Saudi Arabia represents global Islam by virtue of the Kingdom holding the custodianship of the two holy sites in Mecca and Medina, toward which the 1.6 billion Muslims1 around the world are called to turn in prayer and submission to Godâs will. This presents a powerful image of a global faith, but also highlights that ownership of the two holy sites is a major global political and economic position to hold. If a new Caliphate or an Iranian-led destabilization of Saudi Arabia were ever to come about, and consensus says it wonât, it would be because their forces will have driven out the house of Saud and taken custodianship of these sites. Current wisdom suggests this is a somewhat fanciful notion, though Saudis I have spoken to in recent years have certainly expressed the view they feel Iran is a real and credible threat. It is very much in the realms of possibility today we could see a destabilized Saudi Arabia. What heightens this threat is the emerging economic picture in Saudi, which is undergoing a paradigmatic change in its economy as it seeks to move from oil -dependency and the resource curse into a more diversified and sustainable economy. Whether, and how it might, fail or succeed is the question in this book. I posit the possibility that the Kingdom could very well implode within the timeframe the Saudis have set themselves of 2030 to reinvent their economy. Critics may argue implosion is unlikely, but economic implosion or failures are frequently seen in the light of that wonderful thing called hindsight, and consensus is a fickle thing. Many economists, as well as political scientists and others, did not foresee the implosion of the Soviet Union or the 2008 recession. There may be various reasons for this, but in part I suggest this is because they did not study the behaviors of the leaders and networks of people closely enough.
For many years the Saudi story has been a cyclical one of oil rises and falls since the 1970s oil boom. The Kingdom incurred deficits in each year in the period 1983â1999, peaking at a cumulative rate of 25% of GDP from 1981 to 1985.2 The solution was always the same, the government threw money at solving the problem and relied on a strong relationship with America. The status of the House of Saud, with varying predictions of its demise,3 has fluctuated as the Sauds consistently proved themselves adept at retaining a firm grip on power. Iran was annoying, but never perceived as a viable threat; a Shia minority after all could not overthrow the overwhelming Sunni majority. And so the story goes on. Until now. In this book, I will argue that this story is changing dramatically, and there is much in Saudi that could be up for grabs as the Kingdom shows itself more vulnerable to failure and implosion than at any point in its 80-odd-year history. This book is not a prediction, it is a speculation about how Saudi is vulnerable to implosion. The launch of the national economic strategy called Vision 2030 was not just a statement of intent, it was a statement of leadership by the rulers themselves. A major test for the monarchy came in the midst of the economic downturn and the death of King Abdullah bin Abdulaziz on 23 January 2015. Aged about 90, he had been king since 2005, and a very popular one at that. According to the rituals of Wahhabism , King Abdullah was buried simply and in an unmarked grave. This was a far different style of marking the passing of regimes than we see in respect to leaders in many other parts of the world.
King Abdullah was succeeded by his half-brother Salman , aged 79. King Salman promised continuity, stating on national television âWe will continue adhering to the correct policies which Saudi Arabia has followed since its establishment.â There had been much speculation and commentary about the future succession plans in the latter years of the illness of King Abdullah , but this was eventually ended with the family succession and passing of power, in part due to Salman having undertaken many of the late kingâs duties and partly by the opaque way in which power is managed in this nation. After some power games from 2015 to 2017 the question was finally settled, though not to everyoneâs liking, on Prince Mohammad bin Salman, known by the moniker MbS .4 The outcome is that this has settled the succession question for the foreseeable future. King Abdullah had been much loved and respected within the Kingdom, and he managed to initiate a number of reforms, albeit in many Western eyes at something of a snailâs pace. While King Salman shows some of this continuity, he has acted with a certain degree of increased speed, and there is a more clearly detectable response to the economic challenges the Kingdom faces.
What immediately attracted the most attention to the new reign, however, were the human rights issues in the Kingdom. In the first year under the new king there was an increased number of beheadings and capital punishment in the Kingdom. In his first year, there were 150 executions, the highest for 20 years. The strongest reaction came, however, when King Salman started 2016 with the decree of death sentence for 47 people, including Sheikh Nimr al-Nimr, a Shia and outspoken critic of Saudi Arabiaâs ruling family. This set off some violent reactions in the Eastern Province, which is about a third Shia in population, and abroad. There was international outrage, but the lead attacks came from Iran , itself no stranger to such actions with a somewhat worse record than Saudi.5 The Iran reaction coincided with a nuclear deal that rehabilitated Iran in the international political and diplomatic community enough to allow Iranian government and business officials to start a charm offensive and go on a global road-trip to do business with a world prepared to lift sanctions, and apparently to forgive and forget. Iran , used to attacking Saudi as American Islam, had done its own deal with the devil. The politics of the Saudi economic change revolves around three areas of influence: issues of human rights and gender , the relationships with United States and Iran and conflicts with Syria and Yemen . At the heart of these three areas is oil. The revolutionary changes taking place since King Salman became king has made the Kingdom fragile. The changes are coming about through the agency of his heir MbS , who is taking daring risks in a risk-averse culture. London School of Economics associate professor Steffen Hertog goes further, suggesting MbS has undertaken a task to âslaughter many holy cows of the Saudi distributive state.â6 These risks are a high stakes gamble that MbS believes will preserve the Kingdom, and maintain the tradition of the Saudâs adroitness at keeping power.7 On the other hand, and in the eyes of traditionalists, he is a young man in a hurry who is threatening the culture.
The title of this book posits an economic implosion and offers a behavioral perspective. Behavioral economics as an approach brings into play the psychological and behavioral impulses in the economy. Saudi Arabia makes for a very interesting case study for the behavioral economist, because it behaves differently from many economies and religious psychology is of great importance in interpreting economic activities. Saudi has what could be called a distinct ideological economy,8 which is essentially an Islamic distributive welfare state. It is also one that is akin to the Soviet Union and China which emerged in the twentieth century as communist economies, suggesting there are other kinds of political economy than the capitalist economy. The Soviet Union failed as a communist state that was inept at employing economic tools of capitalism , while China thrives as a communist state by using the economic tools of capitalism effectively. These are critical reference points for Saudi Arabia, which has an ideology or faith, which is Islam, that fundamentally is at odds with capitalism 9 yet has been to date a profitable economy. The relationship between this ideology, faith or philosophyâhowever you wish to frame itâand the workings of the economy is what I find greatly interesting here. Saudi is in a period of change, which is not just an economic conundrum but involves social and behavioral change. Will it implode like the Soviet Union or reinvent itself like China ? I will later argue that the aspiration of Saudi Arabia is to be like China , but the nature of the Saudi ideology may drag it down in ways akin to the Soviet Union , but I will conclude there is the option of pursuing an Islamic third way. We have a fascinating journey ahead of us in this book to explore the possibility of implosion, however remote economists may think it so. There are many aspects of economy, religion and politics to take into account. This book will doubtless irritate purists in each of the disciplines, but I ask them to indulge me in a speculative exploration of what might happen, which I realize goes against the grain of economistsâ distaste of hypotheticals. To which I can only say economists have been on the wrong side of history before, and perhaps this book will offer insights to help keep them on the right side of events on this occasion.
The speculation here is that Saudi Arabia could implode. Implosion means a sudden failure or collapse of an organization or system, such as a global financial implosion. While Saudi is facing the possibility of an economic implosion, it is not inescapable. The question to consider here is what the warning signs are of such an implosion, how might it be staved off and what social impact there will be in the Kingdom as it changes and if it were to implode. To its benefit, Saudi has a strong clan or family system and has a relatively high level of social cohesion, though this cohesion has been a proce...