Oil Boom

Introduction

Dubai is one the most populate state in the world which is popular for exporting oil. It has gone under few remarkable transformations during the recent past. Several bold developmental strategies are implemented in the recent past for the development of Dubai. The leadership is trying to promote tourism, mass communication, shipping and financial sector. Dubai is the process of diversifying its economy to become politically stable centre for tourism and commercial activities.

Discussion

Dubai is famous for its oil production and export but the oil is becoming a curse in the development cycle of the country. The principal argument of the oil curse suggests that the oil revenues of the government are contributing in harming the development of the economical and political system of the country. The major cause for this negativity is the ramification of the oil revenues. The oil revenues come arrive in the country in the form of economic rent. This economic rent is calculated by taking the difference of the market price of the good or considering the opportunity cost. For the continuation of growth and development process in the economy it is essential to distort rents. Excess reap of such activities is beneficial without any increasing efficiency or levels of investments. (Henry, 29)

It is important to understand the mechanism of development in those states where production of oil is in excess. Government revenues are significantly increased only by changes in the market prices of the commodity. This have a negative impact on the Gross Domestic Product since, there is no substantial increase in productivity. Hence, long term GDP growth is highly influenced because production incentives are removed since the state is begins to distribute oil to its own citizens. Increase in the government revenues because of the price shifts is the frequently allocated in the infrastructure and health care sector. Shifting of the trend is obvious because citizen are aware of the fact that they are not suppose to pay any taxes and therefore, their hard work is drained off. Thus, epical change is perceived that have drastic impacts upon the overall productivity. As a result of which the production state transforms into the allocation state. (Herb, 156)

Proponents of the oil curse theory also comment regarding the negative political impacts on the state. According to them the state budgets are dominated by oil rents. These can destroy the political situation in two ways. Firstly, it creates ...