An oligarchy tends to have long term devastating economic effects.
The reason is that the best and the brightest – when shut out by the members of the ruling elites – emigrate. In a country where one's job is determined by his family connections or by influence peddling – those best fit to do the job are likely to be disappointed, then disgusted and then to leave the place altogether.
This is the phenomenon known as "Brain Drain". It is one of the biggest migratory tidal waves in human history. Capable, well-trained, educated, young people leave their oligarchic, arbitrary, influence peddling societies and migrate to less arbitrary meritocracies (mostly to be found in what is collectively known as "The West").
This is colonialism of the worst kind. The mercantilist definition of a colony is a territory, which exports raw materials only to re-import them in the form of finished products. The Brain drain is exactly that: the poorer countries are exporting raw brains and buying back the finished products masterminded, invented and manufactured by theses brains.
Yet, while in classical colonialism, the colony at least received some recompense for its goods – here the poor country is actually the poorer for its exports. The bright young people who depart (most of them never to return) carry with them an investment of the scarce resources of their homeland – and award it to their new, much richer, host countries. This is an absurd situation, a subsidy granted reluctantly by the poor to the rich. This is also one of the largest capital transfers (really capital flight) in history.
Some poor countries understood these basic, unpleasant, facts of life. They extracted an "education fee" from those emigrating. This fee was supposed to, at least partially, recapture the costs of educating and training the immigrants. Romania and the USSR imposed such levies on Jews immigrating to Israel in the 1970s. Others despairingly regard the brain drain as a natural catastrophe. Very few countries are trying to tackle the fundamental, structural and philosophical flaws of the system, the roots of the disenchantment of those who leave.
The Brain Drain is so serious that some countries lost up to a third of their total young and educated population to it (Macedonia in South-eastern Europe, some less developed countries in South East Asia and in Africa). Others were drained of almost one half of the growth in their educated workforce (for instance, Israel during the 1980s).
Brains are an ideal natural resource: they can be cultivated, directed, controlled, manipulated, regulated. They are renewable and replicable. Brains tend to grow exponentially through interaction and they have an unparalleled economic value added. The profit margin in knowledge and information related industries far exceeds anything common to more traditional, second wave, industries (not to mention first wave agriculture and agribusiness).
What is even more important:
Poor countries are uniquely positioned to take advantage of this third revolution. With cheap, educated workforce – they can monopolize basic data processing and telecommunications functions worldwide. True, this calls for massive initial investments in physical infrastructure. But the important input is the wetware, the brains. To constrain them, to disappoint them, to make them run away, to more merit-orientated places – is to sentence oneself to a permanent disadvantage and deprivation.