes— tic labor market are delinated. Further, how the indigenous labor force is represented in the newly industrialized sec— tor of the economy, related to the oil sector, is defined. Finally, in terms of question five, the nature of the educa- tional system is examined and certain critical problems of education in Kuwait, in its relationship to the country's economy, are specified. 10J. Petray. Critical Perspectives on Imperialism and Social Class in the Third World. (New York and London: Monthly Review Press, 1978), p.65. 10 Methodology and Data Collection The methodology of the study is historical, because historical analysis of the development of Kuwaitis' indigen— ous labor force and its distribution has enabled the re- searcher to acquire a comprehensive picture of the labor force and the factors that have determined and shaped its development. Such an approach is deemed necessary because most of the research currently available on the labor mar- ket in the Third World has viewed its problems as separate from their historical political origins, and thus tended to explain underdeveloped indigenous work forces as isolated problems newly modern societies are, even now, eliminating. This is not the case. The oil-rich countries of the Third World are, even now, perpetuating the underdevelopment of their work forces, and Kuwait's situation is a case in point. Thus, the study traces the historical development of Kuwait's labor situation and examines the economic, political and educational processes operating in the coun- try's past to produce the extant situation and perpetuate it for the forseeable future. Data for this study, are to a large extent qualita— tive. Therefore, the existing literature, both in Arabic and in English, has represented a major resource in carrying out the researcher's intentions. 11 Information was obtained from various resources, published and unpublished, on the socioeconomic structure of Kuwait, in general, and the labor force, in particular. Census information published by the Ministry of Planning in Kuwait, has proved to be an excellent source of comparative statistics, as has data not yet released for public consump— tion in Kuwait but made available to this researcher for the purposes of this study. Other governmental publications concerning labor force, such as documents and reports were also utilized. Publications of various institutes and international organizations have been included as sources for the study. Of these, the most useful data external to Kuwait has been derived from World Bank, International Labor Office (I.L.O.) and United Nations reports and documents. Further, the re— searcher visited the I.L.O. in Geneva in the Summer of 1981 to obtain certain data needed for the study and gain an out— side perspective on the labor problems extant in Kuwait. A trip was also made to Kuwait to collect certain data, specifically from the Arab Planning Institute. Both the Ministry of Planning and the Ministry of Labor and Social Affairs were helpful in providing data needed. Finally, it should be noted that the reseracher faced some problems in terms of access to government docu— ments and reports which were highly restricted. In 12 particular, documents and reports concerning population policy in Kuwait done by government committees were un- available and had to be obtained through a personal channel. Theoretical Discussion and Review of the Literature Since this research is centered around Kuwait's process of economic development in relation to the Kuwaiti labor force, it is important to define the concept of de— velopment as it has been employed in this study. Develop— ment is a multifaceted process that is social, political, economic. Some scholars of the process of development in the Third World tend to emphasize the raising of per capita income levels as the most important means of overcoming un- derdevelopment.ll However, several experiences in the Third World have proved that the increase of per capita income, alone, cannot be considered an indicator of de— velopment. The Arab Gulf 011 states present an example of the case in point. The revenues from oil have enabled these states to achieve drastic changes in their levels of per capita income, but the states, themselves, must still llC. Wilber and J. Weaver, "Patterns of Dependency: Income Distribution and the History of Underdevelopment," in Charles K. Wilber (ed.), The Political Economy of De— velopment and Underdevelopment, (New York: Random House, Inc., 1979), p. 114; Lord Robbins, The Theory of Economic Development, (London: Macmillan, 1968). A 13 be considered underdeveloped. Therefore, development is not merely a quantitative matter but has qualitative ele— ments. Jaguraibe defined development as, "a total social process, and only for methodological convenience or in a partial sense can one speak of economic, political, cultural, and social development."12 Economic development involves structural change on an institutional level and at an individual level. Thus, development should be viewed in terms of the involvement of people in the production process. Rodney, in How Europe Underdeveloped Africa, determined that, A society develops economically as its members increase jointly their capacity for dealing with the environment... Development cannot be seen as an economic affair, but rather as an overall social process which is dependent upon the out— come of man's efforts to deal with his natural environment. 13 Human resources play a significant role in the pro- cess of economic development. Man , as a force for change, is an essential element in the process of development l2H. Jaguraibe, Economic and Political Development: A Theoretical Approach and a Brazilian Case Study, (Cambridge: Harvard University Press, 1968), p.4. 3W. Rodney, How Europe Underdeveloped Africa, (Washington, D.C.: Howard University Press, 1974), pp.4-6. A 14 because man is the creator of wealth and generator of sur— plus.14 Mehta writes, "the fundamental problem in develop- ing countries is, therefore, not so much the creation of wealth but rather the creation of the 'capacity to create wealth', and strengthening, widening and improving the 'absorptive' capacity of the country."15 Many Third World countries suffer from both lack of capital and underutilization of the human workforce. But the situation in Kuwait is different from that in many Third World countries. Kuwait and other Arab oil-exporting coun— tries have certain characteristics in common which have led to their classification as oil exporting states. The dis— covery and continuing production of oil in these states has enabled them to raise the standard of living of their peo- ple, to purchase Western technology, and to hire a foreign labor force. Because of its small size and rich reserves, Kuwait currently has one of the highest levels of per capita income in the world. l4K. Marx, Capital, (New York: International Pub— lishers, 1967); K. Marx, Pre-Capitalist Economic Formations, (New York: International Publishers, 1965). 15M. Mehta, Human Resources Development Planning, with Special Reference to Asia and the Far East, (India: Macmillan Company of India, Ltd., 1970), p.2. i. it; 15 Yet, despite its high level of income, Kuwait ex— hibits some characteristics of underdevelopment politically, socially, and economically. It is an example of both an enclave and a dual economy. Therefore, the experience of Kuwait is one of economic growth, rather than economic de- velopment.16 Major changes have occurred in the volume of primary commodity trade—-mainly oil produced for export and other products imported from abroad. The experience of Kuwait has been studied from a broad political-economy perspective. Such a perspective provides for a fuller understanding of Kuwait's position, as an oil producer, in the world capitalist system. A de- pendent, "peripheral" country, such as Kuwait, through in- volvement in the world system, specializes in producing and exporting a primary product for the benefit of the "cen— ter." 17 Because of this linked relationship with the "cen- ter," domestic strategy for planning and development is likely to be to the advantage of the local bourgeoisie, in whose interest it is to maintain such relations. 16For the difference between growth and development, see, for example, R. Clower, G. Dalton and M. Harwitz, Growth Without Development: An Economic Survey of Liberia (Evanston, IL: Northwestern University Press, 1966). 17P. Evans, Dependent Development: The Alliance of Multinational, State and Local Capital in Brazil (Princeton, NJ: Princeton University Press, 1979), p.26. A 16 The penetration of the capitalist world system into the Third World has led to what Amin calls the process of "marginalization."18 Economic expansion leads to the de- struction of traditional modes of production, and intro- duces a new mode of production; but does not at the same time destroy the old social relations of production. Con- sequently, capitalist institutions which normally would be associated with the modern oil industry are not introduced.19 Capitalist expansion has prevented the development of productive forces, which instead have been marginalized in the production process. The development of the oil in— dustry in Kuwait and other Arab oil states did not result from local productive forces, rather it resulted from in- fusions of foreign capital and technology.20 Marginalization is also implicated in the creation of unproductive economic sectors, such as commercial and governmental bureaucracies, as the main employers of the indigenous Kuwaiti labor force. 185. Amin, Unequal Development: An Essay on the Social Formation of Peripheral Capitalism (New York: Monthly Review Press, 1976). 19M. Rumaihi discusses this in his article, "The Mode of Production in the Arab Gulf Before the Discovery of Oil," in T. Niblock (ed), Social and Economic Develop- ment in the Arab Gulf (London: Croom Helm, 1980). 20M. Rumaihi, "Temporal Formation and Dependent De- velopment in the Arab Gulf States” (paper presented at the annual meeting of the Arab Planning Institute, Kuwait, Dec. 26-29, 1981) (in Arabic). 17 Employees in these sectors are paid from oil revenues-- which are received by the ruling Class as rent from the oil companies——rather than from their own productivity. The concept of the "rentier state" has its roots in Marx's theory of ground rent, which was derived from the 21 production of agriculture and extraction. Mahdavy exam- ined the concept of rentier states in his case study of Iran. He defines such states as: those countries that receive on a regular basis substantial amounts of external rent. External rents are in turn defined as rentals paid by foreign individuals, concerns or governments to individuals, concerns or governments of a given country. 22 A major aspect of rentier economies, such as those of the oil—exporting countries, is that "revenues received by the governments...have very little to do with the production process of their domestic economies. The inputs from the local economies——other than the raw materials-—are insigni— ..23 ficant. The rent that comes to these governments enables 21 K. Marx, Capital, Vol. 3 (London: Lawrence and Wishart, 1974). 22M. Mahdavy,p.428. 23Ibid, p.429. 18 the countries to realize drastic increases in income levels, "without going through the social and organizational changes usually associated with the process of economic growth."24 Dualism is another aspect of a rentier economy. This phenomenon is present when one sector is highly developed and the rest are underdeveloped. The hallmark of the rentier state is the generation of one expansive product by an industry that employs very few people and very few local resources, so that popular participation in pro— ductive economic activity is extremely low. 25 Because the oil belongs to the state but the oil in- dustry is operated by Western oil companies, the state has come to be a landlord that functions as a collector of rents and as a distributor of such rents through various channels. Theoretically, the oil states--particularly Kuwait and other Gulf oil states-—are likely to be dominated by a landowner class which receives rents fromthe use of the land. Such rent is spent on importing luxury goods. These states cannot generate further capital, once the revenues from the oil are returned to capitalist countries for imports. Nore, in Oil and Class Struggle, made this clear: 24R. First, Libya: The Elusive Revolution, p.149. 25R. Mabro, quoted in R. First, Ibid, p.149. A 19 Countries like Saudi Arabia and Kuwait use a large percentage of their oil revenues either for luxury imports or investments in property and treasury bonds in other countries, both of which in no direct way increase total social capital. This use of oil rent is a reflection of the lack of development of the productive forces. 26 In fact, the issue of economic development in re— lation to the development of the labor force in Kuwait (as well as in other Arabian Gulf oil states) presents a real dilemma. And beyond this, the whole strategy of develop- ment within the structure of the rentier state is in ques- tion. Oil and Development The oil sector of the economy of Kuwait has a very significant role. Production has risen rapidly since the dis- covery of oil; itstarted at 5.9 million barrels in 1946 and increased to 1,201.6 million barrels in 1972 (it has since decreased somewhat to 718.1 million barrels in 1977). In— stability in the production of oil is related to the inter- national market.27 The oil sector dominates the economy; 26F. Nore, "Oil and the State: A Study of Nationaliza- tion in the Oil Industry," in P. More and T. Turner, Oil and Class Struggle (London: Zed Press, 1980), p.81. 