KUWAIT CITY — When a street protest broke out here last month, the demonstrators weren’t rallying against autocratic rule, unlike in other Arab capitals.
Instead, they chanted “Down with parliament!” Tying shut the parliament gates with the Kuwaiti national flag, they urged the country’s monarch to dissolve its freely elected legislature — a wish that came true hours later. Associated Press A Kuwaiti citizen Tuesday tries to symbolically close the gates of the country’s National Assembly in protest against Parliament members, and in support of the emir, in Kuwait City.
According to rankings by Freedom House, a U.S. pro-democracy think tank, Kuwaitis enjoy more political rights than anyone else in the Arab world. But democracy, at least the way it’s been practiced so far, is getting a bad name here. Kuwait is embroiled in a tumultuous power struggle between the ruling Sabah family and increasingly assertive lawmakers. The oil-rich country of 3.3 million people now is gearing up for its third parliamentary election in as many years, a poll that would usher in the nation’s sixth government since 2006.
Amid this constant upheaval, parliamentarians have blocked a slew of development projects, including a $7.5 billion deal with Dow Chemical Co., while imposing conservative Islamic restrictions. Kuwait’s infrastructure has steadily deteriorated, and the former regional hub now finds itself outshone by the absolute monarchies of Dubai, Abu Dhabi and Qatar, where more-liberal social rules and more-efficient governments have attracted investors, tourists and geopolitical clout.
“We used to be the envy of all the Gulf people because of our democracy, but now we envy these other countries ourselves,” says Ali al-Baghli, chairman of the Kuwait Human Rights Society and a former lawmaker. “People are fed up with the National Assembly. It has stopped all development and passed the laws against our liberties.”
Kuwait’s emir, Sheik Sabah al Ahmad al Jaber al Sabah, dissolved the legislature in March to avert parliamentary questioning of his nephew, the prime minister. At the time, he defied widespread expectations that he would suspend the constitution altogether and re-establish absolute rule.
But Sheik Sabah also warned that, should the newly elected parliament prove as confrontational as its predecessor, he will “not hesitate to take any steps to maintain the security and stability of the nation” — a threat interpreted by many as giving Kuwait’s parliamentary democracy one final chance to succeed.
“There is a swelling of views within the country that it’s time to have a breathing space from parliamentary presence,” says Edward W. Gnehm, who as U.S. ambassador to Kuwait in the early 1990s helped nudge the emirate toward democracy.
Watched across the Arab world, the unfolding crisis of democracy in Kuwait has implications far beyond this small emirate. The country hosts major U.S. military bases and sits atop the world’s fifth-largest oil reserves at the strategic intersection of Saudi Arabia, Iraq and Iran. The standoff puts the spotlight, once again, on a crucial policy dilemma for Barack Obama’s administration: whether Washington should pursue the Bush-era commitment to free elections in the Arab world, or whether it should concentrate on propping up friendly autocratic regimes, be they in Dubai, Cairo or Riyadh.
Democracy in Kuwait has its supporters. Though Kuwaitis often complain about their decrepit airport, crowded hospitals and crumbling central business district, not all are ready to surrender their liberties for Dubai-style gleaming malls and skyscrapers. “If you ask me, do you want to trade democracy for concrete high-rises, my answer is — no way,” says Rola A. Dashti, chairwoman of the Kuwait Economic Society. If anything, the recent experience of Dubai, facing a cash crunch because of a massive construction spree engineered by that emirate’s ruler, shows the need to maintain checks and balances over how oil revenues are spent here in Kuwait, Ms. Dashti says. “This is the wealth of the nation, not the wealth of one man. We need accountability.”
