Capitalism and Class in the Gulf Arab States

An oft-used representation of recent changes in the Gulf Arab states is a pair of photographs comparing a 20-year old snapshot of the main thoroughfare of Dubai, Sheikh Zayed Road, to the same stretch of road today. In the space of just two short decades, the pictures reveal a remarkable transformation. The older shot shows a few solitary buildings, surrounded by vast expanses of desert and a dusty road. The more recent picture portrays a stunning panorama of glittering lights and towering skyscrapers. Science fiction analogies are often used to describe this sight—the world’s tallest buildings defy architectural logic as they jostle and twist in the skyline. Up until the puncturing of Dubai’s construction boom in the wake of the 2008 global financial crisis, a widely quoted (although probably exaggerated) rumor put the number of cranes at work in the city at one-quarter of the world’s entire stock.

The end of the first Gulf War was an important signpost of the major transformation in the global economy that was to ensue over the next decade. George H. W Bush’s proclamation of a New World Order was an initial acknowledgment of this shift, and although it took a number of years to fully develop, by the beginning of the twenty-first century the United States would have achieved the position of global “hyper-power.” The collapse of the state socialist bloc and China’s opening to the world market during the 1990s meant that a single global capitalist economy was brought into existence. The key feature of this new phase of internationalization was a further qualitative leap in the importance of finance to the functioning of capitalism and, simultaneously, the construction of a world market based upon fully global manufacturing and distribution chains. Both tendencies had enormous implications for the GCC and helped to underpin the rise of Khaleeji Capital at the onset of the twenty-first century.

A new capitalist class is developing in the Middle East. This new class, Khaleeji Capital, expresses the tendencies of internationalization through all moments of the circuits of capital and operates at a pan-GCC scale. Its internationalization is occurring at the regional scale—i.e., it is a process of internationalization through regionalization. To emphasize once again, however, internationalization should not be understood as delineating a “thing” (e.g., quantities of money, investment flows, or a form of company structure) but rather, conveys the manner in which the circuits of capital are themselves elaborated at the regional scale. The notion of Khaleeji Capital is not meant to imply that the Gulf capital groups no longer identify as “Saudi,” “Kuwaiti,” and so forth. Indeed, these national identities may even become more pronounced as internationalization proceeds. Rather “capital,” as Marx emphasized repeatedly, is a social relation, and the concept of internationalization speaks to the nature of social relations as they form around the circuits of capital within the GCC space. Khaleeji Capital represents a new set of social relations that are developing around pan-GCC accumulation opportunities; they are cotemporaneous with—and are overlaid upon—ongoing structures of national accumulation. These social relations more and more crystallize, articulate, and interpenetrate in a pan-GCC space. Consequently, accumulation is increasingly conceived at the regional scale rather than through a nationally bound perspective.

The mix of financialization and internationalization that characterized the post-2000 global economy always contained within itself the potential to unravel. The tendency of overaccumulation inherent to postwar capitalism—fed by technological innovation and the seemingly limitless production capacities of the world’s low-wage zones—could not be sustained despite the accelerating piles of debt. The stability of this system began to erode with the collapse of the US real estate bubble in 2007. Asset price declines placed severe pressure on highly leveraged banks and financial institutions, which in some cases had extended more than 40 times the amount of capital they actually held. Beginning in the summer of 2007 and continuing throughout 2008 a series of dramatic events occurred: the collapse of Bear Stearns, the fifth-largest US investment bank; the bail-out of Fannie Mae and Freddie Mac, which had accounted for 80 percent of new US mortgages; and then the quick succession of financial institution failures—Lehman Brothers, Merrill Lynch, Washington Mutual, and American International Group (the world’s largest insurer). By the end of 2008, approximately US$30 trillion of value in world share markets had evaporated and the US government had pledged the remarkable figure of $8.5 trillion, equivalent to 60 percent of the total value of the US GDP in 2007, in order to prop up financial markets (Sterngold 2008).