Saudi Arabia clearly needs change. Its present economic model simply is unsustainable in the wake of the collapse in the oil price, and with a young leader in control, who has, at least until now, bet the Saudi treasury, double-or-quits, on wars in Syria and Yemen, and in extravagant foreign policy gestures (Egypt, Lebanon, Iraq and Libya). And now, predictably, the western consultants, McKinsey, have been called in to rescue the kingdom from the enveloping crisis.
“The most striking – and ominous – precedent”, author and Middle Eastern commentator, Patrick Cockburn, foresees
for Mohammed Bin Salman’s economic ‘leap forward’, Vision 2030, is “not Mao or Saddam, but the Shah of Iran, in the five years before the revolution in 1979”. Using Iran’s oil revenues, and urged on by well intentioned western ‘development thinking’, Cockburn writes, the Shah “proposed in 1974 for Iran’s economy to grow by a quarter every year, under an expanded version of the Fifth Five Year Development Plan. The outcome of the Shah’s manic desire for growth and modernisation was destabilisation and popular rage that contributed significantly to his overthrow”. He continues: “At the heart of the Shah’s downfall was ill-informed hubris and wishful thinking which led him to saw through the branch on which he was sitting”. And that already stressed and bowing branch rested – in Iran - on the quiescence of the clerics and the Bazaaris, whose patience and willingness to bear the weight, snapped.
In the Shah’s time, the well-intentioned western advice was all about development, regional co-operation and industrialisation. Today’s neo-liberalism is couched in terms such as privatisation, monetisation of fixed assets, debt-driven growth, competitiveness and financialisation. It is different admittedly, from the earlier Iranian formula, but it may prove no less toxic to the brittle twin pillars on which the Saudi monarchy rests - quiescent clerics, and a majority of young Saudi males (70%), used to idling away their time in the public sector bureaucracy, whilst being handsomely paid for doing nothing. The question is, whether McKinsey – for all the best of intentions naturally - has similarly handed Mohammad Salman the very ‘saw’ (Vision 2030), by which he will sever the branch on which the Saudi monarchy is perched?
Professor Vijay Prashad suggests
that “this report [Vision 2030]
, could have been written without a site visit. It carries all the clichés of neo-liberalism: transform the economy from a government-led to a market-led one, cut subsidies and transfer payments, and sell government assets to finance the transition. There is not one hint of the peculiar political economy and cultural context of Saudi Arabia. The report calls for a cut in Saudi Arabia’s public-sector employment and a cut in its three million low-wage foreign workers. But the entire political economy of Saudi Arabia and the culture of its Saudi subjects are reliant upon state employment for the subjects, and low-wage subservience from the guest workers. To change these two pillars calls into question the survival of the monarchy.”
Salem Saif notes
that McKinsey has made its mark in the Gulf states, producing 'economic visions' for each country. “These master plans present countries with a blueprint to transform their entire economies, promising to move them from oil dependency to rich, “diversified,” “knowledge-based” economies … The testing ground for McKinsey’s “economic vision” business line was the Kingdom of Bahrain. There the company teamed up with the young and “ambitious” Crown Prince in the mid-2000s to draw up the “Economic Vision 2030” — a plan to reform Bahrain into a “competitive” society. Oil-rich Abu Dhabi, the capital of the United Arab Emirates, was next in line for its own Economic Vision 2030.”
If these ‘economic visions’ sound remarkably similar, it is probably because they are
(Saif argues): “diversify the economy away from oil dependency, and grow the economy by transforming it into a financial, logistical, and tourist hub. In essence, become Dubai, in one form or another. Saif continues:
“And the route to success is always through the private sector. In the same interview announcing the Aramco privatization, the deputy crown prince outlined plans to privatize public infrastructure, education, and even health care.
The infatuation with privatization is particularly bizarre in the Gulf. Here the private sector is mainly composed of “family-owned” companies in construction, retail, and hospitality that are subsidy-dependent, plagued by low productivity, and heavily reliant on exploited, poorly paid migrant labour who produce non-exportable services.
In contrast, state-associated companies in the Gulf, whether partially or wholly owned by the government, tend to be more dynamic, productive, and technologically savvy. They have (relatively) better labour relations and hire more local workers. And whether involved in oil, logistics, air travel, or sovereign wealth management, they’re among the most internationally recognized companies the region has to offer.
A common thread in all these economic visions — whether developmentalist or neoliberal — is the near-total absence of participation by citizens themselves. This is not unusual for the Gulf states.
The region’s people suffer a double form of disdain: their autocratic rulers consider them unworthy of playing any role in decision-making, and many around the world, including ‘progressives’, tend to write them off as denizens of oppressive rich states. Rarely are they granted any agency.”
What Saudi Arabia does share with Iran of the era of the Shah is a lack of any structures to absorb and to channel the sometimes explosive social and political impulses that radical and hurried change can generate. And, to put it bluntly, (per
critic Selvam Canagaratna) Mohammad Bin Salman’s “ultimate aim is to put an end to the long-standing social contract under which Saudi nationals get easy jobs in the government sector and a high standard of living, in return for political passivity and loyalty to the House of Saud.”
This political passivity can too easily be taken for granted. In his book Western Political Dominance and Political Islam
, Kalid Sayeed, writes
how the Shah had become entirely oblivious to the enormous hardships his economic policies of rapid industrialisation had created for Iranians – this blindness represented the “the ill-informed hubris and wishful thinking” to which the Shah had succumbed.
70% of the Saudi-born workforce is in comfortable, un-demanding jobs in the state bureaucracy. Will they welcome the metamorphosis to ‘competitiveness’? Bin Salman has big plans
to privatize public infrastructure, education, and even health care. Will the Wahhabi establishment welcome this modernisation and westernisation of their society? (King Abdul Aziz faced rebellion, King Saud faced being ousted, and King Faisal was assassinated (1975), precisely because of their western modernisation proclivities).
Today, the young Saudi ‘subject’ is increasingly well-educated – and increasingly online. The country has the highest number of active Twitter users in the Arab world: 2.4 million, or more than double
the number in Egypt, a country whose population is three times larger.
Professor Prashad concludes:
“To shift from an oil-dependent economy to an industrial-tourism-finance economy will require a massive dose of investment. To secure that investment, Saudi Arabia plans to sell a small stake of its state-owned oil firm—ARAMCO. The plan is to raise at least $2 trillion from that sale and from the sale of other state assets. This money will bolster the depleted Sovereign Wealth Fund, which might otherwise run dry by 2017-2020.
The enhanced Sovereign Wealth Fund will be used to develop new industrial sectors such as petrochemicals, manufacturing at the medium scale and finance as well as tourism. Foreigners will be allowed to own property in the Kingdom and entrepreneurial activity will be encouraged by the state. How does all this happen by 2020 – the date proposed by Prince MbS—or even by 2030—the name of the Prince’s plan? Will Saudi Arabia be able to rapidly transform its population from being satisfied with receipts of oil revenues to being workers in an insecure market environment? History suggests a long period of dissatisfaction amongst the public during this kind of enormous transition. Can the Saudi royal family manage the level of anger and humiliation that this change will evoke?”
As a caution, Bloomberg quotes Capital Economics’
frank realism: "History suggests that it’s best to take reform announcements in Saudi Arabia with a large pinch of salt".
Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.