Kuwait’s ruling family, the house of Sabah, agreed to a constitution giving large powers to an elected parliament when the country became independent from Britain in 1961. Twice in the past, the Sabah suspended this constitution to impose absolute rule. The last such intervention happened in 1986, as the region was racked by the Iran-Iraq war and Kuwait’s large Shiite religious minority grew increasingly restive. Four years later, these curbs allowed Iraqi dictator Saddam Hussein to claim as he invaded Kuwait that he was “liberating” the emirate from its oppressive sheiks. Democracy was restored — under American pressure — after the U.S.-led international coalition ousted Iraqi occupation forces in 1991.
Dominated by Islamists and tribal conservatives, the Kuwaiti parliament has been gaining in strength ever since. Its assent is needed to approve the country’s budget. In 2006, the legislature was instrumental in resolving Kuwait’s succession crisis: It rejected the gravely ill crown prince after the death of the sitting emir, and endorsed the current ruler, Sheik Sabah, as the successor to the throne. Much of the parliament’s recent legislative activity focused on enforcing Islamic dogma, something that alarmed liberal urban elites but appealed to the conservative tribal Kuwaitis outside the capital’s Fifth Ring Road. While parliamentarians reluctantly yielded to the royal family’s pressure to extend the franchise to women, no female candidate managed to get elected. Recent laws adopted by the all-male legislature banned co-ed university education and spurred a police crackdown on gays and transvestites. At the same time, lawmakers resisted government moves toward privatizing Kuwait’s bloated state enterprises, pushing instead to put more and more constituents on government payroll.
Kuwait’s recent response to the global economic crisis highlighted the country’s leadership crisis. Kuwait — theoretically well-positioned to ride out the storm because of its huge oil income and low debts — has been hit hard as political paralysis delayed meaningful help for the country’s ailing banking and real-estate industries. While even Dubai has managed to avoid a banking-sector blowup so far, Kuwait’s largest investment bank, Global Investment House, in January defaulted on loans — the biggest financial institution to do so in the Gulf. Moody’s Investors Service last month placed Kuwait’s sovereign ratings on a downgrade watch, citing the country’s “erosion of institutional strength.” This month, the Kuwait Stock Exchange suspended one-fifth of its traded companies for failing to disclose their losses or earnings.
Kuwait’s banking crisis was exacerbated by populist parliament members, who blocked for months the government’s $5.2 billion stimulus plan that would unfreeze the credit market by providing bank guarantees. Arguing that the program would only benefit a handful of wealthy merchant families, some legislators demanded that the government instead open its till to write off personal loans incurred by some 100,000 Kuwaitis, who can be jailed for nonpayment, or simply provide every Kuwaiti citizen with 10,000 dinars ($34,247) in free cash handouts. Other lawmakers insisted that the plan must first be examined by Islamic scholars for conformity with sharia. The stimulus plan was finally enacted on March 26, but it must still be endorsed by the new legislature that would be elected in May.
Despite such wide-ranging authority over Kuwait’s purse strings, selecting the prime minister and the rest of the cabinet remains the sole prerogative of the emir — a setup, enshrined in the constitution, that virtually guarantees constant friction. “This is the basic flaw: Elections may go in a certain direction, and the government goes in another,” says Khaled Sultan, an outgoing lawmaker whose Salafi Islamist faction has repeatedly clashed with the government.
Yet, though the 50-member parliament has no power to pick ministers, any lawmaker can subject them to intense questioning — a procedure known here as “grilling” — and to a no-confidence vote. While some ministers from non-royal stock have faced and survived this legislative gantlet, the prime minister and other senior members of the royal household view the procedure as demeaning. Following a tradition that holds the ruling family’s honor inviolable, they resign rather than submit themselves to lawmakers’ accusations of incompetence or corruption.
Paradoxically, this behavior empowers even a single parliament member to bring down the government by filing a grilling request — a privilege often abused by populist lawmakers who jockey for spotlight, and who often use the menace of grilling to extract jobs and subsidies for their voters.
