Political Economy of the Middle East and North Africa IA 3300 Summer 2012 Professor Akacem [email protected] June 4th-July 6th Office: Econ 216-A Office hours: Monday 12:45 p.m. to 2:45 p.m. http://Culearn.colorado.edu
Please Note: Leave your laptops at home. I generally do not encourage their use in class. If you have a documented need for them, please do see me. Otherwise, the evidence shows that these are used for things that have nothing to do with class and they distract others. The same goes for cell phones and texting. There is a zero tolerance for their use.
Email: Generally speaking, it is much easier to come to my office and or right after or before class if times allows. Avoid messages such as “I missed class, what did I miss”. If you do miss class, make sure and get the notes from another student. When sending an email message, please do include a subject such as our class, question etc… Messages without anything on the subject line may not be answered or caught in the spam filter. Finally, identify yourself in the first line of your message: example: this is John Smith from your Pol Economy of the Middle East class. With two classes, it helps to immediately know who the student is and which class the question is about in order to facilitate a complete and a quicker response.
Objective of the Course:
The course will help you understand and discuss the relevant economic and political development issues that are important to the Middle East and North Africa region. The Arab spring caught everyone by surprise and it amounted to a Tsunami raging through the region toppling governments and leaders who had run their countries for decades.
We will discuss a number of issues such as what are the economic development constraints faced by this region? Despite the vast oil and gas wealth that the region generates, it still lags behind regions and countries that are not endowed with natural resources. To what extent does it suffer from the resource curse and what policies can be formulated to address it? Should oil revenues be distributed directly to the citizens? If so what are the implication to oil pricing and production strategies? Is it even feasible? Would this mean the end of OPEC? What implication would this have to the political system? The Middle East and North Africa has a youth bulge that requires the economies of the region to generate a large number of jobs far beyond its capability. What policies and/or reforms should MENA undertake to address this problem? Complicating matters, the education system fails to produce graduates that are well suited for demands of the
1 labor market. Should the whole education system be reformed? Is this related to an incentive problem? The Gulf countries rely on a substantial amount of expatriate labor. Is this sustainable in the long run?
Main Texts:
1. Political Economy of the Middle East, Third Edition, by Alan Richards and John Waterbury, Westview Press, 2008, third edition. Referred to below as RW.
2. Islam and Mammon by Timur Kuran, Princeton University Press, 2004. Referred to below as TK
3. Free on line: Regional Economic Outlook: Middle East and Central Asia, the From the International Monetary Fund:
Regional Economic Outlook as of April 2012, post Arab spring: http://www.imf.org/external/pubs/ft/reo/2012/mcd/eng/pdf/mena-update0412.pdf
Main regional economic outlook: http://www.imf.org/external/pubs/ft/reo/2011/mcd/eng/pdf/mreo1011.pdf
Optional: May be on reserve if available.
The Elusive Quest for Growth, William Easterly, MIT press, 2002, Chapter 4, Educated for What?, chapter 11: Government can kill growth, chapter 12 Corruption and growth. Referred to below as WE.
On Blackboard:
3. Waking from its sleep and the Gulf, special reports on the Arab World, The Economist 2009 on Blackboard, under Economist special on the Gulf/Arab world folder.
4. On Reserve if available:
Arab economies in the twenty-first century, by Paul Rivlin, Cambridge University Press 2009. Chapters 2, 4 and 13. Referred to below as: PR
The Prize: The Epic Quest for Oil, Money and Power, Daniel Yergin, A Touchstone Book, 2008. Chapters 31-36 and epilogue, pp 615 to 773. Referred to below as DY
Video Series:
1. The Prize:
This a prize winning documentary about the history of oil from its beginning to the creation of OPEC, through the two oil shocks and the geopolitics of oil, to the invasion of
2 Kuwait by Iraq in 1990. These will not be viewed in class to save on class time but you must view them on your own via the course reserves and do not wait until when we get to the oil markets unit to do so. The password is: pemena2012
2. The House of Saud: This is also posted on course reserves and can be viewed via streaming video. This should be viewed immediately.
