50 years ago this month, the oil price rise turbocharged the Great Global Reconvergence 

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The oil price was low after the war and hovered around $1.80 a barrel for much of the 1960s, but it rose from $3 a barrel in early October 1973 to $12 by May 1974. This article focuses on the impact of this rise for both oil-consuming and oil-producing countries.

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The French expression ‘Trente Glorieuses’ (Glorious Thirty) designates the 30 years period following the end of the Second World war ‘jusqu’au premier choc petrolier' (till the first oil shock) of 1973, as a period of exceptional prosperity for the western industrialised countries.

 

During this period, the west enjoyed the ‘You’ve never had it so good’ election of 1959 in Britain and the forming of the OECD, often then known as ‘The Rich Man’s Club’, in 1960. There was the excitement of US President John F. Kennedy and the space race. The landing of a man on the moon and the Woodstock Festival, which epitomised the social liberalisation of the 60s, both took place in the summer of 1969. Political transitions to independence were occurring gradually, and for the most part peacefully, in countries like, Nigeria, Malaysia, Ghana, Morocco, though notably less so in Algeria and Kenya.

 

But the oil price rise contributed to a sense of loss of control in the west, industrial unrest and the Iran hostage crisis. This led, in turn, to a more muscular, get-a-grip leadership in the forms most notably of UK Prime Minister Margaret Thatcher from 1979 and US President Ronald Reagan from 1980.

 

This is the prevailing international narrative: frustration, soul searching and head scratching for the liberal, democratic industrialised west. But how did it affect the beneficiary nations, most obviously the Gulf oil-producing countries but by no means limited to them?

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The centuries-old European empires were indeed in their decline: in 1971 the fishing and pearling Trucial States gave way to the United Arab Emirates. Dubai was still a developing city with unpaved roads, low-rise buildings, and traditional architecture, whereas today it is one of the most popular and dynamic cities in the world, known for its impressive skyline, luxury lifestyle, and cultural diversity.

 

50 years ago, the site of today’s Abuja was grass-covered hillsides.  But the idea of a new capital was gathering pace in the 1970s and it was built in the 1980s on the back of booming oil revenues. A city with a modern and functional layout, wide boulevards, green spaces, public art, and landmarks. It was and is a leading example of what Africa can achieve when, on its own terms, it looks across the world for inspiration. American city planners; the examples of Brasilia, Canberra and Washington D.C.; neo-classical architecture, domes and minarets, traditional motifs and futuristic structures combine to create a city unique and diverse, yet unified and coherent, a symbol of a country’s potential and ambition in the global arena.

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In populous Indonesia, 1970s oil wealth played a major role in significant social investment: the number of those living in poverty fell sharply; literacy and life expectancy rose materially. The built environment developed markedly.

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In Mexico, Rudesindo Cantarell Jimenez was fishing in the Bay of Campeche in 1972 when he noticed some black stains on the water. He dutifully reported these to the government oil company, Pemex. And as the 1970s passed, the value of that new oilfield rose and rose. It has now yielded over 13 billion barrels. Cantarell received not one cent per barrel, satisfied with the distinction of the field bearing his name and the prosperity it brought to Mexico.

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These changes across the world put the producers in the drivers’ seat, turbo-charging their growth, whilst stifling consumers’.

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Economic historians study the Great Divergence, an expression introduced by Samuel Huntington in the late 1990s and given wider currency by Kenneth Pomeranz a few years later. It reflects the ascendency of the West, and later Japan from Columbus’s “discovery” of America and subsequent European-led resource extraction, galvanised from the 1750s by the Industrial Revolution and continuing well into the 20th century.

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Many have, likely implicitly, assumed this was an inherent hierarchy, simply because of the longevity of the ‘divergence’.  However, ‘divergence’ implies a prior more level playing field.

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It seems to us that this oil price rise of 50 years ago may in time be seen to mark a decisive move, a turbocharging if you like, in the opposite direction: a Great Global Reconvergence of many countries across the world. An era in which the global economic pie is and will be shared progressively less unequally between nations.

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How long will this phase last? How far will it go? How broadly will it spread? When did it actually start? On these questions and more we hope to gather views in our new Journal of the Great Global Reconvergence. For details on how to submit papers, please see this form. 

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We have touched on the advanced economies. Then we have investment banker Jim O’Neill’s memorable acronym BRIC denoting, in his view at the time in 2003, the next four major “bricks” in the world’s economic wall – Brazil, Russia, India and China. These are indeed large and significant, but what to make of the 150 or so countries that did not make either group – countries like the four we talk about above?  

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About one in four of these other countries including our exemplars are covered in the database we license from our sister organisation. We call the total share or slice these countries have of the global economic pie as the Golden Slice.

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Independent of region, religion, form of government, colonial heritage or otherwise, we consider the countries in this portfolio, whose development we closely study, to be At the Forefront of the Great Global Reconvergence.

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Oil was a catalyst for many of these Golden Slice countries; proximity to those who enjoyed it helped others; but by itself oil was insufficient. Stunning progress has been made by these countries since the early 1970s. We have a simple question: if this is what’s happened in the last 50 years, what on earth will happen in the next? (We use “on earth’” idiomatically and not as a limitation.)

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The Great Global Reconvergence is a trend, a mega-trend, which no individual can stop – yet it is, as the economic pie grows, a trend from which in our view everyone can benefit.

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Please check back to learn more as we build out our site. In the coming weeks, this will include pie charts showing the progress of the Great Global Reconvergence over recent years and how the analytical blocs divide in terms of population, GDP and growth. We will also explore how these benefits could be realised, and how we are setting ourselves up to do the best we can to make sure they are.

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The GGRCouncil is for the Great Global Reconvergence, and is a sister organisation of Oxford Business Group.