7Y. al-Sabah, The Oil Economy of Kuwait (London: Kegan Paul International, Ltd., 1980), pp.46—48. A ,QM_.____._.__.-__._,______1__ I; 20 it was estimated that oil contributed 61.5 percent of GDP in 1966-67, and 70 percent in 1975—76. It is also noted that oil accounts for more than 95 percent of all government revenues. In 1946, revenues from oil were 200,000 Kd, and 28 they reached 235,500 Kd in 1976-77. These figures indi— cate that Kuwait's economy is overwhelmingly dependent on oil revenues.29 In contrast, the non-oil sectors have little signi- ficant impact on the economy. It is estimated that non- oil enterprises contribute only 3 percent of total govern— ment revenues. Such imbalance between economic institutions can be attributed to capitalist penetration in most Third World countries. Prior to the discovery of oil, of course, the non-oil sectors had significant economic roles. Wilkinson's study of the Oman economy shows that agriculture was the main economic resource before oil. After the discovery of oil, the agricultural sector slowed down as oil drew labor . . . 0 away from trad1t1onal economic sectors.3 28A Kuwaiti dinar (Kd) is equal to $3.50. 29A. Kuwari, Oil Revenues, p.96. 30J. Wilkinson, "Changes in the Structure of Village Life in Oman," in Niblock (ed.), Social and Economic De- velopment in the Arab Gulf, p.122. 21 High underemployment and slow industrialization have characterized most of the oil states. While Kuwait might not suffer from unemployment per se, it does exhibit under- employment. Seers, in his study of the Venezuelan case, illustrates this phenomenon. He writes: Most of (the people in the) non- petroleum economy have been feeling increasingly the tensions caused by a slow growth of export and fast rise in imports; they have taken many measures which are in fact protective and employ- ment—generating even if intended, in the first place, to protect revenues. A petroleum economy operates differently. Factors that elsewhere would express themselves in balance of payments crises will here cause growing unemployment. An economy of this type has what might be called disguised rather than overt, balance—of—payments tensions. 31 Industrialization in Kuwait has many problems. Two of the most critical are a lack of natural resources other than oil, and a shortage of skilled manpower. Continuity of the petroleum industry is dependent, naturally, on continu- ity of the oil supply. While diversification of the economy could reduce this reliance, the government is reluctant to invest in factories. One reason for this reluctance is fear 31D. Seers, "The Mechanism of an OpenPetroleum Economy," Social and Economic Studies 13 (1964): 236. A T'r—— 22 i that the creation of a working class will constitute a threat 5 to the traditional structure.32 Further, local merchants in ' Kuwait are not interested in building factories because de— pendence on imports is cheaper, in the short run, than do— , mestic production. I The existing social structure of Kuwait presents n itself as an obstacle to development. More than thirty years after the discovery of oil, and despite the introduc- l tion of a modern educational system, the country is still dominated by traditionalism and tribalism. Rumaihi, who is ’ considered one of theknowledgeable experts in Arabian Gulf affairs, points out that although these societies have new modern economies, the governments appear to be unwilling to ' diminish the power of tribal structures. The reason he posits for this reluctance is the government'sdesire to retain their power. In the present study, traditionality cannotbe viewed as a state of society; rather, it will be correlated with the existing traditional social structure to the whole process of capitalist expansion which has led to the underdevelopment of a large sector of the world.33 32See F. Halliday, Arabia Without Sultans (London: Penguin Books, Ltd., 1975); also, P. Nore and T. Turner, Oil and Class Struggle,p. 7; also M. Palmer, Dilemmas of Politi: cal Development: An Introduction to the Politics of the Developing Areas (Illinois: F.E. Peacock Publishers, Inc., l980),p.12. A. Portes, "On the Sociology of National Development: Theories and Issues," American Journal of Sociology (A.J.S.) 82(1)(l976): 55-85. A 23 It is important to understand traditional roles and in— stitutions as elements of a substructure which gives rise to such institutions and roles. Changing traditionality is almost impossible without questioning the prevailing structure in any underdeveloped country. Accordingly, the existing class structure in Kuwait is seen as a product of government policy. This policy is likely to benefit only a small segment of the society. The merchants and the ruling class, to a large degree, bene- fit from the existing social structure in Kuwait. Because the task of development is not easy to undertake within a fragmented society, in which loyalty to tribe or family is paramount, the creation of national goals are essential fordevelopment. Education, Labor and Economic Development Education is one of the essential bases for creating a modern country, but not just any education will serve such a goal. Paul Freire has defined education as the creation "34 of "critical consciousness. Such education should be tied to the economic needs of any given country. 34P. Freire, Pedagogy of the Oppressed (New York: The Seabury Press, 1968), p.19. 24 Many writers have emphasized the role of education in the process of economic development in the Third World countries.35 In Kuwait, however, the educational system is far from what is needed to instill a "critical consciousness," as Sinclair and Birks illustrate: The modern educational system adopted by Saudi Arabia and Gulf States, more- over, has not been the type of system most suited to the needs of such rapidly developing economies; indeed, it has served to accentuate further the dis— inclination of the population to under- take jobs other than administrative posts in government services. 36 I This form of education characterizes, not only the Gulf states, but most of the Arab countries. Harbison, in his study of human-resource development in Egypt, writes, "The Egyptian educational system was never designed to upgrade the masses. Its predominant objective was to train people . 37 for government serVice." 35For instance, see F. Harbison, "Approaches to Human Resource Development," in G. Meier, ed., Leading Issues in Economic Development (New York: Oxford University Press,l976), pp.53l—537. 36C. SinClair and J. Birks. "Some Aspects of the Labor Market in the Middle East with Special Reference to the Gulf States," The Journal of Developing Areas 13 (April l979):301—315. 37F. Harbison, Human Resources for Egyptian Enterprise (New York: McGraw—Hill Book Co., Inc., 1958), p.106. 25 While Kuwait's government has introduced modern edu— cation since the discovery of oil, and has put forth great efforts in building schools, similar efforts have not been concentrated on the quality of education. Shamlan, in his study on Kuwait, notes: "Improvements in education need not mean expanding schools and increasing enrollment, but rather changing the content of the educational system."38 Technical education occupies a low rung on the edu- cational ladder. A recent study carried out by the World Bank indicates that most Kuwaiti students show little de- sire to attend post-secondary technical schools. Students prefer university education as an ideal. This attitude of students toward university degrees can be explained by the government policy of heavy emphasis on university education.39 Further, the technical schools in operation are not designed to actually provide trained manpower. Rather, they are designed to absorb students who have failed in academi- cally oriented education. Some writers blame negative perceptions of manual work on tribal societies, but such explanations lack historical veracity. In Kuwaiti society, 38A. Shamlan, "Toward Manpower Planning in Kuwait“ (Ph.D. Thesis, Fletcher School of Law, Mass., 1978), p.149. 39The World Bank, Survey of Secondary Students' Occupa- tional Aspirations. (Washington, D.C.: The World Bank, October, 1974). 26 manual work was a major force in the economy before the discovery of oil. Closer analyses of this negative attitude toward manual work identify its roots in overall government policy. Work productivity and manual work do not receive widespread support among Kuwaitis, because people tend to think that finding a job for them is a government duty; people also tend to think that the government is able to hire foreigners for manual work. Therefore, high levels of worker productivity within a situation of abundant wealth are very hard to achieve, as Birks and Sinclair illustrate: Substantial sections of Gulf Arab society have in effect become so wealthy (in terms relative to their previous standard of living, if not with reference to absolute standards) that the need to work to attain wealth is not clear to the indigenous people. It is likely that they become disinclined to work hard; they are not able (and can- not in many instances be expected) to think in terms of wages and salaries at normal daily rates in return for production. 40 Dependence on foreign labor has become an almost essential aspect of the Kuwait economy, and it does not seem that there is any long-run planning to develop native, trained 40Sinclair and Birks, "Some Aspects of the Labor Market in the Middle East," p.304. 27 manpower, especially technical and highly specialized, skilled manpower. Sinclair and Birks point out that even though there is a shortage of labor, "no government in the Gulf has made deliberate efforts to encourage its nationals to enter the most handicapped sectors of the economy.”41 In fact, the government has encouraged the Kuwaiti population to become employed in government bureaucracy, which has exacerbated shortages in other sectors of the economy. 41 Ibid, p.304. CHAPTER II THE SOCIOECONOMIC STRUCTURE OF PRE-OIL KUWAITI SOCIETY The focus of this chapter will be an analysis of the socioeconomic structure of Kuwait before the discovery of oil. The first section is a historical introduction concerning British policy in the Arab Gulf and Britain's impact on later events there. The second presents the traditional economic activities that dominated Kuwaiti society. A third section focuses on the class structure of the society during the pre—oil period, and the final part provides a brief analysis of the impact of traditional economic activities on the society. In summary, this chap~ ter builds a historical explanation of the socioeconomic structure of pre-oil Kuwait. British Policy In The Gulf Britain long played a heavy-handed role in the his- tory of the Arabian Gulf. After its establishment of stra- tegic positions in Aden (South Yemen), Britain extended its influence to other sheikdoms of the Gulf area. In the 28 29 nineteenth century, the British government signed treaties with the rulers of the Gulf.42 The discovery of oil in the Gulf area vastly increased its value and thus British and other foreign interest in these states. It was felt that the treaties signed between local rulers in the area and the British government, "pro- vide the legal basis for Britain's position and place the native states virtually under British protection. The over- all direction of British relations with various local rulers is put in the hands of the political resident in the Persian 4 Gulf...“ 31 n fact, the agreement between the British govern- ment and various rulers of the Gulf states had given the British government the upper hand in controlling both ex- ternal and internal affairs of these states. With the treaties, the British government had reserved, "for itself the final decision with regard to the exploitation of the 44 natural resources." George Lenczowski concerning these treaties, wrote: "The main objectives of all these treaties were to put an end to piracy, to prevent traffic in slaves, to curb the widespread smuggling of arms and other goods and to promote peaceful trade." The Middle East in World Affairs, fourth edition (Cornell University Press, Ithaca, 1980), p.655. 3Herbert Lieb, "International Relations of Arabia: The Dependent Areas". Middle East Journal, 1:2 (April, 1947), p.157. 44 Mary Van Pelt. "The Skeikdom of Kuwait", Middle East Journal. 4:1 (January, 1950), p.26. 30 The Gulf area was treated as a trading center and a strategic staging location. The British were concerned with protecting the Gulf area from any radical element that might affect its stability, in order to protect distribution of their goods and those of other foreign countries. The Strait of Hormuz was also a main trade route to India which was occupied by the British at that time. Lord Lansdowne made the British interests clear. First, we should protect and promote British trade in the area. Secondly, we should not exclude the legitimate trade of others. Thirdly, we should regard the establishment of a naval base or fortified port in the Gulf by any other power as a very grave menace to British interests, and we should certainly resist it by all the means at our disposal. 45 Kuwait's Position Kuwait is located on the northwestern shore of the Arabian Gulf. Historically, the sheikdom of Kuwait was one of the most important targets of British interests, because ’ . . . 