Another reader asks:
How much growth in the mideast is attibutable to the rise in the price of oil, how much to normal growth, and how much to the removal of the Saddam regime?
This is of course hard to calculate, but in my opinion the positive value of the second derivative is entirely due to oil.
So, as a thought experiment, what happens if the bubble pops?
in my opinion the positive value of the second derivative is entirely due to oil.
In the cases of Qatar and Dubai, the development economists and business professionals I have talked to think this is completely wrong. It certainly doesn't explain the worldwide success of Gulf firms like Dubai Ports World. Qatar and Dubai have forward-thinking, aggressive growth and education strategies that take into account the eventual disappearance of oil. There's a very big difference between, say, Lagos and Dubai.
Perhaps I haven't had sleep, but wouldn't the "second derivative" simply be implying that the increase in GDP growth is due to oil, rather than the increase in GDP itself(GDP growth being the first derivative)?
So, uhhh...what's the baseline GDP growth in the Middle East then? Just the growth that it's been having for the past 30 years? What is that number, close to zero?
And the building. People were sitting on wealth before. They were afraid to build anything due to the risk it would be stolen or destroyed. When I was in Kuwait a couple years ago, this seemed to be the consensus.
Some collegues also claimed what I think may be a downside of the boom. They'd hadn't developed good standard. The materials/methods they were using (for the many smaller buildings and homes) are expected to start crumbling before too long. If they had done things as the resourses became availible, they may have developed better techniques, skill, and standards.
You seem to share my suspicion that, to date, the removal of Saddam Hussein has made a negative contribution to the second derivative.