This dynamic played itself out in the latest crisis. Members of the Salafi faction in parliament, such as Mr. Sultan, mounted a campaign against the government’s decision to invest $7.5 billion in a joint venture with Dow Chemical. He and others say Kuwait was about to overpay for assets that, they point out, indeed declined in value amid the global crisis.
Yielding to Salafi threats of grilling over the issue, the government shelved the deal just before it was supposed to go into effect in January.
The cancellation sparked the ire of rival lawmakers, who moved to question the prime minister, Sheik Nasser al Mohammad al Sabah, about how crucial economic decisions are being made by the cabinet. The government resigned rather than defend its policies, prompting the emir to disband the parliament and call fresh elections.
No breakthrough is likely anytime soon. The 80-year-old emir, officials say, is likely to replace the current prime minister with the crown prince, Sheik Nawaf al Ahmad al Sabah. As the anointed successor to the throne he is even less likely to accept grilling requests.
A recent conference meant to promote national unity appeared to have the opposite effect. Speaking before lawmakers and civil society activists, a senior member of Kuwait’s ruling household, Sheik Ahmad Fahd al Sabah, waved red prayer beads and described grilling requests as “intellectual terrorism.” He complained that lawmakers’ intransigence was making the country’s best brains too scared to accept senior government positions.
“Even I am being accused of being corrupt and a thief, despite all my efforts,” thundered Sheik Ahmad, the emir’s nephew and head of Kuwait’s National Security Bureau.
Among Kuwait’s traditional merchant elite, unsettled by the parliament’s populist bent and Islamic fervor, many say they would welcome a return to absolute rule, at least temporarily.
“We don’t want those guys. This society is an uneducated society. They’d elect anyone,” said 52-year-old businessman Ali al Salem.
But feelings are different for Kuwaitis of Bedouin tribal backgrounds, many of whom received the country’s citizenship only in the 1970s and 1980s. “For the people not to be represented in running the country would have a catastrophic effect on Kuwait,” said Fadhel al Fadhel, a 42-year-old construction engineer. “We know — we’ve tried that before.”
Source: Wall Street Journal by Yaroslav Trofimov
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Did I write it?! Did we all write it?! Nope. It was a Ukrainian-born Italian who wrote it! Maybe his mother is Kuwaiti? He is a foreigner, but he said it best!
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Very insightful, deep, truthful and a good breakdown which is straight to the point. As a Kuwaiti myslef, i could’nt agree more with the writer. Thanks.
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And I can’t agree more with u! Thanks!
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This is a good article. The problem with Kuwait is that people as a whole are uneducated, and it’s this majority that blindly follows their usually idiotic MP’s views. Why do you have to force religion in every single aspect of society? Do these people really believe that their religious backgrounds automatically qualify them to make informed economic decisions? The government should mobilize and take steps to secure an economic recovery from the very real collapse that will happen in the next year. Here are some basic steps that any logical individual can come to by doing some research:-
1) Break the dollar peg, and replace it with a physical asset (gold/silver). The dollar is a fiat currency, and the fed will inflate it when foreign governments sell back their treasury bonds.
2) DO NOT bail anyone out. The market is dynamic. If a business fails, a new one WILL replace it with a better business model that fixes the former’s shortcomings. A bail out steals wealth from future generations, either through inflation (printing more money), or selling off assets (oil) that could have been saved for our children.
3) Sell our oil in a stable medium of exchange. Currently the Swiss franc is the only one backed by gold, and even they are moving to change this. If we sell in a physical asset (gold/silver/platinum), we will be immune from inflation caused by foreign governments (This is what will cause the coming crisis)
4) Fix the public schools so that future generations can elect the right people into parliament, and negate the need for government intervention.
5) Stop religious legislation from affecting civil liberties. This is the 21st century, and religion is a personal matter. Parliament should have nothing to do with my faith or how I chose to practice it.
But they won’t do any of this. With the current dollar peg, the future looks bleak.
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I agree too !
I’ll go even further by saying, give me a ruler with a will and vision better than a corrupted and ignorant democracy.
look at Singapore’s history.