4 . . it was a commerc1al and trading center. b The beginning of 45 Ward, Sir A.W. and G.P. Gooch, The Cambridge His- tory of British Foreign Policy, vol. III (New York, 1923) p.320-21. 46 For more details concerning the historical develop- ment of Kuwait, see Hassan El—Ebraheem. Factors Contributing to the Emergence of the State of Kuwait. (Ph.D. Thesis. Bloomington: Indiana Univer51ty, 1971), p.27. 31 the rule of the family Al-Sabah, which migrated from Central Arabia, goes back to 1756 when Sabah I established himself as a sheik of Kuwait. His was the first permanent settle— ment in this area. Due to its lack of resources, no other groups had tried to take up residence here. The name Kuwait is a diminuitive of "Kut", meaning a small fortress. The settlement was also known to eighteenth century European travellers as Grane, a dirivitive of the 47 Arabic word "qarn", meaning a small hill. Ismael, in her thesis about Kuwait, wrote: In 1760, the German traveller Carsten Nieburh visited Kuwait and noted that it was a thriving commercial port of about 10,000 population which sustained itself on pearling, trading and fishing and had some 800 boats. 48 From that time until the present, Kuwait has been ruled by the Al-Sabah family. The Al-Sabah family, the Al—Khalief family of Bahrain and the Al-Saud family of Saudi Arabia all belong to the same tribe called "Anaiza". Of this Mansefield states: 4Ahmad Abu-Hakima, "The Development of the Gulf States" in Derek Ho wood (ed). The Arabian Peninsula: Societ and Politics. London: George AIIan and Unwin, Ltd.,iI9 2775.32. 48Jaqueline Ismael.'The Politics of Social Change in Kuwait,"(Ph.D. Thesis, UniverSity of Alberta, Canada, 1979), p.49. 32 Early in the eighteenth century members of the Anaiza tribe occupied the site of the present town and developed marine and trading interests which dominated the life of Kuwait until recently.... In 1756 a member of one of the leading Anaiza families, the Sabah, was chosen as first Amir of Kuwait and his line has ruled continuously ever since.49 The 1899 Agreement Mubarak Al-Sabah, 1896—1915, came to power after he assassinated his brother Muhammed Al-Sabah (1892-1896) who was thought to be closer to the Ottoman Turks than to the British;50 The killing of Muhammed by Mubarak created in— stability in Kuwait. At that time, Mubarak's position was also threatened by the Ottoman Empire which existed just a few miles west of Kuwait. Mubarak needed to both strengthen his internal position as Kuwait's ruler, and to decrease the Ottoman threat to his country. He requested a treaty with the British government to put Kuwait under British protection, but his offer to the British was denied because that government did not want to create a situation which 9Peter Mansfield. The Middle East: A Political and Economic Survey. Fifth Edition. (Oxford: Oxford University Press, 1980). 50 . . For more detail concerning the murder of Muhammed by his brother Mubarak, see el-Ebraheem, p.43. 33 could have led, at that time, to confrontation with the Ottoman Empire.51 Before the First World War broke out, political de- velopments in the Gulf area led Britain to reconsider signing the treaty proposed by Kuwait in 1899, because they saw Germany and Russia as potential threats to their own interests in Kuwait. Germany and Russia had begun annexing territory closer and closer to the Middle East and the British perceived this as a danger to territories in their own sphere of influence, leading them to sign the treaty. This treaty made Kuwait a dependent country. It aimed to protect British interests in Kuwait, but at the same time gave full recognition to Sheik Mubarak as the ruler of Kuwait. The historian Abu—Hakima wrote: "Great Britain thus became responsible for conducting the foreign relations of Kuwait and incidentally, for its protection against foreign aggression." 52 In fact,Sheik Mubarak com- mitted himself, his heirs and his successors... 51 See Busch Cooper, Britain and the Persian Gulf 1894-1914. (University of California Press, Berkley, 1967), p.101. 2 Abu-Hakima, 1972. 34 not to receive the agent or representative of any power or government at Kuwait, or any other place within the limits of his territory, without the previous sanction of the British Government; and further binds himself, his heirs and successors not to cede, sell, base, mortgage,ior give for occupation or for any other purpose any portion of his territory to the Govern- ment or subject of any other power without the previous consent of Her Majesty's Govern- ment for these purposes.53 This treaty is considered a turning point in the history of Kuwait. It was a formal pledge to engage Kuwait in the capitalist world system. Although the treaty was mainly concerned with the external relations of Kuwait toward other colonial powers, at the same time it allowed the British government to interfere in the internal work- . . S ings of Kuwait. The Economy Kuwait, before the discovery of oil, was one of the poorest countries in the world. It was estimated that aver- age personal annual income was 100 Indian rupee (about $35).55 3Ismael , "Politics" , p.111 . Intervention in internal affairs of Kuwait was ac- complished through a political resident assigned by the British government. Usually the political resident gave advice to the ruler concerning internal situations in re- lation to British interests. Shebah Fakhri, "Kuwait: A Super Affluent". Foreign Affairs. Vol. 42 (April, 1964), p.463. 35 Agriculture played a minor role in the economy due to its desert climate. Its natural resources were few. However, the people of Kuwait looked to the development of the sea which surrounded them. The sea symbolized life to Kuwaitis and pearl-fishing was the most dominant economic activity. Ship-building and fishing also became major economic acti- vities. Pearl-Diving Pearl-diving was one of the principal industries in Kuwait, in particular, and in the whole Gulf area. George Rentz wrote that, "Pearling, an ancient occupation in the Persian Gulf, was until recently the chief source of in- come from abroad for the people living on the perimeter of this shallow sea."'56 Issawi, in his book on the economic history of the Middle East, described the income of the Gulf area derived from the pearl industry. In 1790 the annual value of exported pearls was put at 500,000 Bombay rupes, or 550,000; by 1874-75 the figure had risen to £724,000, a peak that was not regained until 1901-2; but in 1902-3, the £1,000,000 mark was passed and before the outbreak of the First World War ex- ports exceded LZ,000,000.57 Quoted in Issawi, Charles (ed.) The Economic History of the Middle East 1800-1914. The University of Chicago Press, 1966, 135.7313. Issawi, Economic History of the Middle East, p.312. 36 Pearl-diving usually started in the middle of May and continued until the middle of September. This was because the climate during this time was warm. It was estimated that around 9,000 men were engaged in this acti— vity in 1904, and the figure reached almost 15,000 men be- fore the start of W.W.I. Almost 45 percent of the active male population were pearl-fishers. The products of pearl-fishing at the end of the sea- son were usually taken to India for sale. From there, they were taken to the international markets in New York and London. The income generated from the pearl industry was used to import necessities. Pearls harvested from the rich pearl banks of the Gulf for the luxury markets of the world were exchanged for basic consumption necessities.... Kuwait not only lacked a surplus product, it lacked most necessities and depended entirely on trade for its subsistence. Pearl production provided the means of acquiring the surplus product and commodities. 9 8See Chapter 1 in Y3 Al-Sabah. The 011 Economy of Kuwait. (London: Kegan Paul International Ltd., 1980). and Ali Al-Kuwari. Oil Revenues in the Gulf Emirates: Patterns of Allocation and Impact on Economic Development. (Boulder, Colorado: Westview Press, 1978), p.7. 9 Ismael, "Politics", p. 37 Fishing and Agriculture Fishing was one of the common economic activities for the people of pre-oil Kuwait. Those who were not capable of entering the pearl-diving industry engaged in fishing. Al-Sabah describing such activity wrote: The fishing sector of the Kuwaiti economy provided one of the most im- portant occupations for the lower class in Kuwait. The fishing banks of Kuwait and its islands were capable of supplying Kuwait with more than 10,000 lbs (4,545 kg.) of various kinds of fish a day during the early years of the 19005.60 It was estimated that more than 1,000 peOple engaged in such activities, using primitive fishing methods. Agriculture played a very minor role in the Kuwaiti economy. Kuwait lacked the water and climate conducive to agricultural production. Nevertheless, there were a few villages that were sources of agricultural products. Domestic agriculture could not, however, meet the people's needs; importing food was necessary. Ship-Building Kuwait was famous as a center for ship-building. The industry was able to meet internal demand and the 60 Y. al-Sabah, 011 Economy, p.13. 38 external demand for ships for other Gulf countries. "In Kuwait, the industry was able to build yachts of European design of 65 feet in length in 1931 and 80 feet in 1932."61 Other kinds of industries existed in pre-oil Kuwait on a very small scale, most were "cottage industries". The main ones were the production of fishing tools, nails for ship-building and tents. These industries were based on primitive methods and oriented to the internal market. Trade and Commerce The strategic position of Kuwait in the Gulf area, made the country an important trade center. Al-Sabah de- scribes, "Its position as a link between the Persian and Arabian coasts of the Gulf, India and Far East on the one hand, and the Mediterranean ports and Europe on the other hand, made it the best transit area for trade." 62 It was estimated that in 1920 almost 150 Kuwaiti ships were en- gaged in commerce and trade with various areas of the world. al-Kuwari, Oil Revenues, p.10. 62al-Sabah, Oil Economy, p.19. 39 Most of the trade was conducted with India. Kuwaiti ships usually carried pearls, dates, and horses, and they came back with coffee, woolens, spices and grain.63 TABLE 2.1: KUWAITI FOREIGN TRADE, 1820-1905 1820 1905 1932 Exports Rs*l42,000 Rs 1,154,322 -- Imports Rs 710,000 Rs 4,818,929 -- Number of Sailing Ships Employed 35 86 291 *in Rupees SOURCE: Miscellaneous estimates and reports on trade from the British Political Agency, Kuwait. In Al-Sabah, The Oil Economyyof Kuwait. (London: Kegan Paul International Ltd., 1980), p.20. It was estimated that around 30 percent of Kuwaiti trade was conducted with India in 1905. Trade with the Arab countries was only 27 percent during the Ottoman oc- cupation and 14.66 percent with the United Kingdom. Trade . . 64 mainly con51sted of manufactured goods and arms were traded. 63 . . . 'Malcolm Yapp, "The Nineteenth and Twentieth Centuries: The History of the Persian Gulf" in Alvin Cottrell (ed.). The Persian Gulf States: A General Survey. (Baltimore: The Johns Hopkins University Press, 1980), p.44. 64 . . . H.R.P. Dickson Kuwait and Her Neighbors. (London: Allen and Unwin, 1956), p.26. 40 The Class Structure Before the withdrawal of British forces from Kuwait, giving it independence in 1961, the ruling family and the merchant class held the most power and shaped the socio- economic structure of Kuwait. A boat was the principal means of production for the merchants and it was this group which financed the pearl-fishing and ship-building indus- tries. The merchants also financed the ruling family by paying taxes and customs. The working class formed the rest of the population who made their livings in cottage industries, fishing, ship-building, or diving. The Ruling Family The ruling family, as mentioned before, migrated to Kuwait from Central Arabia. Many factors led to this migration. The most important reasons were tribal con— flict and the search for a way to make a living.65 In 1756 Sabah I was chosen by the noble families to be the ruler of Kuwait, with a mission to organize the affairs of the country differently (See Table 2 for a chronology of the leaders from the al-Sabah family). 5 Ahmed Baz, Political Elite and Political Develop- ment in Kuwait. (Ph.D. Thesis, George Washington Univer- Sity, Washington, D.C., 1981), p.92. 