Over the last 50 years, a massive infusion of petrodollars enabled the new monarchies of the Gulf to engage in impressive experiments in counterrevolution. During the 1970s, King Faysal of Saudi Arabia attempted to preserve the traditional social hierarchy of his country by modernizing without industrializing. A decade earlier, the Shah of Iran staged a preemptive strike against demands for change by launching his own “white revolution.” Yet the most successful counterrevolution in the Gulf was the massive and successful program of the Sabah dynasty in Kuwait to preserve its power by building the region’s first modern welfare state. The Kuwaiti constitution of 1962 guaranteed “generous aid for citizens in old age, sickness or unable to work” and “social security, social aid and medical care.”  For decades, the Kuwaiti government has lavishly subsidized everything from electricity to housing, has underwritten travel abroad for those seeking education or medical treatment and has created comfortable, well-paying, white-collar jobs for 96 percent of its working citizens. 
In the 1990s, however, Kuwait’s ability to sustain this welfare state has become dubious. Part of the problem stems from the same 1986 collapse of oil prices that afflicts every other state in the Gulf. In Kuwait, however, there are aggravating factors. Even though it had rebuilt most of its damaged assets within two years of the 1990 Iraqi invasion, the emirate was left with massive bills. For almost two years in Kuwait, there was no “gross national product,” no oil exports and no banking. To restart the economy, the government had to spend perhaps $65 billion, including $20 billion for rebuilding the oil industry and another $20 billion to stabilize the financial sector.  After its liberation, Kuwait also acquired a new and ongoing drain on its resources: subventions to the Americans to ensure a continuation of their security umbrella against renewed threats by Iraq (or Iran). In 1992 alone, Kuwait not only paid Washington $16 billion as part of a deal to cover all the costs of Operation Desert Storm, it also authorized $11.7 billion of new arms imports — largely from the US. 
To cover these outlays, the Kuwaiti government has had to liquidate many of its hard currency assets, including much more than half of the $100 billion it had invested abroad through the Kuwait Investment Office. This liquidation has continued to affect the country long after wartime damages were repaired. The Kuwaiti government budget consumed 50 percent of GDP — a larger share than that of any other Gulf state. Even before the Iraqi invasion, oil exports had covered only about 40 percent of this bill; income from foreign investments had contributed another 35 percent. Since the drop in the value of Kuwait’s overseas portfolio, however, the country has faced a structural budget deficit. In the 1990s, the deficit averaged around $5 billion each year and there are signs that population growth will drive this figure steadily higher. 
The Kuwaiti population combines the second-highest literacy rate in the Arab world with the traditions of an urbane merchant culture.  All Kuwaitis quickly recognized that the budget deficit would have to be curbed soon or it would permanently cripple the country’s economy. But none of the three political blocs that dominate public discourse in Kuwait has yet to show any real leadership in dealing with this economic adjustment crisis.
The Sabah Clan
The first of these blocs consists of the Sabah clan and its partisans who dominate the machinery of the state not only through the office of the amir (who can, if necessary, rule by decree) but through control over the prime minister’s office and other key cabinet portfolios. In the aftermath of the Gulf war, the prime minister solicited the advice of the International Monetary Fund (IMF) and the World Bank on how to deal with the country’s fiscal crisis. These institutions urged the Kuwaitis to slash their various consumer subsidies, to raise tax revenues dramatically and to privatize all state-controlled economic enterprises except for the oil industry. The ruling family, however, declined to follow the recommendations about subsidies and taxes, and it moved very slowly on the question of privatization. Indeed, many experts think that privatization will not ease fiscal pressures significantly. It is true that privatization will allow the government to unburden itself of a few white elephants, particularly some enterprises that the state had to take over to deal with the 1981 Souq al-Manakh stock market collapse. Privatized firms, however, are unlikely to generate major government revenues, whether at the moment of sale or through future taxes, if only because the privatization law of 1996 guarantees the right of most workers to retain their former jobs after privatization.  Likewise, the sale of these firms will not reduce government expenditures significantly, since the enterprises eligible for privatization employ only a tiny share of the public sector workforce — whose salaries form the largest single item of government expenditure and consume about 30 percent of its budget. 
