Saudi Arabia Tries to Save Itself

Saudi rulers have a lot of history and tradition to overcome if they are to save the kingdom from itself.

Last week, Saudi Arabia’s crown prince, Mohammad bin Salman, announced Vision 2030: a far-reaching economic reform package designed to save the kingdom from its own many, exponentially multiplying sins.

It does not go far enough: that doesn’t mean the situation is absolutely hopeless. Combined with other reforms, it could thread the narrow needle of survival and keep the “Saud” in “Saudi Arabia.”

And narrow that needle is.

First, what is this “Vision 2030” thing and why is it so radical?

Vision 2030 aims to break the social contract carefully constructed over the past seventy years. In days of flush oil cash and a relatively simple society, Saudi royals funneled oil wealth to citizens and tribes through easy jobs, do-nothing-soldiering, free housing and cheap energy.

When the kingdom’s population was just a few million, this worked fine: oil reserves brought in more than enough. Saudi Arabia’s state-run oil company, Aramco, pulled a profit no matter how many useless Saudi desk jockeys it hired. Its military fought no wars; its security services were stiffened by a Wahhabi religious establishment that made virtually everything beyond prayer and going to mosque a moral crime (and which was policed by enthusiastic volunteers). The cost of control, in other words, was very low.

But things have changed. While in the olden days it was enough to build a road and a few towers using imported labor, today such roads must be maintained and towers must be staffed; both jobs are more complicated and expensive. In between the roads and towers Saudi society has shifted: once grateful for AC, Saudis now expect it set at a comfortable winter breeze regardless of the month. When oil was sky-high, this reckoning could be put off: Saudi leaders stored vast sums of cash for a rainy day. But fracking and green technology has changed the game forever. Oil is cheap and will remain so for the foreseeable future.

While once upon a time, Saudi leaders could view the military as gigantic jobs scheme, today it is an army on the move, fighting a hot war in Yemen and a proxy war in Syria. This is entirely because the Saudis believe they are, for the first time in nearly a century, on their own strategically: the Americans are no longer reliable. The Saudis see the United States as inept on Iran, apathetic on Syria and Yemen and jaded by the Iraq occupation. The combination is potentially deadly for Saudi Arabia: Should Iranian troops landed on Bahrain, would the United States even care?

And these factors have driven up the costs of control beyond the old social model. To maintain power, the economic contract has to be ripped up and rewritten. Saudi Arabia, in other words, must become much cheaper to govern and fast.

Enter Vision 2030

This plan will hammer every pillar of the economic pact between rulers and ruled. Energy, housing and lifestyle subsides will be slashed or end; taxes will enter; new industries will be brought forth from the desert; education models will be transformed.

The world has seen this before and nearby: in the tiny city state of Dubai, the most populous emirate of the United Arab Emirates. Like Saudi, the rulers of Dubai built a social contract based on oil; like Saudi, the rulers eventually ran out of oil cash (around the 1980s) and invested heavily in a post-oil world. And, for the most part, it worked. Today, Dubai is a major port, financial center and tourist hot spot. It created an aluminum industry from dust; its real estate, retail and construction sectors dominate the economy. It seems quite reasonable that Saudi rulers might choose to emulate Dubai.

Except Dubai’s success story stops at the end of an Emirati neighborhood, where high unemployment, low levels of education and hefty subsidies reveal that old social contract is still very much in play.

What Dubai did so well was not so much as rewrite their social contract as create an entirely new, separate one for the expatriates who flooded the city state. While Emiratis were allowed to wallow in the indolence of their cradle-to-grave welfare system, expats picked up the slack; while talented Emiratis were siphoned into critical, new government agencies that did the actual business of running Dubai. Hardly any of the bad old ministries or plush do-nothing jobs of yesteryear have been abolished; they’re just in the shadows of the great towers now wholly dominated by foreign talent.

Dubai is, even today, still only 15 percent Emirati — with no signs of that shifting radically.

So if that’s the success Saudi Arabia hopes for, then the situation is truly dire

Dubai is a small emirate: there are perhaps only 220-300,000 Emiratis in Dubai, swarmed by another 1.8 or so million expats who must support them to retain their visas. Its older brother, Abu Dhabi, the capital of the UAE, has millions of gallons of oil and the both the need and ability to bail out Dubai. In other words, Dubai can continue to indulge its citizens with whatever subsidies it likes: the economy is run by other people.