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LogicAndReason:
Interesting comments. Nevertheless, I disagree with u on some points:
1- i believe breaking the peg and going to a gold standard would be a step back. The $US is the best available currency. Relative to other currencies, the US dollar confirmed its status as a safe haven and relatively appreciated. As for the Chinese threats, they are bluffing because they will always need to buy treasuries to strengthen the $US relative to the Chinese Renminbi.
2- I mostly agree on this point. Their is a dire issue of threatening moral hazard in this country. However, some bailouts are necessary when they create a systemic risk. By bailing out a company, I mean doing something like the US whereby equity shareholders are burnt.
3. Selling in other than the $US is unrealistic. There are other political aspects that are beyond Kuwaiti control. Also, its impractical to exchange gold from the daily oil trading because there would be huge demand for gold and there are storing concerns etc. Further, Kuwait can simply manipulate its currency and artificially make more money by weakening the KD relative to the $US just like what recently happened.
4 & 5. I can’t agree more!
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keynesian09: Wow, this is going to take a while:-
Full disclosure: I wholeheartedly disagree with Keynesian theory, preferring the Austrian school of economics instead, but anyway:
1) Look at the US trade deficit, it’s insane. The way the country operates is they take loans from foreign governments, by issuing treasury bonds, and use the money on imported goods. This enlarges the debt (as well as the trade deficit), and every year the cycle repeats itself. How do they pay their loans? By issuing new treasury bills that are nothing more than IOU’s, since they are not backed by anything.
When foreign governments realize that the US cannot pay them back without inflating their currency, they will sell back the treasury bonds they’re holding back to the US, to beat the inflation they know is coming. This will start a selling frenzy, pumping all the money held abroad back into the US, creating inflation that the US cannot recover from, since they are not producing anything overall (again look at the trade deficit). This will lead to Zimbabwe style inflation. Economists like to cite the fact that US national debt is not that bad since the debt/GDP ratio is not that high compared to other countries. Look at how GDP is measured though, it calculates the foreign loans they get as a plus!, so obviously you take out the biggest problem and the whole thing looks good. This is all artificial though, and when people realize this, the penny will drop….hard.
Compare this to the Euro or the Yen, where these countries are net producers –so they have the capability to pay off debts without reverting to inflation– and the dollar is no where near as good.
China will eventually drop the dollar peg. The US is actually slowing it down, not helping it, because it’s paying them in monopoly money. If they didn’t export to the US, then its economy would strengthen as goods would be consumed locally, and standards of living would rise.
2) Again the market is dynamic. Even if there is a systemic failure, let them go bankrupt. The extra labor would be rerouted to profitable businesses, and the toppled giants would be replaced by a bevvy of smaller firms that will take their place (greater distribution of wealth). This is the beauty of PURE capitalism, it is self correcting. Any attempt by the government to alter it will only make the market correction bigger by prolonging it.
4/5:
The fed stopped publishing ‘M2′ figures which tracks the total monetary supply in 2004. Why would they do this, if they have nothing to hide? Instead they use the Consumer Price Index to gauge inflation. CPI doesn’t take food and energy prices into account, and excludes treasury bonds (where most of the money supply is!). It’s only a matter of time till the cherry pops, and when it does, Zimbabwe will have a stronger currency than the dollar.
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Oops, forgot one point:-
3) Oil can be valued and sold in precious metals. Supply and demand would regulate the value. Storage is not a problem, just as the storage of billions in cash by governments is not a problem. The political aspect of it is in theory, not a factor. The seller (us) can chose whatever means to sell his goods in. If the buyer doesn’t like it, he doesn’t have to buy. Since there always will be a demand for oil, they will buy. In practice however, every country that has tried to shun the dollar as their medium of trade with oil, has been militarily attacked by the US. It really is up to the Americans to control their government, but then if they could, they wouldn’t be in this mess to begin with.