Why was the ruling family’s response to the fiscal crisis so lethargic? The power of the dynasty, while still formidable, had been greatly reduced by the Iraqi invasion and its attendant scandals. Many Kuwaitis are still angry that, rather than anticipating, resisting or at least staying to subvert the Iraqi invaders, most members of the Sabah clan quickly fled the country in 1990 — and several pilfered public funds to finance their escapes. Furthermore, there were signs of a leadership crisis in the dynasty. Jabir al-Ahmad, the amir, has been demoralized (and perhaps clinically depressed) since the occupation and has played a much less public role in politics. In March 1997, the prime minister and heir apparent, Sa‘ad ‘Abdallah, had to leave for medical treatment in London and (as of August 1997) has not returned. During his absence the prime minister’s role was delegated to a kinsman, Sabah al-Ahmad, who has served as foreign minister for many years and is an old rival of Sa‘ad ‘Abdallah. Given these political tensions, the dynasty appeared very reluctant to impose painful economic cuts that would further erode its popularity and provoke a political crisis. Instead, the dynasty seemed to content itself with cosmetic measures and the hope for a rise in oil prices. 
The other two main political blocs, while critical of the government’s low-energy response, were unable to propose any substantial alternatives. They endorsed the privatization program but sought to complement it with other tactical policies.
Islamists in Kuwait
This was true, for example, of the second major power bloc in Kuwait: the Islamic movements. Three main Islamic groupings are represented in Kuwait’s parliament: the Islamists of the Islamic Constitutional Movement (the local branch of the Muslim Brothers); the fundamentalists  of the Islamic Popular Movement (salafis who are ideologically akin to the Wahhabis of Saudi Arabia) and a Shi‘i alliance known as the National Islamic Coalition. All three groups are highly organized and the two Sunni movements, despite their different outlooks, often collaborate effectively enough to dominate the parliamentary agenda. Yet, instead of using this power to deal with the pressing question of economic adjustment, they have employed it primarily to address social issues. For example, in the spring of 1996, parliamentary debate was dominated by their proposal to segregate the University of Kuwait along gender lines. In the spring of 1997, they pressed for another bill that would have banned music concerts and fashion shows.  Both of these proposals, which some Kuwaitis feared were a prelude to an attempt to ban women from public life altogether, were defeated. Although Kuwaiti women cannot vote, they remain a significant political force. On the left they play a public role in the major political organizations, and among the Islamists they are well organized in various women’s associations.  As of 1994, they formed 33 percent of the work force, and even among the Islamists, women reject the idea that they should give up their jobs in order to create new employment for men.  Indeed, just before the October 1996 elections, 600 women staged a strike to demand suffrage.  Political groups on the left lent growing support to these demands, partly with the hope that newly enfranchised women voters might improve the left’s declining fortunes at the polls. Indeed, for some time, it seemed as if gender issues would dominate public debate and largely occlude the economic adjustment issue.
While the Islamic movements focused increasingly on gender, they neglected the issue of political corruption that had once been central to them. This provided an opportunity for Kuwait’s third power bloc, the left-wing parliamentary opposition, which had suffered badly in the October 1996 elections. In December 1996, liberals in parliament accused the government of allowing middlemen to skim millions of dollars from arms import contracts, and passed legislation banning the use of such agents.  In early 1997, al-Tali‘a, the journal of the Kuwait Democratic Forum (the local offshoot of the Arab Nationalists Movement), ran a series of provocative articles about corruption in government and military supply programs. In July, parliamentarians formally interrogated Finance Minister Nasir al-Rawdan about both the broad issue of government corruption and his personal involvement in it.  The raising of this issue of corruption ignited a major political crisis. On June 9, ‘Abdallah al-Nibari, one of the leaders of the Kuwait Democratic Forum, was machine-gunned to death as he was driving back to Kuwait City from a weekend at the beach. Security forces quickly arrested a group of conspirators led by Salman Shamlan al-Rumi, a businessman whom al-Tali‘a had accused of being a major figure in “the mafia that steals public funds” and who was a relative and business partner of Finance Minister al-Rawdan.  Some of al-Nibari’s colleagues charged that the government was protecting al-Rumi and his friends, a charge the government claimed was irresponsible and which provoked the acting prime minister to hint that he might have to suspend Parliament.  The left’s campaign against government corruption attracted a good deal of public attention and support. Strategists hoped to use the campaign to expand parliamentary authority over state finances. This might eventually position the left to address the national budget crisis. How it would do so under these circumstances, however, is unclear. The Kuwait Democratic Forum opposed the government’s privatization plans, but it has only three representatives in the 50-member National Assembly. It is politically effective only when it acts in concert with a much larger group of liberal parliamentarians (the so-called “bloc of 86,” named for the year when most were elected) who represent Kuwait’s cosmopolitan merchant elite. While these liberals want to curb the power of the dynasty, promote democracy and root out corruption, they accept the need for privatization and are willing to collaborate with the government in developing a reformist approach to the budget crisis.