41 TABLE 2.2: THE RULING FAMILY OF KUWAIT Name of Ruler Period of Rule Sabah (I) Al-Jabar Abdullah Al-Sabah Jaber Al-Abdullah A1-Sabah Sabah A1-Jabar Al-Sabah Abdullah Al—Sabah Mohammed A1-Sabah* Muburak Al-Sabah** Jabar Al-Mubarak Al-Sabah Salem Al-Mubarak Al—Sabah Ahmed Al-Jabar Al-Sabah Abdullah Al—Salem Al-Sabah Sabah Al-Salem Al-Sabah Jaber Al-Ahmed Al-Sabah 1756-1762 1762—1812 1812-1859 1859-1866 1866-1892 1892-1896 1896-1915 1915-1917 1917-1921 1921—1950 1950-1965 1965-1977 1977-present *Killed by his brother Mubarak **Signed a treaty with British Government, became a British Protectorate. in which Kuwait 42 The political power was in the hands of the ruling family, but they depended on the merchants to pay them taxes and customs to maintain their lifestyles. During the time of Mubarak (1890-1915), Kuwait signed the 1899 Agreement with the British Government which was the turn- ing point in the Kuwait history. This treaty had a major effect on relations between the ruling family and the merchant class. Not only did this treaty give the ruling family a legitimate right to power in Kuwait, it also directed the British government to pay certain amounts of money to the ruling family, which di- rectly reduced their former dependence on the merchants. The Merchants The merchants in Kuwait occupied an influential posi- tion in the process of decision-making, due to their financial contributions to the ruling family. Some of them also shared the tribal origins of the Al-Sabah family. Other merchants migrated from Iraq, fleeing from the Persian occupation of Basra from 1775-1779 and the threat this represented to their wealth. Merchants who migrated from Iran did not consolidate as much power as those from Cen- tral Arabia, because of the tribal status of those related to the ruling family or originating from the same area. Baz, in his thesis concerning political developments in 43 Kuwait, describes the power of the merchants in Kuwaiti society: ...the merchant community emerged as the backbone of Kuwaiti society. They played a pivotal role in its economic, social, and political life. Economically, it was their enterprising ventures in the pre—oil era, that provided both the government with its income--in the form of taxes and customs duties--and the labor force with employment. They were, for instance, the owners of the dhow industry, importers of goods from the outside, and financiers of diving missions and seafaring.66 Since the merchants owned all the means of production, and were the principal financiers of the economy, they ac- cumulated capital through two main channels: first, as owners of diving and trade ships and diving products; second, they acquired a large number of divers' and other crew members' houses through the system of debt. Divers and haulers would become indebted to the merchants and when they could not pay their debts, the merchants had the right to take their houses in payment. When disputes would arise over cheating in book- keeping between the divers, most of whom were illiterate, 66 . . m. Rumaihi. "The Mode of Production in the Arab Gulf Before the Discovery of Oil," in Tim Niblock (ed.). Social and Economic Development In The Arab Gulf. (Croom, Helen and Center for Arab Gulf Studies, Exeter, London, 1980), p.58. 44 and the captains or merchants, they would be settled by the ruler, and the divers would not be represented. "The ability of such judges to give an objective judgement when disputes arose between divers and nokhudahs (captains) was, of course, limited. Legislation, in fact, was simply a means for . . . 6 protecting the interests of the ruling class.“ The interests of the rulers and merchants, however, did not always coincide. Conflicts and resentment arose when economic power failed to generate corresponding poli- tical power. It was the merchant class which led the poli- tical reform movements of 1921 and 1938. The goals of these movements were to eliminate the corruption said to exist within the ruling family at the time and to acquire more political influence for the merchants, themselves, since they controlled the economy. Al-Sabah writes: In the 1930's the upper merchant class was the driving force behind the estab- lishment of the first legislative Council in Kuwait. At that time the government depended on the level of taxes, which were supplied by the activities of the merchants. They were constantly raising the issue of no taxation without representation. 68 7Rumaihi, The Mode of Production, p. 68al-Sabah, Oil Economy, p.15. 45 The reform movement of 1938 was aimed at bringing about the changes desired by the merchants in the political, social and economic affairs of Kuwait. Demands were made, for example, for social services, more schools, and better health care for themselves and their families. The mer- chants, however, were not interested in replacing the Al— Sabah ruling family. They simply wanted to press their economic demands and thereby increase their power in the affairs of Kuwait, to the extent of having representative government in the form of a legislature. The Divers The divers in the Gulf area were the most exploited social class. They were also the most important sector of the working class or proletariat. Although they produced a product which sold for high prices on the market, the workers were kept impoverished. The merchants controlled and abused the divers and ships' crew members by lending them money before the pearl-fishing season, to support their families while they were away. The loans that the divers obtained from the merchants usually did not meet their needs, but were the only monies available to them. The debts thus incurred had to be worked off during the pearl season, at wages kept artificially low to keep the divers indebted to the merchant captains. At the end of 46 the season the divers and drew usually found they would need additional loans for living expenses before the next season. "When a diver did not earn sufficient to cancel these debts, the amount outstanding was carried forward to the following year and interest charged upon it."69 The loans thus obligated the divers to work for the same merchants in the following season. The diver is now a slave for the rest of his life. It is probably easier for a negro slave on the Pirate coast to escape than it is for a ...diver to retain his freedom. As long as he is in debt he cannot change his employer, no matter how badly he is treated, nor can he leave the town except under bonds to return before the diving season begins. And he never will get out of debt. He can- not read or write. There is no witness to the transactions that take place between the captain and himself. It is a recognized thing for divers to receive a loan of rice when the season begins, so that their fam— ilies may have something to eat while the head of the house is away. The sum written into the books is regularly about fifty percent greater than the market price of the rice... The upshot of the matter is that these men never get out of debt, not one in a thousand of them. 70 If, for any reason, a diver could not do the work, he was obliged to induce his sons to take his position. 9 . . . Rumaihi, The Mode of Production, p.54. P.W. Harrison, The Arab At Home. (New York: Thomas Y. Crowell, Co., 1924), p.84. 47 If he died, his sons inherited his debts. It was a mer— chant's right to confiscate a diver's house in case of non-payment of his debt, or he could marry a diver's wife, if upon his death, a diver's debt had not been paid. Rumaihi, in explaining the exploitation of pearl- divers in Bahrain, also describes the situation of Kuwait's divers: ...even death was not an exit for the (Kuwaiti) diver, as his debts were then inherited by his sons or brothers, who were forced to enter the pearl industry themselves.... Some of the more inhuman of captains would insist on marrying the widow of the diver as payment for the debts, and in doing so obtained for them- selves the children of the diver to act as servants in the house and later to be trained as divers themselves. 71 In addition to being exploited financially, the divers worked under extremely harsh conditions, as described by al-Sabah in this passage: ...the pearl—diving industry was very hard and difficult as far as the divers and haulers were concerned. First, the divers were not allowed to eat or drink more than a very small portion of rice and dates. This was to keep them thin and thus enable them to dive quickly and to remain longer on the seabed. Second, as a result of the above-mentioned diet the crew suffered from malnutrition and there was scurvy because of the lack of fruit and vegetables in their diet. Third, J'Rumaihi, The Mode of Production, p.55. 48 the absence of modern equipment meant that divers were readily and frequently exposed to attacks from sharks and sting— ing jellyfish. Finally, the continuous hot sun and the lack of fresh showers after diving, caused a greal deal of suffering and skin disease. 72 Although the Arabian Gulf did not experience feudal- ism as it existed in Europe, diver-merchant relations were very similar. ...the relationship between the divers and the merchants and shipowners was akin to a feudal relationship--the diver was trapped within a system of clearly defined duties and marginal rights, which gave him little opportunity of bettering his position and which effectively transferred the economic surplus into the hands of his master. 73 The pearling industry was evenutally destroyed when the Japanese entered the international market with the cultured pearl. At about the same time, there was the world-wide economic depression of the early 19305. The Kuwait economy was ready to be reoriented to accommodate the oil industry. 72 al—Sabah, Oil Economy, p.15. 73Rumaihi, Mode of Production, p.57. 49 Social Impact Of The Traditional Economy As a result of the country's shortage of natural re- sources, the people of Kuwait struggled with nature to find a way of living sufficient to meet their needs. The sea represented their main source of revenue and subsistence before the discovery of oil. The lack of economic oppor- tunities in early Kuwait produced certain social values. Most important to the scope of this study, is the work ethic. Work acquired high status in Kuwaiti society. It was shameful for a male, after he reached ten years old, to remain out of work. Ten-year-old boys were usually expected to learn and to get experience in pearl diving. In 1924, Harrison found that, "Boys are frequently taken The value placed on work and motivation to work were a result of economic conditions which required people to spend most of their time working. Any male who was capable of work, but would not do it, was viewed as a woman, with a role limited to staying within the boundaries of the home. For social and cultural reasons, women were viewed as inferior to men and kept in the home. It was common to call a man, Ha woman", when he stayed at home and did 7 not work; it was a justified insult to his masculinity. Harrison, Arab At Home, p.80. S ‘Y. al-Ganai. Tarikh Al-Kuwait (History of Kuwait) (Kuwait, 1968) p.78, In Arabic. 74 out to learn pearl diving while they are still under twelve." 50 Kuwaiti society was comprised of many different tribes and these tribal people engaged in professions which seem incompatible with their nomadic customs and former lifestyles. Many went into shipbuilding, diving, or fishing as their main employment and became settled, while other bedouins were still in transition from nomadic to sedentary life. The impact of bedouin upon Kuwait was minimal. In fact, they themselves have become influenced by Kuwaiti commercial life. As a result of their involvement in maritime commerce, they began to set- tle and assume sedentary life. Nevertheless, tribal social relations prevailed and were often reinforced by the state. Bedouin ties were used as political and military tools by the ruling family. By calling on family ties and political alliances, tribes could be united to guard the rulers. Successful efforts were made to settle remaining tribal members as long as social ties remained strong. Tribal loyalty to the ruling family was rewarded later in the oil era with services and economic considerations. The extended family was the norm in Kuwaiti society before the oil era. The head'of a merchant family usually 76 Baz p.103. I 51 owned the means of production, and would employ his family members. Rumaihi wrote: A situation where the means of pro- duction were severely limited meant that those who did own these means had a powerful base within their own extended families. The head of family, in other words, had considerable power over the other members: the others could be employed within the 'family' with minimal economic rights.77 Women's status was low and their economic participation outside the home was insignificant. A Kuwaiti historian described women's status, writing: A woman represented no value to men, especially the old ones. She was a worldly pleasure that one should avoid. If you mentioned her in your speech you should say to your listener, 'May God grant your honour.‘ A girl was compelled to marry her man, especially if he were her cousin. It did not matter if he were ugly orimmoral. A man who was 80 had the rignt to marry a 20-year- old girl.78 Marriage took place within the family's boundaries. It was usually the head of the family who arranged the marriages. Traditional marriage customs such as "dowries" were manipulated to enrich the family of the woman. Such 7Rumaihi, Mode of Production, p.57. Quoted in Rumaihi, Mode of Production, p.58. 52 marriages within the extended family were a form of keeping a family's wealth in the family. Transition Period The worldwide economic depression which occurred after 1929, and the introduction of Japanese cultured pearls on the international market, led to the collapse of the pearl industry in Kuwait. In response to this, Kuwait concentrated on building a transportation system and the pearl boats were used for carrying cargo. During this time there were preliminary indicators that Kuwait might have oil fields, especially after the oil discovery in Bahrain in the early 1930's. In December 1938 the first oil concession was created between the ruler of Kuwait and the British Government. The Kuwaiti Oil Company (KOC) was established in 1946, owned by the British Petroleum Company (B.P.) and the Gulf Exploration Company of the United States of America, with each company taking an equal 50 percent share. After the end of the Second World 79 , oil production was begun. War The oil concession system was not set up to benefit the country, although the KOC paid taxes to the Al-Sabah McLachian, "Oil in the Persian Gulf," p.202. 