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Libya: an Analysis of the Oil Economy

Published online by Cambridge University Press:  11 November 2008

George Heitmann
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Extract

Prior to the discovery of rich oil deposits, Libyan development prospects seemed markedly discouraging. In a primarily agricultural economy, cultivation was narrowly confined to two physically separated coastal belts constituting less than 3 per cent of the country's total land area. Under the combined influence of outmoded techniques and the hostility of an arid soil, agricultural productivity was low. Possibilities for developing other forms of economic activity were few and unpromising. Libya seemed destined for an existence of continued dependence upon foreign assistance.

Type
Article
Information
The Journal of Modern African Studies , Volume 7 , Issue 2 , July 1969 , pp. 249 - 263
Copyright
Copyright © Cambridge University Press 1969

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References

Page 249 note 1 Ministry of Economy and Trade, Census and Statistical Department, Statistical Abstract (Tripoli, 1965).Google Scholar Although more recent estimates of G.D.P. are available, they are based on arbitrary projections of the 1964 figures and are of dubious validity.

Page 249 note 2 The disruption of oil operations attributable to the June 1967 outbreak of Arab— Israeli hostilities temporarily retarded the economic expansion; but, barring further renewals of the violent stages of this long smouldering conflict, the modifying adverb ‘confidently’ is appropriate. Unfortunately, a high degree of confidence cannot be assigned to the probability of an amiable Arab—Israeli settlement.

Page 249 note 3 The International Bank for Reconstruction and Development conducted an economic survey of Libya in 1958—1959. Although recognising the possible significance that the discovery of oil might have upon the economy, the study was not able, at that time, to evaluate the impact, of Libya’ subsequent oil prosperity. See I.B.R.D., The Economic Development of Libya (Baltimore, 1960).Google Scholar More recently, Abdul Amir Q. Kubbah has presented a study of the Libyan economy and its oil industry, which is primarily descriptive and has few analytical pretensions. See Kubbah, , Libya: its oil industry and economic system (Beirut, 1964).Google Scholar

Page 250 note 1 Even the highly developed economies of Western Europe and North America have this characteristic of duality. However, the traditional sector of the developed economy is relatively insignificant and can be ignored in macro-economic analysis. In the developing economy, such as Libya, the traditional sector embraces a large portion of the population and may contribute the greater portion of national income. (This latter observation would not, of course, be true for Libya, where the modern sector makes the major contribution to national income, although absorbing only a relatively small proportion of the population.) It can be argued that the distinction between developed and under-developed economies can be drawn in terms of the relative importance of the modern and traditional sectors.

Page 253 note 1 Ministry of Economy and Trade, Census and Statistical Department, Report of the Industrial Ceasus (Tripoli, 1964).Google Scholar

Page 257 note 1 The model might be more formally stated in terms of the following set of equations:

Assuming that oil investment expediture V, is exogenously determined, the equilibrium level of income is given as

where c is the marginal propensity to consume, m is the marginal propensity to import, A is any autonomously determined consumption or import expenditure, and B represents the relationship between the modern and traditional sectors. This latter relationship, for reasons previously outlined, is not considered in any further detail.

Page 260 note 1 However, see Grayson, C. J. Jr, Decisions under Uncertainty: drilling decisions by oil and gas operators (Boston, 1960),Google Scholar for an interesting attempt to employ the tools of modern decision theory to exploration activities.

Page 263 note 1 Measured in terms of income per capita, Libya, surpassing South Africa in 1964, has become the richest African nation.