Supporters of this approach recently formed a new political grouping, the National Democratic Rally. Its founders were mostly influential professionals, including the editor of Kuwait’s main daily, al-Qabas, and several prominent women. Its declared mission is to promote “cultural openness, a belief in pluralism and respect for civil liberties,” and it is widely viewed as a natural foil to the Islamic movements.  Whether or not the National Democratic Rally develops into a major force, its very existence testifies to the divisions on the left over how to deal with the problem of economic adjustment.
Of the organized political centers in Kuwait — the dynasty, the Islamic movements and the left — none seem to be interested in promoting a radical solution to the country’s fiscal crisis. Neither the IMF’s vision of an austerity program nor populist proposals for a “social pact” in which groups would meet to negotiate subsidy reductions have found significant support. Under these circumstances, the government’s current reformist approach is likely to continue. Whether Kuwait will steadily fritter away its finances, leaving the population in genteel poverty, or whether a rise of oil prices will come to its rescue, remains to be seen. But even in the most optimistic scenarios, fiscal pressures ensure continuing political clashes and have already terminated the old dream that a welfare state would secure the rule of the dynasty for perpetuity.
Author’s Note The author would like to thank Shafiq Ghabra and Sayf ‘Abbas ‘Abdallah for teaching him most of what he knows about Kuwaiti politics. Any abuse of this knowledge in the present article is solely the author’s responsibility.
 Article 11; see the text of the constitution republished in ‘Abdul-Reda Assiri, The Government and Politics of Kuwait: Principles and Practices (Kuwait, March 1996), p. 193.
 Angus Hindley, “Kuwait: Trimming the State,” Middle East Economic Digest, November 12, 1993.
 New York Times, May 4, 1992.
 “Kuwait: Assembly Achieves Budget Breakthrough,”Middle East Economic Digest, August 27, 1993.
 Naomi Collett, “Kuwait’s Real Enemy — The Budget Deficit,” Middle East International, November 18, 1994.
 UN Development Program, Human Development Report 1996 (New York: Oxford University Press, 1996), p. 135. Kuwait also has the second-highest ranking (again, after the United Arab Emirates) in terms of the “human development index,” a combined measure of income, education and health.
 Al-Wasat, September 9, 1996.
 Nigel Chalk et al, Kuwait: From Reconstruction to Accumulation for Future Generations (Washington, DC: International Monetary Fund, April 1997), pp. 12-13.
 To a limited extent, this tactic worked: In 1996-1997, oil prices rose significantly — but not enough to assuage the structural budget deficit.
 I have worked up a typology of Islamic movements — drawing on the example of Olivier Roy and other French scholars — that divides them into traditionalists, fundamentalists, Islamists and modemists. See my “Bosnia’s Muslims: A Fundamentalist Threat?” Brookings Review (Winter 1995), pp. 10-15.
 Mideast Mirror, May 23, 1997.
 For a description of Islamic politics among Kuwaiti women, see Haya al-Mughni, Women in Kuwait: The Politics of Gender (London: Saqi Books, 1993).
 World Bank, World Development Report 1996 (New York: Oxford University Press, 1996), p. 195.
 Reuters, September 29, 1996.
 For an analysis of the last Kuwaiti elections, see Yahya Sadowski, “Les tribus contre les marchands Poussee conservatrice au Koweit,” Le Monde Diplomatique (January 1997).
 New York Times, June 9, 1997.
 Al-Wasat, July 21, 1997.
 Mubarak al-‘Adwani, “Tasfiyat Hisabat am Ta‘rib ‘Awda?“ al-Wasat, June 16, 1997.
 Mideast Mirror, June 12, 1997.
 Mideast Mirror, June 4, 1997.