53 family. Rather, it was monopolistic control of the coun- try's resources by international foreign firms. The quan— tity of oil produced was not relative to the economic needs of the country, but entirely controlled by the international oil companies. From the beginning of drilling in the 1930's right up 1970 there was no national control of the operations of the oil com- panies. Companies could drill wherever they liked and could produce as much oil as they could sell. However, in practice this meant that large quantities of oil were extracted from Kuwait in very short periods. 80 Between 1948 and 1958, oil production rose from 806,616 metric tons to reach 69,275,952 million tons.81 During this period Kuwait became the major oil supplier for Britain, which drew more than half of its oil needs from Kuwait. A United Nations report about oil agreements in the Middle East states: The terms of their concessions... give the foreign companies a free— dom of action which substantially insulates them from the economy of the Middle Eastern countries. Output is determined by considerations of the world, rather than local conditions. 80Charles Issawi and M. Yerganeh. The Economics of Middle Eastern Oil. (New York: Frederick A. Praeger, 1962) p.25. 81Ibid, p.30. 54 Moreover, it is the companies which provide and own the means of trans- port, whether pipelines or tankers, to carry Middle Eastern oil to its markets, and it is they who secure these markets, both in Western Europe and other parts of the world... 82 Western nations became more dependent on Kuwait after the Iranian Revolution under the leadership of Musaddegh, who decreased oil output and nationalized the oil companies. With oil production in that country gauged to internal needs, Kuwait's oil fields were further ex- ploited to make up the difference on the world market. Thus, the discovery of oil led to drastic changes which affected the socioeconomic structure of Kuwaiti society and gave Kuwait a new role in the world system. 82Quoted in Charles Issawi and M. Yerganeh, Economics of Middle Eastern Oil, p.35. CHAPTER III OIL AND THE ECONOMY OF KUWAIT The aim of this chapter is to explain major aspects of the economy of Kuwait in a global context. Oil, the major commodity that Kuwait exports to world capitalist markets, has transformed and dominated the economy of Kuwait. As such, it has affected the country's government. The role of the government in the economy will also be discussed. Finally, the capital surplus that accrues to the government, as the sole recipient of oil revenues, and the uses of this capital are discussed. Political Economy of Oil A common characteristic of most of the Third World countries is a lack of capital and a concommitant deficiency in their balance of payments, which is considered a major obstacle to development in these countries. This is not the case for Kuwaitand other Arab oil countries. The oil revenues that these countries collect from oil companies have enabled them to accumulate capital and remove the 55 56 common constraint of the Third World countries. But, even though these countries have extensive supplies of capital, they are still considered underdeveloped.8:3 In fact, oil revenue has hindered, even blocked the development of Kuwait, and produced a structural dependency. Oil is a commodity very strongly affected by exter- nal factors, that is, the world capitalist system. It is a product needed in huge amounts by industrial countries. Thus, oil is tied to external factors, even more than it is related to the internal structure of the producing states (See Table 3.1). TABLE 3.1 GROWTH RATES OF OIL CONSUMPTION (%) Year World WECC* OECD** 1950-1960 8.2 7.6 7.4 1960-1970 8.1 7.9 7.9 1970-1973 6.9 6.5 6.6 1950-1973 8.0 7.6 7.5 1960-1973 7.8 7.2 7.6 *World excluding the Communist countries **Organization for Economic Cooperation and Development SOURCE: Oystein Noreng, Oil Politics in the 19805, (McGraw- Hill, 1978), p.34. 833,51rhan ."Modernization and Underdevelopment: The Case Of a Capital-Surplus Country; Kuwait" (Unpublished Ph.D. Dissertation, The American University, Washington, D.C., 1980). 57 Kuwait, as an oil producer, is assigned and occupies the role of a supplier of raw material in the international division of labor. This position has had a drastic impact on its internal socioeconomic structure. More specifically, this position actually threatens the economy of Kuwait be- cause it ties the country and its people to the consumption patterns of the industrialized countries. As mentioned in the second chapter, oil was discovered and its production developed by international firms with foreign capital, technology and labor. The concession sys- tem that was introduced by the oil companies was intended to organize production operations and relations between the oil companies and host countries. This system was agreed to: (l) by governments subject to foreign domination, (2) by immature governments; and (3) by governments which did not represent the will of their people.84 The major role of the oil companies was to maximize profit, with little regard for effects on the economies of host countries.85 This exploitive relationship was described by Tarriki, the former oil minister of Saudi Arabia, George Lenczowski, Oil and States in the Middle East, (Cornell University Press, New York, 1960), p. 99. 5 Abbas Alnasrawi, "Arab Oil and the Industrial Economies: The Paradox of Oil Dependency," Arab Studies Quarterly vol. 1, no. 1, 1979. 58 ...they, the oil companies, aim to control the economy of the host coun- try, drain its resources and impede its development. 86 He continues ...they followed a policy derived from that of the imperialist power, whose main concern is to produce raw materials from areas under their control, trans- form these materials to their by-products and then export the finished products.87 Oil Price Historically, the oil producing countries had little effect on either the rate of oil production or its pricing. From the discovery of oil in Kuwait and other Gulf oil states until the 19705, their role was insignificant; the oil companies controlled production and pricing. More specifically, the international market affected such decisions.88 It is evident that increases in oil prices in 1973 were a product of the mechanism of the world capitalist system.89 The decision that the OPEC made to increase oil 86Alyamamah, (Saudi daily) 18 Dec. 1959. 87§£3§§Q (Beirut Weekly magazine) 19th and 26th December, 1959. 8Noreny, p.63. 89Holly Sklar (ed). Trilateralism: The Trilateral Commission and Elite Planning for World Management. (Boston: South End Press, 1980), p.437. 59 prices was encouraged by the international oil companies. The U.S. oil companies, in particular, played a large role in the process during the Nixon Administration. The U.S. domestic oil price at that time was higher than those in Western Europe and Japan, and the energy price was also higher. Thus, the world oil market price was increased beyond the U.S. level, making U.S. oil more competitive.90 Noreny observed that the increased oil prices during the 19705 would have a positive effect in increasing "the competitiveness of American industry.”91 Grivan also observed that increasing oil prices was a strategy adopted by oil companies in order to, "secure higher prices and generate the enormous profits they claim are necessary to fund expansion in the industry."92 The establishment of the International Energy Agency (IEA) by the United States was intended to keep the U.S. in the upper position in handling oil policy in the world oil market; it is a means of political control. For more details concerning U.S. oil policy see Sexon Brown, New Forces in World Politics, (Washington, D.C.: Bookings Institute, 1975). Also V.H. Oppenheim, "Why Oil Prices Go Up." Foreign Policy, no. 28/1976-77, pp.24-27. lNoreny, p.51. 92Sklar, p. 451. 60 The IEA can be seen not only as an attempt to solve the energy problems of the OECD countries as a common basis but also as an attempt to mold the OECD countries into an institutional framework controlled by the United States. 93 The oil-exporting countries are considered an im- portant and crucial component in the stability of the world capitalist market. Thus, the economies of these countries are highly restricted and limited by the mechanisms of the world capitalist system. It is evident that this system has pro— duced a high degree of dependency, and at the same time, threatened elements of the internal economic structures of the oil exporting countries. They are especially vulnerable, in that the oil is the backbone of their economies. WhiCh is the hallmark of dependency. Alnasrawi explains this vulnerability, Both development programs and ordinary budgetary expenditures became so dependent on oil revenue that any serious shrinkage in this source would have significant economic and political consequences for the affected countries. 94 The oil exporting countries play a marginal role in the international division of labor, in terms of their 93 Noreny, p.25. Alnasrawi, p.3. 61 ability to introduce any radical change on a world scale. Even though the oil companies in these states have been nationalized, the host countries' independence is still re- stricted. In many respects, nationalization was another result of the oil companies' control of the host countries. Nationalization was a strategy initiated by these compan- ies to avoid any disruptive political activity in the host countries, in a time of growing public and political re- sentment against the oil companies in these countries. Third World state ownership, moreover, makes the problem of dealing with the labor force a government responsibility and removes the MNCs from the politically vulnerable position of being a 'foreign imperialist exploiter' of indigenous labor. With ownership, the national government directly assumes the risks of fluctuations in the international markets for commodities concerned, a situation which could easily have adverse repercussions on them, benefitting the consumer and the MNCs. Such factors indicate the transnationalized nature of capitalism, not only of accommodating to Third World economic nationalism but also of turning it to its advantage by assigning it a specific role in the overall inter- national 5y5tem.95 International Monetary System The oil-exporting states have been assigned subordi- nate roles in the international division of labor as 95Sklar, pp. 456—7. 62 suppliers of a raw material. Apart from this role is the requirement that the huge amounts of capital they ac- quire should act in the interests of stabilizing the in- ternational monetary system. As a result of oil price in- creases during the 19705, there was a substantial net trans- fer of real income from industralized western countries to the oil-producing and exporting states. Recycling the capital surplus of these states is a function of the in- ternational system, to provide means and mechanisms for 96 transferring this surplus back to the center. An oil minister of one of the Arab states, in an interview with the BBC Television, explained the relationship of oil to dollar investments in the world market. What we are doing right now is against that (our) self-interest perse...be- cause we are producing much more than what we need for our financial requirements, we are depleting oil resources. Thus, we are accumulating a surplus and losing on the surplus. If I compare the apprec- iation of a barrel of .crude in the ground in Saudi Arabia with the rate of return I get from my dollar invested in the world market, there is no comparison. It is a net loss--what we are getting is sometimes below zero rate of return. 97 9 6Alnasrawi, p. 11. 97Middle East Economic Survey (MEES), May 22, 1978. 63 This oil minister noted the most harmful dependent relationship, in which the economies of the Arab Gulf oil states are tied to the world capitalist system. The losses that the minister mentioned are a logical product of the interdependent relationships in which oil price increases speed up world-wide inflation. The losses are manifested in the inflation rate which, "leads to depreciation in the purchasing power of currency and exchange rate fluctuations whichnmy result in the depreciation of the value of one , 98 currency Vis-a-Vis other currenCies." Aburdene analyzed the effects of inflation on the OPEC dollar. Because of inflation, the present purchasing power of the OPEC dollar is 72% of those dollars&bought in 1974. Accordingly, in terms of 1974 dollar prices, the $96 billion net foreign assets of OPEC which are denominated in dollars have suffered anegative compound interest rate. That is, they have been losing more money each year. 99 For instance, Kuwait's losses alone from depreciation of the dollar in 1976/77 amounted to over 5.4 percent and in 1978 according to the Central Bank, losses amounted to 100 almost $2 million per day. 8 Alnasrawi, p.15. 99MEES, May 22, 1978. 100 . . Rajai Abu-Khadra, "A Review of the Kuwait Economy," OPEC Review, Vol. III, No. 2., Summer, 1978, p.54. 