Good times in Kuwait

The 1970s rise in oil prices generated an unprecedented economic boom in Kuwait and throughout the Middle East. From 1960 to 1985, Middle East and North African countries outperformed all other regions in the developing world in terms of income growth and distribution. The implications for business–state relations were equally profound. On the one hand, increased state investment in shareholding companies and the general increase in domestic demand significantly enriched merchant elites. Whereas the KCCI elite was already comparatively wealthy within their own country, the boom of the 1970s made them rich regionally and internationally. On the other hand, the monumental increase in state autonomy and distributional resources reduced the KCCI's policy leverage while increasing the leverage and profile of new business elements. By the mid-1970s, state officials and the monarchy ignored most KCCI attempts at policy input and altered distributional policies to enrich rivals to the traditional elite, thus building a wider network of supporters. The economic effect of these policies was creation of a fragile fiscal system that by 1982 was on the verge of collapse.

While Kuwait reaped oil riches in the 1960s, the boom of the 1970s was massive by comparison. In the latter half of the 1960s oil revenue to the state averaged about KD 270 million annually. In 1974, oil revenue had increased to over KD 2 billion. The 1973 war and ensuing OPEC interventions helped keep oil prices high throughout the decade.