3. Readings and data sources for the class in general:
Arab World Competitiveness Report 2010 from The World Economic Forum, Geneva. http://www3.weforum.org/docs/WEF_GCR_ArabWorldReview_2010_EN.pdf For data on the region from the UNDP and the Human Development Reports and Development indicators for the region: http://hdr.undp.org/en/statistics/
Sources on oil: An excellent source for international oil data from BP and other sources: http://www.bp.com/productlanding.do?categoryId=6929&contentId=7044622 The Joint Oil Data Initiative: http://www.jodidata.org/ Energy Information Agency: http://www.eia.doe.gov/ EIA's country's analysis briefs: http://www.eia.doe.gov/emeu/cabs/contents.html The International Energy Agency (OECD, Paris) (do not confuse with the EIA, part of the US Department of Energy) http://www.iea.org/ The Oil and Gas Journal: http://www.ogj.com/index.cfm The Oil and Gas Journal International: http://www.oilandgasinternational.com/ US Geological survey: Energy resources program: http://certmapper.cr.usgs.gov/rooms/we/index.jsp
The Gulf 2000 Site: Covers the following countries: Bahrain, Iran, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates: http://gulf2000.columbia.edu/
The IMF: http://www.imf.org/ Page where the list of recent Article IV reports are found: http://www.imf.org/external/np/sec/aiv/index.htm Country information page: http://www.imf.org/external/country/index.htm Finance and Development:
3 http://www.imf.org/external/pubs/ft/fandd/fda.htm International Monetary Fund: Regional Economic Outlook: http://www.imf.org/external/pubs/ft/reo/2010/mcd/eng/mreo1024.htm Special issue of Finance and Development on the Middle East and North Africa http://www.imf.org/external/pubs/ft/fandd/2003/03/index.htm The World Bank: http://www.worldbank.org/ Middle East and North Africa page: http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/MENAEXT/0,,menuPK: 247603~pagePK:158889~piPK:146815~theSitePK:256299,00.html
Iran: A special from the N.Y. Times http://www.nytimes.com/library/world/mideast/041600iran-cia-index.html.
Other Sources: It helps if you have access to or use the library to consult these publications: The Wall Street Journal The New York Times The Economist
4. Course Outline: Below is the list of topics that we will cover. Material will be covered and added as events warrant.
RW=Richards and Waterbury
Week 1:
1. Introduction, Case Study: The Saudi Question, viewed in class. From the New York Times, Times Topic: Saudi Arabia http://topics.nytimes.com/top/news/international/countriesandterritories/saudiarabia/index .html?scp=1-spot&sq=saudi%20arabia&st=cse
Regional Economic Outlook: Middle East and Central Asia, From the International Monetary Fund: http://www.imf.org/external/pubs/ft/reo/2011/mcd/eng/pdf/mreo0411.pdf
2. RW chapter 1 and 2: Unfulfilled Promise, George T. Abed, F&D March 2003 http://www.imf.org/external/pubs/ft/fandd/2003/03/abed.htm
3. RW chapter 3: Economic growth and structural change
Recipes for Success: Dani Rodrik on How to Grow the Economic Pie http://www.imf.org/external/np/exr/BForums/2007/summary/112907.htm
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Getting the Diagnosis Right by: Ricardo Hausmann, Dani Rodrik, and Andrés Velasco found at: http://www.imf.org/external/pubs/ft/fandd/2006/03/hausmann.htm
Week 2.
4. RW chapter 4 Population and economic development: A major challenge for the region
Challenges of Growth and Globalization in the Middle East and North Africa, IMF, 2003. by George T. Abed and Hamid R. Davoodi. Found at: http://www.imf.org/external/pubs/ft/med/2003/eng/abed.htm
Demography and economics, chapter 2, Paul Rivlin
5. Exchange rate regimes, oil and economic development:
Dutch Disease: Too much wealth managed unwisely http://www.imf.org/external/pubs/ft/fandd/2003/03/ebra.htm#author
Choosing Exchange Regimes in the Middle East and North Africa by Abdelali Jbili and Vitali Kramarenko, (2003) International Monetary Fund http://www.imf.org/external/pubs/ft/med/2003/eng/jbili/jbili.htm
Should MENA Countries Float or Peg? Abdelali Jbili and Vitali Kramarenko http://www.imf.org/external/pubs/ft/fandd/2003/03/jbil.htm
6. The Gulf Cooperation Council:
GCC Countries: From Oil Dependence to Diversification by Ugo Fasano and Zubair Iqbal (2003)International Monetary Fund http://www.imf.org/external/pubs/ft/med/2003/eng/fasano/index.htm
Persian Gulf Myths by Graham E. Fuller and Ian 0. Lesser in Foreign Affairs, Volume 76, number 3, May/June 1997. http://www.foreignaffairs.com/articles/53044/graham-e-fuller-and-ian-o-lesser/persian- gulf-myths
You may need to access it through the library to get the whole article.