64 It is evident that capital accumulation in Kuwait and other oil states is characterized by constraints that affect its potential for creating an effective and pro- ductive economic base. In sum, it is an "unequal exchange" necessary for maximizing profits in the world market.101 Thus, a possible decline in the value of the U.S. dollar threatens the economy of Kuwait, in which oil revenue is the only resource available to the economy to finance all economic projects and state expenditures. If the United States found it necessary, for any reason, to de- value its currency, the OPEC states would be severely affected. Such wasthe effect in 1970 when the U.S. government officially devalued its currency.102 Recycling Petro Dollars Recycling petro dollars, or internationalization of capital, is one of the mechanisms of the world capital- ist system by which Third World capital surpluses 1 . . . lc)Arghiri Emmanuel, in Unequal Exchange (New York: Monthly Review Press, 1972) spelled out that unequal ex- change is a function of the world capitalist system and is necessary for the expansion of a world market for maximizing profits. Without such expansion it would not be profitable to maintain the world capitalist market. p. 130-132. 102For more detail see M. Atotiba, OPEC and The Petroleum Industry (N.Y.: John Wiley and Sons, Inc., 1975) pp. 154-157. 65 are channeled back to the industrialized coun- tries.103 Various means are utilized to recycle petro dollars. Bank deposits and investment in the industrialized Western countries are two ways, increasing exports to the oil states is another. For instance, Saudi Arabia agreed to invest 50 percent of its annual surplus in the United States.104 Around 85 percent of the surplus of OPEC countries, mainly the Arab Gulf oil states, found its way back to OECD countries and the United States (See Table 3.2).105 Magdoff pointed out that during the period 1974-77, the United States pur- chased around $106 billion worth of goods and services from the OPEC states. And during the same period the amount that found its way back to the U.S. was $108 billion.106 The fact is that such a pattern of investment, which all the Arab Gulf oil state governments view as a successful strategy for development, is considered a threat to 103 See Tom Baumgartner, Walter Buckley and Tom R. Burns, "Unequal Exchange and Uneven Development: The Structure of Exchange Patterns." Studies in Comparative International De- velopment. Vol. XI, No. 2, 1976, pp. 51-72. 104 Kai Biard "Co-opting the Third World Elites: Tri- lateralism and Saudi Arabia" in Holly Sklar (ed) Trilateral- ismfl p.345. 105 OPEC total foreign assets (1977) were $160 billion. Of this total, $120 billion was owned by Arab Gulf oil states. 106 Harry Magdoff, "The U.S. Dollar, Petrodollars and U.S. Imperialism", Monthly Review, vol. 30, No.8, January,l979. 66 TABLE 3.2: DISTRIBUTION OF OPEC FOREIGN ASSETS ($U.S.BILLION) Type of Amount in Investment $ Billions % of Total Investment in U.S. 42 26.25 Investment in other industralized countries 16 10.00 Loans to industralized countries 12 7.50 Loans to international institutions 10 6.25 Loans and investments to developing countries 20 12.50 Eurocurrency Deposits 60 32.25 Total 160 100.00 SOURCE: MEES, May 22, 1978. 67 these economies and exposes them to further political and economic restrictions. The political question is whether these countries are capable and/or willing to break away from the state of economic dependency. The over- whelming evidence indicates that, for a variety of ideological, political, and strategic reasons, they have com- mited themselves to the existing inter- national economic order of which they have continued to be an integral part of marginal importance and that they will continue to play the role of raw material suppliers. This commitment is compounded by their inability to protect their investments from the destablizing effects of the present system.107 This development strategy has a direct influence on shaping the socioeconomic structure of these societies, whereby all economic development policies are affected by and tied to the world capitalist market. The Economic Structure of Kuwait's Oil-Based Economy Since oil is Kuwait's only economic resource that generates capital accumulation. two major characteristics, common to such economies, are produced: (1) disarticulation of traditional economic activities, as a result of capital- ist penetration manifested in the international oil 107 Abbas Alnasrawi, "Pardox of Oil Dependency", p.15. 68 companies and (2) development of a type of enclave econ- omy, where a modern sector (oil industry) highly inte- grated into the world capitalist market leads to disarti- culation of internal economic structure.108 The oil economy of Kuwait can be seen as a "rent- ier state", in which the state, as landowner, receives a substantial amount in the form of external rent, either from the oil companies or foreign governments. Essentially, oil-rent earnings lead to an availability of foreign ex- change which facilitates import and discourages internal production}09 The structural consequences of such char- acteristics are the insertion of the oil economy into the world capitalist market as an important element of its function.and delayed national development. Thus, oil revenues are spent on financing imports, rather than de- velopment projects such as national industrialization.llO This process of disarticulation that characterizes the economy of Kuwait is manifested, on one hand, in rapid growth in the oil sector and, on the other hand, stagnation 08 . . . l The two major aspects of Oil-based economies are discussed by Wolfgang Hein in "Oil and the Venezuelan State," and Ruth Firth, "Libya: Class and State in an.Oil Economy," in Petter Nore and Teresa Turner (eds), Oil and Class Struggle, (London: Zed Press 1980). Also by Gavin Williams in "Nigeria: The Neo—Colonial Political Economy," in Dennis L. Cohen and John Daniel (eds), Political Economy of Africa (New YEEE: Longman, 1981). OHein, p.224. Ibid, p.229. 69 and decline in the other sectors of the economy (See Table 3.3). Oil is the largest contributor to the GDP; in 1968-9 it contributed 56.5 percent, which increased to 70.0 percent by 1975/6. In the same periods, non-oil sectors contributed 43.5 percent and 23.0 percent,respectively. This fluctua- tion in the degree of dependence on oil is due to the na- ture of the oil sector of the economy, which is tied into the world capitalist market. Oil, as a source of energy, has been subject to a continuously increasing world demand and world energy consumption (See Table 3.4). Oil's greatest threat to the economy of Kuwait is that it has become an "engine of growth" for the whole economy, "through providing employment opportunities, in- creasing capital transfer and private investments, and increasing demand on the service sector."111 Thus, any de- cline in the oil economy would result in a threat to the whole economy. Further, the high growth rate of the econ— omy does not reflect the actual performance of the pro- duction capacity of the country. Rather, it is a process "of transformation of one form of wealth (a tangible asset) into another (a financial asset)" alist market.112 , through the world capit- lllElias T. Ghantus, Arab Industrial Integration: A Strategy for Development (London: Croom Helm, 1982) p.86. 112Ghantus, p.87. 7O .hm.m ..mhma .cmaaaeomz ”coocoqv .mucmcflm HmcoflumcuouCH ca maom cam ucwemon>mQ ”uflm3sx mo msocoom one .umaomm o.m 0cm onsonx .3.z “mumsom o.ooa c.ooa o.ooa o.ooa o.ooa o.ooH o.ooa o.ooa sauce o.sk quM m.mm m.mm o.sm m.sm 5.0m m.om nouumm Hflo o.m~ m.- m.sm H.ov o.mm H.~m m.mv m.mv muouomm HHo-coz Hayes Imam. qum Imqm mqmm. m.HH o.o m.sH m.sa mufl>umm w coapmunmflcflsoa unansm m.m H.¢ m.m m.o s.o v.m o.m m.m moans Hampmm 6cm mammoaonz o.v m.m «.0 a.» m.H o.~ m.a m.a mucmcfim a mucmusmcH .ocfixcmm o.~ m.a H.m m.m o.m m.m m.m m.m cos» umoflcseeou a coflumuHOchmua m.o m.o o.H m.s o.m m.m o.v v.4 coauosuamcoo m.~ m.H o.~ m.~ m.m H.v >.m m.m swam: a mmo..pomam o.m o.¢ m.m m.m H.m m.m k.m m.m manusuommscmz m.o ~.o ~.o m.o m.o a.o m.o m.o mannmflm new musuasofiuoa mk\mk mk\vs vk\m5 ms\~k ~k\as Hs\os os\mo mo\mo muouumm unaccoum ARV m\mhmH I m\mmmH mam m.BH\Hsma muflmmm< munmuma muflmmma soap muammuc HMHOE Ocflmsom wuflumsn UHEmHmH Hmauow (meuomcH nuamm: coaumusom uoaumucH whom» 1.6.x ocmmsons cHs om\msma . ~k\Hka mmOH>mmm OHsmam zo mmseHozmmxm ezmmmso "m.m mamas 80 TABLE 3.9: GOVERNMENT OIL AND NON-OIL RECEIPTS (PERCENT OF TOTAL RECEIPTS) 1971/72 1972/73 1973/74 1974/75 1975/76 Oil 83.5 84.8 81.0 90.0 89.3 Non-oil 16.5 15.2 19.0 10.0 10.7 Total 100.0 100.0 100.0 100.0 100.0 SOURCE: Calculated from Annual Statistical Abstracts, Kuwait, 1978. Development of Financial Oligarchy It was noted in Chapter Two that the Kuwaiti mer- chants occupied powerful positions during the pre-oil era. The power of this class continues intact in the post-oil era. As oil assumed great economical importance, the tra- ditional merchants were transformed into financial power- brokers interested in strengthening their relations with the world capitalist market. For government played a signi- ficant role in this process, transferring accumulations of public capital into private banks. Further, the government had a significant interest in building and strengthening the financial institutions that handle capital transfers either in the local markets or abroad. In fact, the government, through its political and economic power, has fostered the development of Kuwait as 81 a financial center and further strengthened the role of the Kuwaiti financial class through increased public ex- penditures. One of the means of doing this, by which the Kuwaiti financial class has acquired financial power, is the land purchase program. The International Bank of Reconstruction and Development has described this program: The Government buys land at highly inflated prices for development projects and for resale to private buyers. Land purchases amounted to between Kd 40 million and Kd 60 million in most recent years. Whatever the political or developmental justifications for this practice, the prices fixed by the government for these transactions and the small amount thus far collected on the resale of the land make the public land transactions a rather indiscriminate and inequitable way of distributing the oil revenues. 122 It is estimated a total of $3.4 billion was disbursed through the total acquisition program during the years 1952- 123 1975. A large portion of the funds realized through this . 124 program have been invested by private investors abroad. 122 The International Bank for Reconstruction and De- velopment, The Economic Development of Kuwait, (Baltimore: Johns Hopkins University Press, 1965), p.4. 123 ' . M.W. Khouja and P.G. Sadler, The Economy of Kuwait: Development and Rule in International Finance. (London: Macmillan Press, LTD, 1979) p.44. 124Shehab Fakhry, "Kuwait: A Super Affluent Society" Foreign Affairs, 42, no. 3, (Aprill964) p. 469. 82 The power of the financial class actually derives from its position in the political structure. Due to this position, this class has become influential in constructing the development policy of the state. Stork points out that, "Kuwait has gone further than any of the Arabian peninsula countries in developing a national bourgeoisie which play a role in setting national policy."125 Thus, cabinet posts are usually distributed among the ruling family and the Kuwaiti merchant families. The ruling fam- ily controls the ministries of interior, defense, foreign affairs and information, while the rest are held by a mer- chant Oligarchy."126 In these cabinet posts, the merchant Oligarchy are in positions from which they can control, distribute and circulate political and economic power. Ismael points out that, "in fact, the council of Ministers provided the mech- anism for bringing into direct government participation and post-oil economic organization members of pre-oil dominant class."127 Further, she found in her study that most of 125Joe Stork, Middle East and the Oil Energy Crisis, (New York: Monthly Review Press, 1975), p.281. 126Naseer H. Aruri, ”Kuwait: Sociopolitical Develop- ment" in Foreign Policy and Defense Review, Vol. 2, No. 3 and 4 (American Institute for Public Policy Research, 1980) p.49. 127Jaqueline S. Ismael, Kuwait: Social Change in His- torical Perspective, (New York: Syracuse University Press, 1982), p.88. 83 the families of cabinet members were also members of major , , 128 shareholding companies. The Kuwaiti financial class is also benefitted by government construction projects. With some of their mem- bers in positions to make decisions on government contracts and others still in control of the private sector, this Class is in position to contract to undertake these projects at high prices. The private sector, which in other countries is often hostile to the govern- ment economic role, is totally pro- government in Kuwait, and welcomes govern- ment partnership and subsidies. Private businessmen are usually quite reluctant to share any venture which is not directly for the government or indirectly backed by it.129 The private sector profits from the government's role in the economy, especially its support of the finan- cial industry. At the same time, its contribution to the total economy is almost insignificant. As shown in Table 3.10, its activities are concentrated in financial activi- ties which formed 61.2 percent of total activities in 1973. lZBIbid, p.85-86. 129Sirhan, pp.150-151, 84 TABLE 3.10: ESTABLISHMENT CLASSIFIED BY FORM OF ECONOMIC ACTIVITY, 1973 (%) Type of Economic Activities % Agriculture and Fishing 2.3 Mining and Quarrying 0.1 Manufacturing Industry 14.2 Electric, Gas and Water -- Wholesale, Retail Trade, Finance, Insurance and Real Estate 61.2 Transportation and Communication 1.3 Construction 1.8 Services 19.0 SOURCE: M.W. Khouja and P.G. Sadler, The Economy of Kuwait, 1979, p. 127. 