Power has been the major quest for human beings since
known history. In Stone Age, a person or a group who possessed any thing
(we can call "weapon") by which he could kill maximum number
of people was supposed to be a powerful leader. Week, feeble people had
to follow the instructions as they had no options.
The same thrust of power forced power hungry leaders
to fight two world wars as they had an urge to conquer the world; but
history tells no one could ever succeed. After World War-II world had
moved from armed power to trade powers that gave boost to capitalism.
The market economy, an economic term emerged and
became a new variable by which world's powerful nations proved
themselves as one of powerful countries with new identity like Japan,
Germany, China and others. According to market economy, a nation whose
Balance of Payments is in surplus has favorable Terms of Trade (TOT). To
improve terms of trade, countries increase their exports and try to
reduce their imports to target trade surplus.
To improve TOT few countries really worked hard and
innovated good marketable products and machinery and captured world
markets. Their hard work made them member of developed countries of the
world. Few countries were blessed by nature and were lucky to excavate
natural resources in the shape of oil and gas like Middle Eastern
countries. These developing countries improved their balance of payments
by exporting natural resources to the world. In return they imported
infrastructure, better communication system and enjoy excellent quality
of life. But there is nothing without ifs and buts in life; hence they
are exposed to concentration in only one sector/industry; as stated in
Rybczynski theorem, a renowned theory in international economy.
RYBCZYNSKI THEOREM (1955):
Acquiring more natural resources such as discovering
new oil fields can retard development in other industries because of the
Dutch Disease. Reliance on natural product only like oil, would cause
concentration in that sector only, which will attract labor, capital and
other input factors cannibalize the share of other sectors result
retardation and cause de-industrialization and biased growth in a
particular sector at the cost of others.
On the other hand, few great nations kept themselves
busy in more than one fields and diversified their portfolio by working
hard not only in consumer products, natural resource excavation but in
technology as well. They invested a huge capital in research and
developments (R&D) and well diversified their human resources and
capital in almost all walks of life. They advanced more in value-added
goods, whose raw material/inputs were mostly provided by less developed
countries (LDCs). They export value-added goods back to the same LDCs at
higher prices from where they imported raw material for the same. It is
only possible when one has innovative technology. Hence they enjoy good
profits that ultimately improve their Terms of Trade. Apart from
technology and novel products they invested heavily in oil producing
countries in the shape of foreign direct investments by setting up oil
So we discussed two different types of economies,
ones who diversified their resources in different industries and others
who concentrated only in one industry like agriculture, oil, gas etc.
Concentration infects their economies with Dutch disease, means over
relying on one industry and retardation in other industries that drag
them into de-industrialization in the long run. The price of their only
product is also decline as they sell primary products to developed
foreign countries. On the other hand, diversified countries put efforts
in all fields including defense industry and are equipped with high tech
weapons and artillery. In other words we can say that they are not only
strong economically but also have force to protect their resources,
assets and interests. The weapons of mass destruction and technology
pulled us back towards Stone Age, where the ritual was that leaders were
those who posses power either physical or material.
After World War-II someone asked G.B. Shaw, "How
do you think World War-III will be fought?" He replied, "He
did not know about WW-III but if World War-IV will take place, it will
be fought with stones and pebbles".
1991 Gulf war cost US an additional $61 billion.
However, $54 billion was offset by contributions of other members in
coalition. Two-thirds of the $54 billion was provided by the Saudi
Arabia, Kuwait and the UAE ($36 billion) with the remaining one-third
mostly provided by Japan and Germany ($16 billion). Payments were made
in one of two ways: with financial assets ("Cash") and with
services such as sealift and airlift ("In-Kind")
Conduct of the Persian Gulf War, Final Report to US Congress by US
Department of Defense; April 1992; Appendix P.
Saudi Arabia provided US Military with fuel, food,
water, local transportation and facilities, accounting for the
"In-Kind" assistance. This accounted for 25% of the Saudi
commitment to the US Military presence and was 71% of all
"In-Kind" contributions. The US paid roughly $7 billion, less
than 12% of the total war cost and less than half what Saudi Arabia and
Kuwait paid. Apparently war was financed by above countries; but does
anyone know, in fact who financed that war? The answer is global fuel
consumers. The price of oil before war was about $20 per barrel, which
rose up by 100% to $40 per barrel. Oil companies earned about $60
billion profit. Who own oil companies? The answer is obvious, those who
deserve ownership, means developed countries, which had already invested
huge initial capital in this sector in the form of infrastructure,
communication systems and improved living standards. It is lucid that
people bore the cost of war.
Gulf war gave hype to the economic wars. Few
political critiques stated that 2500 km long gas pipeline project is the
basic motive behind Afghan war. Now the Iraq war again targets Iraqi oil
reservoirs, a natural resource, a commodity. Iraq has more than 12
percent of the world oil reserves. Press has already pointed out that
American firms will take over control of Iraqi oil fields.
This situation takes us back to Stone Age, where
commodities were more valuable and people fought to gain control on
resources. The most powerful person was considered the one, who
possessed most lethal weapon. The same goes to for the present war that
is targeted for material acquisition and to gain control over natural
resource, a backbone of all human development, and power still lies with
most powerful nations who possess most lethal weapons. Technology is the
only difference. This is a lesson for less developed countries that they
should not rely on one or few primary resources but must diversify to
avoid Dutch Disease mentioned in Rybczynski theorem.