Democracy through oil. We will examine a privatization scheme and look at the whether this approach will work and how? Implication to financial markets, stock markets and oil production strategies.
Week 3.
5 7. A Political economy of Oil: Part One
Lecture: OPEC, OAPEC, GOPEC and Non-OPEC, the Hotelling rule, the Hubbert curve and the resource curse. Review of historical data, production, reserves and pricing.
The Prize: The Epic Quest for Oil, Money and Power, Daniel Yergin, A Touchstone Book, 2008. Chapters 31-36 and epilogue, pp 615 to 773. On Reserve.
World oil: Market or Mayhem? By James Smith, posted on Blackboard in the folder Articles on oil and oil markets.
Whose to blame for oil volatility. Used with permission. Posted on Blackboard in the folder Articles on oil and oil markets.
The perils of the Petro state, by Terry Carl, posted on Blackboard in the folder Articles on oil and oil markets.
Optional:
Take a moment to review the oil posters that are posted on Blackboard.
Does Saudi Arabia Still Matter? Differing Perspectives on the Kingdom and Its Oil By Shibley Telhami, Fiona Hill, et al. http://www.foreignaffairs.com/articles/58444/shibley-telhami-fiona-hill-et-al/does-saudi- arabia-still-matter-differing-perspectives-on-the-kin?page=show
Oil Boom Tests Producing Countries, by By Rolando Ossowski, Mauricio Villafuerte, and Paulo Medas http://www.imf.org/external/pubs/ft/survey/so/2007/res0830a.htm
Managing Oil Wealth Benn Eifert, Alan Gelb, and Nils Borje Tallroth http://www.imf.org/external/pubs/ft/fandd/2003/03/eife.htm
8. B: Political Economy of Oil: Part Two: Oil surplus and global finance
What happens to the oil surplus? Sovereign Wealth Funds, their role and impact on global financial markets.
Sovereign Wealth Funds: The Rise of Sovereign Wealth Funds http://www.imf.org/external/pubs/ft/fandd/2007/09/straight.htm
IMF intensifies Work on Sovereign Wealth Funds http://www.imf.org/external/pubs/ft/survey/so/2008/POL03408A.htm
Sovereign Wealth Funds: A Work Agenda, February 29, 2008 http://www.imf.org/external/np/pp/eng/2008/022908.pdf
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Mid-Term Exam: Material covered from 1 to 8. The exam will be on June 22nd, 2012.
9. RW chapter 5: Education and labor markets
“The Road Not Traveled: Education Reform in the Middle East and North Africa” MENA development report Executive Summary, The World Bank, 2007. http://siteresources.worldbank.org/INTMENA/Resources/EDU_Summary_ENG.pdf
This is also posted on Blackboard.
The Elusive Quest for Growth, William Easterly, MIT press, 2002, Chapter 4, Educated for What?
Optional:
Living Better Sena Eken, David A. Robalino, and George Schieber http://www.imf.org/external/pubs/ft/fandd/2003/03/eken.htm
Wanted: More Jobs by Edward Gardner http://www.imf.org/external/pubs/ft/fandd/2003/03/gard.htm
Week 4.
10. Part A: Financial markets: Part One:
Lecture on the role of financial markets, financial intermediation and monetary policy.
Financial Development in the Middle East and North Africa by Susan Creane, Rishi Goyal, A. Mushfiq Mobarak, and Randa Sab , 2003 International Monetary Fund in: http://www.imf.org/external/pubs/ft/fandd/2003/03/crea.htm
11. Financial Markets: Part Two: Islamic Economics and Finance: This may take a week or two.
By now you should have read Timur Kuran’s book on Islam and Mammon. We will discuss it and review it and will call on students to comment on it.
Lecture: Islamic Banking and Finance Overview of the Islamic banking model compared to the traditional Interest based model Implication to monetary policy, macroeconomic shocks.
7 Akacem’s paper and Op Ed from the WSJ on Islamic Banking Principles found on Blackboard under Akacem Op Ed folder.
Islamic Financial Systems by Zamir Iqbal http://www.imf.org/external/pubs/ft/fandd/1997/06/pdf/iqbal.pdf
Islamic banking and finance continued: material from the previous week
Week 5.
12. RW chapters 8 and 9: Central Planning and the Market
The Elusive Quest for Growth, William Easterly, MIT press, 2002, chapter 11: Government can kill growth, chapter 12 Corruption and growth.