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1) Keynes would reply by saying, “In the long-run, we are all dead.” As long as China buys these treasuries to make sure the US dollar is strong against the Renminbi so that its exports (core of its economy) florishs; we’re ok. And I don’t think that will change anytime soon. Further, look at the way the US dollar appreciates relative to other currencies in this crisis. Although the Fed is printing money like crazy, investors still see it as a “safe haven.” Since the US was the first into the crisis, the assumption is that they will be the first out (FIFO :p).
I don’t think China will ever drop the dollar peg. Their currency would skyrocket, causing various issues such as eliminating their competitive advantage in exports (heart of their economy).
As for the Euro region and the Euro, they proved total weakness in this crisis. They are net producers, so what? The US isn’t and the dollar held much better than the US. Why would this change anytime soon?
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2: I guess ur from the Freedman invisible hand school. Where is the invisible hand in this crisis? It was surely invisible when we needed it to be visible! If it wasn’t for aggressive Keynesian policies, God only knows where we would’ve been by now. How was the market going to self correct in front of this severe de-leveraging event that could’ve wiped out or whole financial system? In the long-run it may, but sometimes the short-run is too significant to ignore.
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4/5:
You are talking in text-book language. We just had a severe crisis, why hasn’t the cherry popped? Why is the dollar stronger relative to the Euro? The US $ is the reserve currency of the world.
3:
This would be a move back to the ages of bartering. How can we trade in a finite resource? Gold prices will skyrocket. Imagine trillions of dollars of gold? gold will go to $20,000 I guess. It doesn’t make sense.
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keynesian09,
It seems to me you’re set on your views and don’t want to deviate from them. Please approach the subject with an open mind. The gold system was in place up until the 70’s in the USA, and it limited government spending and kept them fiscally responsible. The reason why they got rid of it, is they wanted to spend more money than they had in reserves. Since then, the US has never had sound money. The ‘invisible hand’ was never allowed to function properly for some time now, because of a fake monetary system, and government (read: keynesian) intervention.
You’re an intelligent person, so instead of me going on and on, I invite you to look into it.
About china, this was just published today:
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/5160120/A-Copper-Standard-for-the-worlds-currency-system.html
I’m not going to argue any further with you. You’ll see everything I’ve talked about play itself out in the next year or so. But this isn’t an “I told you so” type of thing. It’s very sad, because a lot of people will lose a lot of money because they think just like you.
Cheers.
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LogicAndReason:
Rest assured that I enjoyed your deliberations on all of these issues and appreciate your comments. In no way I’m arguing with you; I’m debating and I’m really enjoying this intellectual conversation. I don’t have to agree with you to respect your point of view. What China is doing is a mere buying on the low kind of thing for various commodities including copper. It may be something more, but I personally doubt it is nothing more than an editorial stunt by the Telegraph. I have to review my previous comments, but I remember that I wrote them during a stressful day at work so don’t really pay too much attention to the tone
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keynesian09:
I know, it’s nothing personal. I have to share a quote from Henry Hazlitt’s book, ‘Economics in one lesson’. This book was written in 1946 :-
“There are men regarded today as brilliant economists, who deprecate saving and recommend squandering on a national scale as the way of economic salvation; and when anyone points to what the consequences of these policies will be in the long run, they reply flippantly, as might the prodigal son of a warning father: “In the long run we are all dead.” And such shallow wisecracks pass as devastating epigrams and the ripest wisdom.”
Funny how history repeats itself
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Lol I love it!
I guess u r right in that there are always long-term implications to short-term policies. Nevertheless, we are currently caught in a dilemma whereby the short-run implications of not risking the long-run are significant. (I personally had to read my last line twice to understand it lol). I guess the question is when are we willing to risk a downturn in the long-run for a short-run catastrophe?
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good observations of what’s happening on the surface …great start but a part 2 is needed
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Welcome to the blog
I can’t agree more!
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