Saudi Arabia under King Abdullah

by Benjamin Studebaker

King Abdullah’s reign in Saudi Arabia has come to an end with his death at age 90. Abdullah became king in 2005, but his rule truly began in 1996, when, as crown prince, he became King Fahd’s regent. Effectively, he was in power for nearly 20 years. It can often be difficult to judge the legacies of democratically elected leaders. Their short terms in office make it difficult to distinguish the effects of their administrations from those who precede and follow them. By contrast, autocratic rulers not only typically rule for far longer, but they also have much greater personal influence over the policies that emerge during their reigns. For these reasons, when a long-serving autocrat passes the torch, it is an interesting and useful exercise to have a look at how much better or worse off their country is now than it was when they rose to power. In March 2013, I ran a similar piece about Hugo Chavez’ 14-year reign. So let’s look at Abdullah’s legacy.

To start, we need to get a sense for whether or not Abdullah’s policies improved Saudi living standards. Effective comparisons will look not only at how Saudi Arabia has performed on various metrics from 1996 to 2015, but will also consider how Saudi Arabia has performed relative to other similarly developed countries during that time. If a country sees growth, but that growth is slower than its peer competitors, this counts against the regime rather than for it. Let’s start with healthcare:

Saudi Healthcare

 

In 1996, Saudi Arabia was behind Syria and even with Iraq on life expectancy. Today it has pulled ahead with both, and has closed the gap with the United States from from about 5 years to about 3. This fits with the research, which indicates that the state run Ministry of Health has made substantive gains in recent decades and is rated higher than the healthcare systems of some highly developed countries. Full marks here.

What about education? In the early 90’s, Saudi Arabia had a literacy rate of only 62%, with 25 point spread between men and women. Today, the rate is 87% and the spread has been reduced to just 8 points. Saudi women still remain at substantial disadvantages in Saudi society–they famously cannot drive and require male guardians–but these are nonetheless encouraging figures. In any case, surveys of Saudi women do not suggest that these limitations are viewed as onerous or oppressive, though they certainly appear that way to western eyes. This may, however, be due to the deeply religious, conservative education Saudis receive. The result is that many Saudis have no marketable skills. 75% of the jobs created in Saudi Arabia have gone to foreigners living in Saudi Arabia, and while the national unemployment rate is roughly 5%, the unemployment rate among native Saudis is 12%, and some reports have it much higher than that. Consequently, oil accounts for 55% of Saudi GDP and 92.5% of state revenue, and most of the people working in the oil sector are foreign born. This leaves the Saudis people extremely dependent on government jobs, and these jobs in turn depend on the oil revenue:

Saudi Government Jobs

Abdullah’s government has continually tried to push more Saudis into the private sector, but the aforementioned education deficit has made it very difficult for the Saudis to diversify their economy. Compared to other regional petrol states like the United Arab Emirates (which has reduced it’s oil share of GDP to 29%), Saudi Arabia is clearly falling behind here, and it’s primarily due to the House of Saud’s inability to comprehensively modernize the education system. The most devastating consequence? Productivity and real wages in Saudi Arabia haven’t really moved in decades:

Saudi Productivity

 

Indeed, Saudi real GDP per capita more or less follows the oil price–there’s hardly been any improvement since the 1980’s:

Saudi per capita GDP

And, as you might expect, this follows the oil booms and busts:

With oil prices taking a tumble, the Saudis are planning to start eating into their reserves to prop things up. That said, because of wars, sanctions, US interventions, and mismanagement in the other gulf states, Saudi Arabia has managed to retain the largest share of wealth and power in the gulf region, as calculated by share of regional GDP:

Persian Gulf BoP without US

 

However, the Saudi position remains precarious–Iran only trails by 7 points despite constant efforts by the western powers to restrict its growth. This contributed to Abdullah’s fear of Iran and his constant desire to see the United States “cut off the head of the snake” and use its military forces to destroy Iran’s nuclear program. To date, the Obama administration has seen war with Iran as an expensive headache it doesn’t want or need. Given Iran’s much larger population (77 million to Saudi Arabia’s 28 million) and more diversified economy (oil accounts for 25% of Iran’s GDP as opposed to 55% of Saudi Arabia’s), it is very likely that Iran will overtake Saudi Arabia in the long-run. Only high oil prices and US support prop up Saudi Arabia’s advantage. When one or both of these fade, the Iranians will likely pull ahead.

This is not entirely King Abdullah’s fault–outside of oil, Saudi Arabia is a resource-poor desert country. Prior to the discovery of oil, it relied on subsistence agriculture and many of its people were nomads. Nevertheless, Abdullah did not do enough to prepare the country for its future, choosing to prioritize inculcating the populace with conservative religious values over creating a modern, competitive workforce. He used the oil revenue to provide for basic public services and public sector jobs, but these tactics only serve to conceal Saudi Arabia’s problems and further delay the day of reckoning. All the while the House of Saud has made off very well financially–the entire family (which consists of roughly 10,000 princes of various levels of distinction) has an estimated net worth of $1.4 trillion, roughly $140 million per prince on average. This is more than Saudi Arabia’s entire annual GDP and more than 6 times the amount of money the Saudi government spends on all government services each year. It’s one thing for a monarchy to maintain the king and his immediate dynasty in luxury and comfort, but it’s quite another thing for a king to divert a large percentage of the national output to maintaining and ever-expanding number of trivial princes, the vast majority of which are nowhere near close to the line of succession. Future generations will regard this as a tremendous waste of public funds and a tragic missed opportunity to put Saudi Arabia on a strong, sustainable competitive footing. Saudi Arabia’s oil wealth should fuel the country’s national transformation into a modern state. Instead, it is fueling an immense number of decadent parties where distant members of the dynasty bask in luxuries and privileges they deny not only to the Saudi people of today, but to the Arabians of tomorrow. His successor, King Salman, would be wise to chart a different course, though the personal financial stake he (and all the members of the House of Saud) have in the status quo makes this unlikely.