House of Saud’s doomed bid for survival

House of Saud’s doomed bid for survival
The House of Saud is famous for its fiscal extravagance, recently Al Waleed Bin Talal bin Abdulaziz Al-Saud (pictured here) spent $485 million on the custom Airbus A380, with interior and amenities designed by British firm Design Q.
The House of Saud is famous for its fiscal extravagance, recently Al Waleed Bin Talal bin Abdulaziz Al-Saud (pictured here) spent $485 million on the custom Airbus A380, with interior and amenities designed by British firm Design Q.

By Finian Cunningham
6 Jan 2013

Saudi Arabia’s latest budget announcement - the biggest in the kingdom’s 80-year history - had the world’s financial press swooning last week. It came as an almost delirious distraction from the relentless austerity news coming out of the United States and Europe.

USD219 billion is to be pumped into the Saudi economy by the government in Riyadh. In an age of capitalist austerity, the Saudi spending plan may seem like socialism on steroids. 

By contrast, as part of its so-called fiscal cliff deal, Washington is planning to execute USD110 billion in cuts to government spending later this year. Bear in mind that the Saudi population is only six percent of the United States, the House of Saud’s largesse is, to put it mildly, wildly lavish. Such spending plans are in stark contradistinction from the rest of the world, beleaguered as it is with recession and fiscal bankruptcy. 

The world’s other exceptional big government spender, China, announced late last year that it was allocating some USD150 billion on new infrastructure projects - a relatively modest fraction of the Saudi spend. 

A Saudi finance ministry was quoted by the Financial Times as saying that the new budget would focus on “investment programs that enhance strong long-term sustainable economic growth and employment opportunities for citizens”. 

While US President Obama is targeting health and education for draconian cuts, the biggest part of the Saudi spend is conversely on these same public goods - some 37 percent - or USD80 billion. 

But this largesse from the House of Saud towards its 20 million subjects is less to do with generosity and well-being of the nation and more to do with trying to buy political survival. The bigger the largesse, the greater the sign of desperation among the Saudi rulers. 

Since the eruption of political protests across the Arab region against Western-backed autocratic rulers in early 2011, the government in Riyadh has increased its year-on-year public spending by nearly 60 percent compared with 2009 and 2010. Notably, in March 2011, shortly after the Arab uprising deposed Tunisia’s Ben Ali and Egypt’s Mubarak and was knocking on Saudi Arabia’s backdoor in Bahrain, the House of Saud made an exceptional budget announcement then of USD130 billion - to fund new housing, wage increases and unemployment welfare. 

Given these recent public expenditures by the House of Saud, one would expect the kingdom to be a veritable land of plenty and contentedness. This is far from the social reality. Saudi Arabia continues to reel from weekly protests against its rulers. Indeed, the protests have become increasingly vociferous in calling for the downfall of the Saudi regime - despite the inordinate wads of money that the regime is throwing at the public. 

The apparent robust fiscal position of the Saudi rulers actually points up deep structural weaknesses and conflicts within the kingdom. It is a symptom of the many contradictions in Saudi society that are driving discontent against the ruling order. 

Some 70 percent of the Saudi population is under the age of 30. This demographic is in contrast to the decrepit House of Saud led by the aging and ailing King Abdullah. The House of Saud is reckoned to comprise an inner circle of about 2,000 family members - some 0.1 of the country’s total population - most of them the progeny of the founder of the state, King Abdulaziz Ibn Saud. The latter is reputed to have had as many as 22 wives and sired more than 40 sons, of whom 20 are still alive.

Following the death of Ibn Saud in 1953, the throne passed on to his sons. Subsequently, Saudi Arabia’s tightly controlled hereditary system mandated that rule would from then on pass from brother to brother, rather than father to son. King Abdullah (89), who reportedly went into a coma last month following a 14-hour surgical operation, is the fifth son of Ibn Saud to take the throne since 1953. 