Failed Legacies by Adam Bennett http://www.imf.org/external/pubs/ft/fandd/2003/03/benn.htm
The Washington Consensus as Policy Prescription for Development by John Williamson Senior Fellow, Institute for International Economics http://www.iie.com/publications/papers/williamson0204.pdf
Optional:
Arab Human Development Report 2003, Chapter 7 Socio Economic Structure. http://www.arab-hdr.org/publications/other/ahdr/ahdr2003e.pdf
13. RW, Chapters 11, 12 and 13: The nature of Arab Regimes, Failure of parties, the lack of a true political class and the Military and the state.
Will discuss the currents events in MENA starting with Tunisia, Egypt, Algeria and a few GCC countries and explore the incentive and moral hazard issues in these economies.
14. RW 14: Economics, religion and economic growth
Separation of Religion and state and implication to economic prosperity or lack of. Evidence from the Middle East.
For those students who wish to pursue this as a paper topic, read Timur Kuran’s latest book “The long divergence” just published.
Religion and Economic Growth by Robert J. Barro and Rachel M. McCleary Working Paper 9682 found at: http://www.nber.org/papers/w9682 through the campus library
People’s Opium? Religion and Economic Attitudes by Luigi Guiso, Paola Sapienza and Luigi Zingales Working Paper 9237 found at: http://www.nber.org/papers/w9237 through campus library.
8 If time allows: The Middle East and North Africa: What Next?
15. PR chapter 4 and 13.
Arab and Human Development Report, 2004, Chapter 5. http://www.arab-hdr.org/publications/other/ahdr/ahdr2004e.pdf
Book review presentations will be scheduled starting in the fourth week of the class. These should not be longer than 10 or 15 minutes. Every group should bring a hard copy of an outline to distribute to the class in addition to uploading it to CULearn by the due date. The presentations are not meant to be simply reading your cards or notes but rather a thorough discussion of the main ideas of the book, any critique, its relevance to our class etc… You need to be engaging and not merely read a report or your PPT slides to the class. Use of PPT slides is strongly discouraged.
The written book review is due on: June 29th, 2012. Late reviews will be graded down by one letter for each day that they are late including week end.
Final Exam: The final will be on Friday July 6th, 2012
Grading:
Each student will have to complete the following:
Two exams: 30% each A book review: 25% Presentation based on the book reviewed: 15%
A book review: Choose one book from the list below. You can do this in teams up to two students per team.
The Oil Curse: How Petroleum Wealth Shapes the Development of Nations, by Michael L. Ross, Princeton University Press, 2012.
Carbon Democracy: Political Power in the Age of Oil, by Timothy Mitchell, Verso 2011.
No War for Oil: US Dependency and the Middle East, by Ivan Eland, The Independent Institute, 2011.
Queen of the Oil Club: The Intrepid Wanda Jablonski and the Power of Information by Anna Rubino, Beacon Press, 2008
The Long Divergence: How Islamic Law Held Back the Middle East by Timur Kuran, Princeton University Press, 2011.
Why Nations Fail: The Origins of Power, Prosperity, and Poverty by Daron Acemoglu and James Robinson, Crown 2012
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The Quest by Daniel Yergin, Allen Lane, 2011.
The Globalization Paradox: Democracy and the Future of the World Economy, by Dani Rodrick, W. W. Norton, 2011.
Power Hungry: The Myths of "Green" Energy and the Real Fuels of the Future by Robert Bryce, Public Affairs, 2010.
The Black Swan, by Nassim Nicholas Taleb, Random House, 2007 (is The Arab Spring the ultimate Black Swan?)
Grading Policy
Grades will be earned on the following basis: Grade scale:
A 93.4-100 A- 90.0-93.3 B+ 86.7-89.9 B 83.4-86.6 B- 80.0-83.3 C+ 76.7-79.9 C 73.4-76.6 C- 70.0-73.3 D+ 66.7-69.9 D 63.4-66.6 D- 60.0-63.3 F less than 60
Your final grade will be according to the percentage of total points that you earn based on the above apportionment. For instance, if you earn 83.3 points of the total available points then your grade will be a B-.
Disabilities: Any student with a documented disability who needs to arrange accommodations must contact both the instructor and Disability Services at the beginning of the term
Please get familiar with the Honor code and the policies at CU by visiting the honor code website: http://honorcode.colorado.edu/
Any cheating and/or plagiarism of any kind will result in F for the whole course and a report made to the Honor office.
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