85 Developing the financial market is considered a major aim of the government of Kuwait. The government participates in 38 shareholding companies at a share amounting to 310,984 million Kd.130 Thus, the growing financial institutions actually act as links between the local Kuwaiti market and the international market. In this context, Ismael says: By 1976, the commercial banks had 38.6 percent of total assets in foreign assets, the specialized banks had 35.0 percent of total assets in foreign assets and the investment companies had 62 percent of total assets in foreign assets. It is especially through the investment companies, then, that the country's vast financial 131 resources are funneled into the world market. Table 3.11 demonstrates that large percentages of local capital are invested abroad, especially in the U.S. and Western Europe, while domestic investments are relatively small, compared to foreign investments. Further, a survey carried out by the Foreign Investment Office in the United States shows that the government of Kuwait was the most Visible OPEC investor. The Kuwait Investment Company (KIC) half owned by the government, "accounted to five transactions, 130Annual Statistical Abstract, Kuwait, 1981, p.301. 131Ismael, Social Change, p.99. 86 TABLE 3.11: INVESTMENT COMPANIES' CONSOLIDATED BALANCE SHEET 1976 % 1977 % 1978 % 319.3 470.5 611.0 Cash and balance with local banks 34.4 10.7 63.4 13.4 75.0 12.2 Loans and discount; to residents 22.0 6.6 34.3 7.2 52.0 8.5 Local investment 40.9 12.8 56.5 12.0 78.0 12.7 Foreign assets 199.9 62.5 274.5 58.6359.5 58.1 Other assets 24.4 7.4 41.8 8.8 46.5 7.6 SOURCE: Ministry of Finance and Central Bank of Kuwait. Annual Economic Report, 1980. all in the real estate sector--with four revealing values of about $65 million. Most importantly, the purchase of Kiaw Island in South Carolina for $17.5 million in 1974.132 In 1979, Kuwait's financial assets totaled $48,700 million, of which two-thirds was held abroad.133 According to the Chase World Information Corporation, Kuwait acquired between $1 million and $50 million in the stocks of almost all the top 500 U.S. industrial companies. In 1978, the Morgan Guaranty Trust Company alone handled 132International Currency Review, VOl- 12. nO-lo1980' p.24. 133 Middle East Economic Digest, Feb. 20 1981, p.6. I 87 $700 million for Kuwaiti investors.134 Private Kuwaiti in- vestors have invested 430 million pounds in London.135 It is evident that the Kuwait government plays a role in strengthening and fostering the development of a finan- cial class that is tied to the international market. Thus, this class invariably structures internal conditions to favor the international market and is generally antagonistic to any real domestic development that might affect its posi- tion. "As a class, in fact, peripheral capitalists in Kuwait are dependent upon maintenance of the structure of dependency and fundamently antagonistic to any development of product- . . . . 136 ive forces in Kuwait that alter this structure." Capital Accumulation And Uneven Development Kuwait presents a pattern of development that has been generated from its subordinate role in the international division of labor. The use of capital surplus that Kuwait 134 Ibid, p.6-7- 135 Halliday, 1975, p.426- 136 Ismael, 1982, p.101. 88 enjoys from exporting oil, in real fact strengthens the dependency of the country in the international market, where its capital surplus in various ways finds its way out of national boundaries. Actually the surplus capital and its foreign investment has made the economy additionally vulnerable to the international market. Sirhan states that, "Kuwait is so closely integrated into the international capitalist economic system that its whole survival, econ- omically, depends on its place in, and on its vitality to, that system.137 It is evident that large amounts of oil-money are being invested in financing imports and increasing depen- dency on the world market. Expenditure on imports reached a high proportion in 1977, rising to 45 percent of GDP expenditures. There is a relation between increases in oil revenues and the value of imports, as shown in Table 3.12. Capital imports increased from 15 percent in 1974 to 29.4 percent in 1975, while consumer goods accounted 138 for 42.9 percent of total imports. The high ratio of 137, Sirhan,p.185. 38 Annual Statistical Abstract, 1981, p. 215. 89 TABLE 3.12: OIL REVENUES AND VALUE OF IMPORTS (Million Kd) Year Oil Revenues Value of Imports 1973 543.9 311.0 1974 2,056.5 455.0 1975 3,528.0 693.0 1976 2,598.276 972.0 1977 2,575.361 1,387.0 1978 3,036.079 1,264.0 SOURCE: Annual Statistical Abstract, p.225, 1981. consumption, in real fact, doubled the dependency of Kuwait and, at the same time, produced a pattern of consumption that creates in Kuwait the present consumption values of the world capitalist system:139 This is indicated in the consumer rate, which rose 0.6 percent from 1960 to 1970, and during the seventies accelerated at an annual rate of nearly 18 percent in 1970-79.140 139- Immanual Wallerstein, (ed), World Inequality, (Montreal: Black Rose Books, 1975). 140 . . . Jahangir Amuzegar. "Oil Wealth: A Very Mixed Blessing". Foreign Affairs, vol. 60, no. 4 (Spr. 1982) p.822. 9O Consumption patterns are, in real fact, an outcome of development strategy adopted by the government. The financial class reinforces such patterns of consumption, since they control trade companies. The development strategy, that is, consumption bound, is in part an outcome of organic links between in- ternational capitalism and family corporate business. The cycle of consumer development makes it possible for the business families and their collaborators to engage in highly profitable trade, contracts, and real estate projects. 141 It has become clear that patterns of development which are oriented toward strengthening ties with the world market are a function of the class structure of Kuwait's society. The development of a productive economy would be a difficult task within the existing class formation of the society. Such patterns of development are reflected in the distribution of the labor force that helps to maintain the structural priviledges of the dominant class. This phenomena will be discussed in the next two chapters. l4h.H. Nagi, "Development With Unlimited Supplies Of Capital: The Case of OPEC". The Development Economies, Vol. XX, No. 1(1982), p. 10. CHAPTER IV DEMOGRAPHIC AND SOCIAL STRUCTURE The expansion of the economic sector, mainly due to the discovery of oil, led directly to increased importation of foreign workers to Kuwait, since the domestic labor force could not meet the labor demands of the new economy. Newly heterogenous demographic patterns began to develop with this inflow of foreign workers. The task of this chapter is to examine various aspects of Kuwait's indigenous demographic structure, in relation to this immigrant population, as well as the new social structure which resulted. Population Growth Official data, about the characteristics of Kuwait's population before 1957, do not exist. Population data for pre—l957 periods were provided, mainly, by the British and other European travelers, and are only estimations. The population in 1831 was estimated to be 4,000 persons, rising to 120,000 by 1947, with an estimated annual growth rate of 142 2.7 percent. The first official census was done in 1957 142 C.A. Sinclair, "Education in Kuwait, Bahrain and Qatar: An Economic Assessment". (Ph.D. Dissertation, London: Durham University, 1977), p.39. 91 92 by the Planning Board in Kuwait and the last one was done in 1980. The census of 1980, for official reasons, was not published in detail for the public. As shown in Table 4.1 the total population increased from 206,473 in 1957 to 1,355,827 in 1980, more than a 500 percent population increase over twenty-five years. The growth rate for the years 1960-1970 was 9.8 percent and dropped to 6.0 percent during the years 1970-1979.1431' he growth rate of the non-Kuwait population is higher than that of the Kuwaitis, and the fluctuations in this growth rate can be explained by shifts in job opportunities and labor market demand. As shown in Table 4.1, the growth rate for Kuwaitis for the period 1957-1961 was 9.2 percent, which dropped to 6.4 percent during the period 1970-75, while for non-Kuwaitis 1970-75 growth was 5.9 percent and increased to 7.58 percent during 1975-1980, due to good job opportun- ities, especially in the infrastructure which increased pro- jects during this period, consistent with revenue increases resulting from rising oil prices. The increase in Kuwait's population is due to two main factors; (1) natural increase and (2) naturalization. Natural increase has been high among Kuwaitis, compared to non-Kuwaitis. The rate for Kuwaitis is 4.8 percent, while 143 The World Bank, World Development Report 1981 (New York: Oxford Press 1981), p.167. .Hm.a .Hmma .Dflmzsx .Dumuumn< HmOABMHumum Hmscc< "momDOm .NHN .Q Amhma .mwmnm Uflemcmua wxuo» 3mzv Nddmumoemo wo amauoumz 0cm moonuw: one A.Umv Hawzxooum cumzom CH Ammv mm- o» oCHououom omumHSUHmU omumnma Mom mumu nusouox cm 93 kmm.mmm.a mm.» m.mm Nos.mmk :mv.m m.Hv moo.~mm cams smm.vmm m.m o.~m mak.-m ¢.o v.ks mmo.~sv mums www.mms o.m o.mm oom.aam m.m o.kv mmm.svm cams mmm.kwv m.Ha m.mm om~.kvm o.m H.k¢ mmo.o- moms HBN.HNm m.va m.mv NHk.mmH N.m v.om mom.ama Hows mkv.oo~ .. o.mv Hmm.~m .. o.mm NNB.MHH kmma GOHUMHSQOQ wumm HHHMSDX wumm HUHM3D¥ HMO.» Hmuoa Buzouu x -coz Buzouu x Hmscc< Hmscc< ommankmma mmam» amaomsmm mom iHeHazsxuzoz nza HBH cademsm umUMDOm o.o0s o.ooa m.vmm m.mvm m.mvm o.oo~ c.oos n.-m ~.nom ~.>om s.oo~ H.oosa.-- m.mm~ m.nm~ sauce k.s o.s o.m~ o.m o.s ~.o m.o v.e m.~ m.H m.~ v.~ N.HH m.m n.m awao 6cm ms s.~ v.~ H.v~ v.o~ n.m~ m.s o.s n.m e.m m.s m.~ s.m v.vH o.a v.5 vonmm m.m~ ~.as v.sns s.~o n.mo~ H.ms m.o~ a.mo~ ~.~m a.sa m.m~ ~.ma m.~o m.a~ o.mm emumm o.m~ m.m~ m.~ss a.mvs m.meH o.mm m.m~ w.-ms s.mm o.mm k.o~ m.H~ s.HoH s.~m m.me em-o~ m.m n.m o.sm o.sv w.vv w.o ~.n ~.pm v.m~ m.s~ o.o~ e.oa m.mv v.m~ m.m~ mslms ~.mv m.vv m.o-e m.os~ H.-~ ~.~m a.mm q.no~ v.~o~ o.oos H.om «.mv m.mm~ «.mas H.mss vs-o mama ohms mums chad mama ohms msoso x x sauce L z x x smuoe a z x a sauce L 2 was sauce ausmzsxucoz assmzsx mhma 92¢ ohm- .xmm D24 m0< >m ZOHBhave been given Kuwaiti citizenship. 145For more detail about the historical development of education in Kuwait, see Fauzia Alabdulghafoor, The Develop- ment of Education in Kuwait: 1912-1972, (Kuwait: Alfalah Publisher, 1978). 97 TABLE 4.3: KUWAIT'S ILLITERATE POPULATION BY SEX FOR 1957 AND 1975 (10 YEARS AND OVER) Non- Kuwaiti % Kuwaiti % Total % 1957 M 17,834 46.4 30,722 49.8 48,556 48.5 F 26,168 74.2 5,757 47.5 31,925 67.3 Total 44,002 59.7 36,479 49.4 80,501 54.6 1975 M 44,880 30.0 61,889 27.5 106,769 28.5 F 88,734 59.1 42,971 31.3 131,705 45.8 Total 133,614 44.6 104,860 28.9 238,474 36.0 Source: Annual Statistical Abstracts, Kuwait, 1981, p.49. 98 Generally speaking, the educational attainment of most Kuwaitis is low, as appears in Table 4.4. A majority (59 percent) of Kuwaiti adults have not had six years of education. The non-Kuwaitis tend to be better educated (only 28.9 percent of non-Kuwaitis were illiterate in 1975, as compared to 44.6 percent of the Kuwaiti population). The percentage of university educated persons in both groups, however, is relatively low. Only 1.3 percent of Kuwaitis had acquired a university degree 1J11975; for non-Kuwaitis this figure was 6.4 percent. Social Divisions An important aspect of the demographic structure of Kuwait is the clear social division among the Kuwaiti and non-Kuwaiti populations. It is a society where the native population are a minority and the immigrant population com- prises the majority. The social division has created a fear among Kuwaitis of being overcome by foreign elements in their own country on which they are dependent. The govern- ment, in order to increase the proportion of Kuwaitis in the total population, encourages childbearing through offer- ing financial rewards; an additional amount is added to Kuwaitis'monthly salaries for each child. Social divisions exist, not only between Kuwaitis and non-Kuwaitis, but also among Kuwaitis themselves. There 99 .um.d .Aomma .Eam: EOOHU "coocoqv .uCOEQOHm>ma mo wflmfluu one "noonsz omu< .uamaocam .«.O can mxuflm .m.h "mumaom coaumosow >umocooomuumOQ CH OOH-oucm mmonp mops-UCHt o.oos s.o m.aa «.ma m.ms m.a~ m.m~ issmusmas omo.~om ko~.m~ mm~.mv Hmm.as ~sa.mo mam.kk oom.voa asamsasusoz o.ooa m.a m.m m.HH H.- ~.aa m.ss issmusmas mma.mm~ mam.m mom.ma mas.mm mma.so oam.mv sas.mma asamsas awn-OH. OOMOOQ COHHOHQEOU mvaHMHwth OUMUHMHHHOU mumumufld OHMHmHflHHH wuflwum>fica t>umpcoumm mumflomeumuCH >umeaum maumsm Hmsoasmoaom muasmsoaumz Amm>o az< mucus oav mama 2H ;sHazax zH monemH:m.quusom m.~m o.om o.mh m.- o.o~ m.mm ummCUHm m.v o.v H.m o.mH N.mH H.mH Cum 0 m.m m.> m.NH >.NH N.HH cum N.mm o.m H.H N.HH m.m o.m Cub H.H m. v.H N.m m.m h.b Cum 0 m. N.H m.m N.m o.o Cum o.~ H. m. h.@ o.» m.m Cuv n.v o om. m.v H.m v.v Cum 0 b. ca. h.m o.v ~.m CCN o m.o ~.o m.m m.~ m.H pmmuoom UEOUCH OEOUCH OEOUCH mmHumHmw COHumesMCOU OEOUCH mHHqu xUOum wuumdoum mmmCHmsm UCm moons Hmuoe Hmuoe >HHEmm mmmfizm BszOmZOU wm Aezmommm ZHV .manmama zH onsmmHmsmHm mzoozH maomHmnmmm sHazms "m.a mamas 110 satisfied with an abundance of goods and does not represent a real threat that might affect the stability of the system in the short run. Further, the state has extended the size of the middle class by providing employment in public bur— eaucracy, creating a Class dependent on maintaining govern- ment stability.159 Nevertheless, a small proportion of this class has formed an oppositional group to the traditional power structure, but its impact has been minimal in a state with an abundance of capital. The indigenous working class is small in size and con- sists of unskilled and skilled workers who are distributed in oil and related industries and in the government sector. It is a government-designed policy to shrink the size of this class by increasing the country's dependence on imported workers who are more controllable.160 159Sirhan, p.93. 