The arcane hereditary system has locked the kingdom into a chronic problem of aging rulers. The next successor is King Abdullah’s half-brother, Crown Prince Salman, who is 76. Salman was designated heir to the throne last year following the death of Crown Prince Nayef, who was 78 and who himself succeeded Crown Prince Sultan the year before when the latter, in his 80s, died from long-term illness. 

This elitist arrangement engenders seething rivalries between brothers, half-brothers and their sons as to the next in line for power. 

The calcified state of the House of Saud is in sharp contrast to the general youthful population. More enlightened members of the ruling family are aware of the quandary and have tried to introduce political and social reforms in recent years. The incumbent King Abdullah has, in spite of the hereditary dictates, tried to oversee wider political representation of the populace, with the introduction of municipal elections and the participation of women in the voting process in the past two years. 

As reflected in the latest budget announcement, the Saudi rulers are spending heavily on education and new economic cities, in an attempt to diversify away from the oil-dependent economy. Four years ago, for example, the King Abdullah University of Science and Technology opened in Mecca Province, aimed at turning the kingdom into a “knowledge-based economy”. 

However, such flagship projects cannot disguise the deep political, social and economic cleavages within Saudi society. These cleavages have arisen over decades of crony misrule under the House of Saud and cannot be simply fixed by belated expedient government expenditure. Saudi Arabia’s political problems are systematic, both nationally and, as we shall see, internationally. 

Despite the ruling elite’s best efforts at diversification, the Saudi economy is structurally dependent on oil exports. The world’s top oil exporter earns some 90 percent of government revenues from hydrocarbons. It is also heavily dependent on cheap foreign labor - some 80 percent of the workforce is foreign. 

In contrast, poverty and unemployment are widespread among Saudi nationals. For those aged between 20 and 30, the unemployment rate is estimated at up to 30 percent. In some peripheral provinces, the youth unemployment rate could be as high as 50 percent. Poor housing, education and healthcare sit uncomfortably alongside the showcase development projects and universities that only benefit a small minority. This contradiction can only but serve to harden popular discontent and resentment against the fabulously wealthy and indolent ruling class.

And while the opening of copious government coffers in recent years may seem like a shrewd move by the rulers to assuage social discontent, what that fiscal largesse shows to the wider population is the extent to which Saudi oil wealth has been up to now siphoned off by the House of Saud entourage. King Abdullah is reported to be one of the richest men in the world. His four sons and the countless other Saudi princes are big investors in luxury properties and other assets in North America and Europe - while many parts of the country remain undeveloped and marginalized. 

On the latest Saudi budget announcement, ratings agency Fitch points out that although the kingdom’s fiscal position is exceptionally strong, it is heavily predicated on the continuance of oil revenues. 

That is the crux of the Saudi dilemma - a dilemma that will intensify political pressure on the ruling class. Saudi Arabia’s fortune, or perhaps misfortune, is far from immune from the malaise of the world economy. On the short-term, the kingdom may appear to be able to embark on the biggest spending program ever. But the outcome is bound up with the deeply problematic state of the global capitalist system. 

The largesse of the Saudi rulers is only viable if it can sell oil at a price. The trouble is that the world economy is flat on its back. The kingdom’s top five customers are the US, Japan, China, South Korea and India. But Asian demand for Saudi oil is dependent on their export-led economies finding customers in the US. The slowing Asian economies, China in particular, is evidence of the structural problems of American and European societies, where poverty and unemployment have become endemic under relentless austerity measures. 

What we are seeing across the world is a historic crisis in the global capitalist economy - a crisis that will only worsen as the American and European financial oligarchies demand more and more austerity imposed on their impoverished populations. This, in turn, will wither Asian export-led economies, which in turn will rebound on Saudi’s oil economy. 

In that way, the Saudi rulers’ efforts at buying off social discontent with massive government spending will become a fiscal millstone around their necks. Rather than securing the political survival of the House of Saud, more likely its short-term fiscal extravagance will hasten its collapse. 

The dilemma is fittingly integrated. For the crisis in world capitalism is at root a crisis of democracy - and no country suffers more from this condition than the absolute feudalist monarchy of Saudi Arabia. 


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