Saturday, 31 March 2012

The House of Saud

The Good, the Bad and the Ugly
If there is any country in the world which has been laid to waste by rent seeking monopolies then it is Saudi Arabia.

The Desert Kingdom is the sixth largest consumer of Oil, with an economy and population that is not commensurate in size to the 2.8 million barrels it guzzles each day; which increased without unease by 78.2% between 2000 and 2010, shown in the above graph taken from this week's issue of The Economist. For all its vast fields, which represent nearly 18% of global oil reserves, Saudi Arabia is an unequal, politically repressed, and a stagnant society. It follows a highly strict version of Islam descended from the teachings of Muhammad Abd-al-Wahhab, an 18th Century Theologian. Saudi Aramco, the parasitical State Oil Monopoly, inefficiently pumps out more than 95% of the Kingdom's Oil and is controlled on the whims of its political masters; in 2005 it was briefly valued at $800 billion, 20% larger than the current GDP of Saudi Arabia.

The current absolute monarch King Abdullah, the son of the Kingdom's first Ruler, has done little to improve the structural weaknesses of the economy despite having a family wealth that lays to shame the coffers of its neighbours. But its neighbours, like Qatar and the UAE, have striven to diversify their economies unlike the Kingdom's heavy addiction to its one and only sector. The youth, composed mainly of testosterone driven young men as women are heavily marginalised in society, live high octane, idle lives given that the price for a litre of oil is subsidised at 8 pence or 13 cents; part of the delicate social contract between the monarchy and its peoples.

Meritocracy is alien to the Kingdom and labour mobility is based on nepotism and relative distance of lineage from the royal family. Then it is no wonder that the economy is profligate, rent seeking and stray. The weak institutions and monopolies on power and incomes only goes to reinforce this status quo.