160Halliday, Arabia Without Sultans, p.434. CHAPTER V THE LABOR FORCE The major objective of this chapter is to discuss various aspects of Kuwait's indigenous labor force, in light of its imported labor force. The economic distri- bution of the labor force, as well as its occupational structure, will be examined. Special emphasis is given to employment in the government bureaucracy, as well as the indigenous labor force in the new industrial sector. The educational system is also examined as a source of trained manpower. Structure of the Labor Force Background Kuwait subscribes to the international manpower classification system so that manpower, according to the Ministry of Planning, is classified into two major groups: 1, those in the labor force which is divided into two categories: 111 112 A. employed persons, which includes self-employed and paid employees and unpaid family workers. B. unemployed persons. 2. those not in the labor force, including full_time students, persons able to work but not willing to work be- cause they have other support not classified as employment, and housewives engaged in household work. Table 5.1 shows that in 1975 the labor force included 304,582 persons, of whom 6,167 were classified as unemployed.161 The labor force was 30.6 percent of total population, with female workers comprising only 11.6 percent (35,306:269,376) of the total labor force. Kuwait is highly dependent on foreign labor that ac- counted for almost 70 percent of the total labor force in 1975. In the two groups,Kuwaiti and foreign workers, con- siderable variations appear (See Table 5.2). Indigenous workers are 19.5 percent of the total indigenous population (472,088), while foreign workers are 40.7 percent of the total non-Kuwaiti population (522,749). Another varia- tion is the differing participation of women. The par- ticipation rate for non-Kuwaiti women is very high com- pared to Kuwaiti women and the low participation rate of Unemployed Kuwaitisnumbered 4,873 persons during 1975. Employment is by individual choice since the Consti- tution stipulates that every Kuwaiti has a right to work and the government is the employer of last resort. 113 .Ammuoamumcoo. Hmma .sommsmsa Hmuasmaamsm Hmacca "mommom m.vmm o.Hmv m.mvm m.mm >.mmm n.m- «.mHm 0.0m o.vom ~.mm v.mm~ mhmH n.mmn m.mHm m.mHv m.vm m.mov m.mmH o.~mm m.mm N.~vm m.oH o.m~m osmH m.hmv o.HwH m.mmm n.0o o.mm~ H.Hm m.~mH v.mm m.va m.m m.th mme Hmuoe mHmemm OHmz COHH Hmuoa OHmemm mHmz COHu Hmuoe meemm mHmz mumm» COHHMHSQOC Hmuoe IMHCQOC Co30dcmz IMHCQOC mouom Coomq m0 x no x AmQZass a.ma a.aa m.oa m.o s.o m.o a.a m.m a.o smmmsoommiwaosa 0.0a m.aa o.m a.m m.» a.s smmosoumm ~.m H.m m.aa a.m o.m m.m m.m H.m ~.m mumammsmmssm m.oa m.m ~.aa ~.m m.» m.om s.m m.m m.m smmaasm m.a~ a.m~ m.m~ o.am m.om N.am m.Hm m.km o.mm muss: mannama m.am m.~m m.mm a.mm o.mm H.aa H.aa m.~a m.am mammmuamam sauce auamzaa asamzaa amsoe asamzas asamzaa sauce Humasaa auamsas msmscaassa ICOZ ICOZ ICOZ HMCOHHMUDUB cams cams mmma mama .oama .mmmH mom ARV BZMZZHHuo< UHEOCOUm mama mama mmma amma mhmH OB hmmH .ssa>aeoa Oazozoom am .momom momaa mmozmonza uh.m mdmde 123 7.3 percent in 1975. Manufacturing, at 3.6 percent in 1957, had increased to 10.2 percent by 1970, but fell sharply to only 2.6 percent from 1970-1975. Agriculture and fishing was the only sector (other than services) that showed an overall percentage gain,from 2.1 percent in 1957 to 4.6 percent in 1975. It is evident from Table 5.7 that indigenous labor is distributed in an unbalanced manner. It has been mar- ginalized from participation in the newly industrialized sectors that arose in the wake of the discovery of oil. This is illustrated in Table 5.8, where the indigenous ' labor force proportions in the oil industry, manufacturing, construction and utility sectors are 0.6, 0.8, 0.6 and 0.7 percent, respectively. Non-Kuwaitis in the labor force outnumber Kuwaitis in all economic sectors except agricul- ture and fishing and this is also the case on a percentage basis. Employment in the Government Sector The government sector is considered the largest . 167 employer and employs 11.7 percent of the total population. Government workers comprise 76.2 percent of the total in— digenous labor force and 29.6 percent of the total non—Kuwaiti 167Tarik Alrayes. "Authority and Influence in the Government Civil Service in the State of Kuwait",(Ph.D. Dissertation, Claremont Graduate School, 1979) p. 18. 124 TABLE 5.8: PERCENTAGE OF KUWAITI AND NON-KUWAITI EMPLOYMENT IN EACH ECONOMIC ACTIVITY, 1975 Economic Activity Kuwaiti Non-Kuwaiti Total Agriculture & Fishing 1.3 1.2 2.5 Mining & Quarrying 0.6 1.0 1.6 Manufacturing 0.8 7.5 8.2 Construction 0.6 10.2 10.8 Elec.,Gas & Water 0.7 1.8 2.4 Commerce 2.1 11.1 13.3 Transportation, Stor- age and Comm. 1.5 3.7 5.3 Services 21.5 34.4 55.9 Total 29.1 70.9 100.0 SOURCE: Annual Statistical Abstracts, 1981. 125 or foreign labor force (See Table 5.9). One major rea- son for the overconcentration in the public sector is the state's policy of encouraging Kuwaitis to work for their government. Another is a constitutional provision that every Kuwaiti has an obligation to work and that it is the obligation of the government to provide its citizens with jobs, in theory making the government the employer of last resort, but actually making it the first, best choice of most Kuwaitis. Article 41 of the Constitution contains this provision: Every Kuwaiti has the right to work and to choose the type of his work. Work is a duty of every citizen necessi- tated by personal dignity and public good. The State shall endeavor to make it available to citizens and to make its terms equitable.168 TABLE 5.9: EMPLOYMENT IN KUWAIT'S GOVERNMENT AND PRIVATE SECTORS, 1975. Number of Employees Government Private Government Nationality Sector Sector Total Percent Kuwaiti 66,235 20,736 28,971 76.2 Non-Kuwaiti 62,783 148,661 211,444 29.7 SOURCE: Annual Statistical Abstracts, 1981. l6 . . . . %onstitution of the State of Kuwait, (Kuwait: Government Press, 1962), p.11. 126 Employment, according to the State's policy, is a means ofdistributioncm'wealth among its citizens}69 It is not, in real fact, based on economic standards, nor designed to meet the needs of the country as a whole. This strategy of meeting its individual citizens' economic needs has been criticized by The World Bank. The Kuwaiti labour force is employed by the government with the objective of providing employment as a social measure. At the time, the public sector is experiencing a shortage of technically qualified and trained man- power. 170 In terms of educational attainment, almost 55.4 percent of the indigenous labor force in the government sector lacks any formal educational certificiate. And, 6.4 percent of indigenous government staff have university degrees, while 18.7 percent non-Kuwaitis have university degrees (See Table 5.10). Classified by occupation, 30.4 percent of indigenous government workers are in clerical positions, 10.1 percent of non-Kuwaiti workers have clerical positions. Professional 169Birks and Sinclair, Arab Manpower, p. 347-348. 170World Bank, Report on Long-Term Development Strategy: Kuwait, (Washington, D.C., 1981) p.54-55. 127 TABLE 5.10: EMPLOYMENT IN THE GOVERNMENT SECTOR BY EDUCA- TIONAL ATTAINMENT, 1975 (BY PERCENTAGE) Educational Kuwaiti Non-Kuwaiti Total Attainment % % % Illiterate 24.1 26.2 25.7 Read and write 31.3 28.5 29.6 Primary 8.1 3.8 5.5 Intermediate 13.3 24.7 8.2 Secondary and Below University Level 16.8 17.4 17.2 University Level 6.1 17.4 12.9 Post Graduate 0.3 1.3 0.9 SOURCE: Annual Statistical Abstract, 1981, p.131 (Constructed) 128 and technical indigenous workers equal 21.5 percent, while 32.0 percent of non-Kuwaitis were in this category. Similar percentages were found for the Production, Transport, and Laborer category. Percentages of service workers were al- most even. There is a tendency to employ Kuwaitis to work in administrative and office work, "because the government desires to keep responsibility in the hands of Kuwaitis, it gives them managerial positions even if they do not have the ability required."171 In fact, the government tends to hire Kuwaitis in administrative and managerial positions, even atthe expense of other sectors of employment. Employment in the Industrial Sector Employment of the indigenous labor force in the in- dustrial sector is almost insignificant. Their represen- tation is very minor. Oil Industry The oil industry was the first modern industry that started operation in Kuwait. Given the fact that the oil Jim-Tarik Alrayes,"Authority And Influence? p.36 129 TABLE 5.11: GOVERNMENT EMPLOYEES BY OCCUPATION 1976 (BY PERCENTAGE) Kuwaiti Non-Kuwaiti Occupation % % Professional, technical and related workers 21.5 32.0 Administrative and managerial workers 0.9 0.04 Clerical and related workers 30.4 10.1 Sales workers 0.2 0.02 Service workers 23.8 23.9 Agriculture, animal husbandry and:fishing 0.7 2.6 Production workers,. transport equipment operators and.1aborers 22.5 31.3 SOURCEC Annual Statistical Abstract, 1981, p.130 (Constructed) 130 industry operates in an environment which has not developed modern industrial relations of its own, it is an industry totally isolated from the local environment. Its manage- ment, labor and technology are all imported from outside Kuwait's boundaries. It is the oil companies' role to provide all the requirements for operation of this industry. Part of this role is providing labor which the local environment was not able to provide. It has been the companies' strategy to import workers with various needed skills from outside the country. Aside from the local shortage of trained man— power, the oil companies deliberately avoided developing indigenous trained manpower. As a result, local attitudes developed in opposition to the oil companies because they were regarded as exploiters of domestic natural resources, without investing in developing the domestic economy. These negative attitudes reinforced the oil companies' tendency to be cautious in hiring indigenous workers, repeating a negative cycle. The tensions thus produced have been ex- plained by Badre and Siksek: ...management finds itself isolated in the sense that it cannot discover or create an indigenous management-milieu through which its point of view can be expressed naturally and with political effectiveness. When one adds to these circumstances the fact that the community which provides the labor force is itself 131 in political and ideological flux, with one of the strongest drives activating it being the desire to eliminate all foreign domination, one can see not only how conflicts between labor and management arise but how easily they can be shifted from purely industrial to the more tense and more complicated political plane.l72 Under these circumstances, the oil companies found that imported labor, especially Indian and Pakistani workers, more appropriate for their needs, "due to their knowledge of English, from their past training under British rule."173 High positions were reserved to Americans and the British, and Europeans, while indigenous labor representation was very minor (Table 5.12). Those Kuwaitis who did go to work in the oil companies found that they did not obtain the highest positions. When these local nationals complete their local training programs, or secure the desired professional degree from foreign university, they find that their chances of promotion to the top super- visory and executive posts in the oil companies are strictly limited. 174 l72A1bert Y. Badre and Simon Sikseck, Manpower And Oil in Arab Countries, (Lebanon: Economic Research Institute of American University, 1959), p. 19. 173Ibid, p. 37 174Ibid, p. 108. 132 TABLE 5.12: EMPLOYMENT IN KUWAIT OIL COMPANY (K.O.C.), 1966 (THE FIVE HIGHEST GRADES) Grade Nationality No. Total 20 (highest) American 3 12 British & European 9 21 American 2 4 British & European 2 22 American 2 British & European 19 23 Kuwaiti 1 Arab 1 23 American 6 British & European 32 41 Kuwaiti 1 Arab 11 24 American 4 British & European 97 118 Kuwaiti 4 Arab 13 25 American 9 British & European 136 170 Kuwaiti 9 Arab 25 SOURCE:Altaliah(Weekly in Kuwait), July 29, 1970. 133 While Table 5.12 presents 1966 data, the numbers of indigenous workers in oil companies are still insignificant. For instance, in 1978 indigenous workers in the Kuwait National Petroleum Company numbered 489 out of a total of 75 2,949 employees} Imported workers still seem to be pre- ferred. Other Industries The indigenous labor force, as has been illustrated, reflects severe distribution imbalances, with the majority concentrated in the service sector, mainly in government bureaucracy. A small number are employed in the industrial sector but outside of the oil companies, this sector is totally left to the imported labor force since it requires heavy and manual work. Tables 5.13 and 5.14 illustrate the marginal role of indigenous labor in the newly industrialized sector, that was developed after the discovery of oil. 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