Saudi Arabia, with some nineteen million citizens, has no such options. It cannot suddenly flood Arabia with the 180 million or so extra foreigners needed to adopt the same kind of plush equilibrium. Never mind the unfairness of such a proposal (“Let’s bring in over a 100 million foreigners so none of us have to work ever again!”), but the kingdom’s water table is already severely tapped and the technology used to desalinate the oceans are energy and cash hungry.

Thus Saudi Arabia must do what Dubai has not: reform its own citizens and put them to work. This involves considerable hurdles.

And so it must overcome virtually all the social glue of their country: wasta, tribalism and religious conservatism.

Wasta is the tribally-based system of influence that allow connected folks in Arabia to accomplish much with little effort. You know it as “knowing a guy,” except this “guy” is a tribesmen who can get you any job you want and keep you from getting fired. For obvious reasons, this is economically unfeasible: the fat cousins napping at the desk must go if the power planet is to be kept running.

Tribalism, meanwhile, divides Saudi society into spoils: one tribe gets this, another that, with tracts of land going to favored tribes and lesser territory going to disfavored ones. Again, this completely undermines any human talent within: A smart Saudi should be able to live in Riyadh, Jedda or Damman, regardless of tribal name. But smarts take a backseat to tribe.

Finally, religious conservatism absorbs huge amounts of social energy, sucking up talented folks into the religious police, the mosque and religious schools that produce nothing more than more people just like them. The untapped talent within is staggering: Every Saudi student who attends free government schooling wastes time memorizing why they should hate everyone but themselves.

Dubai has these same sins (though they practice a more moderate and open form of Islam, making the final sin far less terrible). Its solution has to been to bury all of that under a mountain of foreign talent. But Saudi Arabia has no such option. It must go on the offensive.

And so it did in 2013 when it expelled thousands of foreigners

In 2013, the Saudi government prepared the groundwork for Vision 2030 by expelling tens of thousands of migrant workers, creating space for Saudis to go to work. Many of these were unskilled workers: car mechanics, construction workers, people who worked with their hands and the Saudi government hoped their absence would pull Saudis into the workforce to fill the need.

It didn’t work; Saudis had already developed a cultural aversion to that kind of labor. Clearly, more than a pull was needed. So it has begun to push.

And in Yemen, they have pushed

Part of the reason the Saudis invaded Yemen was to force their do-nothing military to action: rousing useless officers to combat is one way to jostle the ranks and shake the system. Saudi’s military is increasingly no longer a reward but a duty and one that sends home coffins. Because of Saudi’s macho culture, few Saudis would get caught out saying they’d rather not die in Yemen for King Salman’s pride. This has helped hone and cull some of the indolent excesses of Saudi military culture.

Still, they can’t go too far: to blood the military too much would produce a backlash once sleepy Saudi officers wake up to the ruse. This is one reason the Saudis don’t march on Sana’a, though if they deployed enough troops they certainly could. Absolutists they may be, they cannot afford to upset the army too much.

And this is emblematic of why Vision 2030 is more suited to failure than success

Even in the face of a national security threat, the Saudis cannot deploy their full power because they need reserves to quell domestic foes. Saudi Arabia is still not yet in economic crisis: it has even less social leverage to kick Saudis out of their beds and put them to work.

Saudi citizens already understand low oil prices are partially a result of the kingdom itself, which keeps pumping out oil well beyond apparent reason. As the sovereign wealth funds empty, they will blame not just Iran but the king. Knowing Saudi Arabia is full of oil, they will not see the situation the same as the royals. Rather than deep necessity, it will appear to be a ploy to keep rich princes off playing in the fleshpots of Europe while the masses starve.

This view is dangerous and it will be tempting, because it’s the easiest view to hold. Few groups of people could resist it.

Without political reform, without giving Saudi citizens a say in their future that allows blame to be shifted back onto the masses themselves, this formula is likely to backfire: When things go invariably wrong, when comforts are taken away, when assumptions are shattered, when people have to do things they had been led to believe they’d never have to do, someone will be blamed. In a democracy, the blame is shared between governed and government. In Saudi Arabia, it goes one way to the top.

So success is possible, just unlikely

If Saudi Arabia embarks upon ambitious and well-measured political reform to let society blow off steam, the rulers may well survive this. There are few indications of that, but the rulers of the kingdom always play their cards close to the chest. Vision 2030 will not in and of itself save Saudi Arabia but in conjunction with a change in politics, it just might.

Otherwise, well, it won’t be the first Saudi state to collapse.

This story first appeared at Geopolitics Made Super, May 4, 2016.