“What is rich? . . . Rich is education . . . expertise . . . technology. Rich is knowing. We have money, yes. But we are not rich. We are like the child that inherits money from the father he never knew. He has not been brought up to spend it. He has it in his hands; he doesn’t know how to use it. If you do not know how to spend money you are not rich; we are not rich.
Without this knowledge, this understanding we are nothing. We import everything. The bricks to make houses we import. The men who build them, we import. You go to the market, what is there that is made by Arabs? Nothing. It is Chinese, French, American . . . it is not Arab. Is a country rich than cannot make a brick, or a motor car or a book? It is not rich, I think.”
Mohammed Manne, Arab Merchant Banker
In the sixteenth century, Imperial Spain was the wealthiest and most powerful kingdom in all of Europe. Conquistadors brought tons of gold and silver back from the New World to fill the coffers of the Royal Government. To many observers it seemed that Spain had been blessed with a gift from God, yet within a century the empire was in terminal decline and Spain had been superseded by the Protestant states of England and the Netherlands. Abundant gold and silver turned out to be God’s curse. First of all the influx of treasure decreased the incentives in the Spanish economy to increase productivity; furthermore it also cause rampant inflation. Spanish buyers saw no need to produces goods when they could simply buy them from other countries and the Spanish economy began to steadily stagnate. Furthermore with its new found wealth the Royal Government saw no need to promote critical thought and learning among its subjects. Instead it imposed its dogmatic and anti-intellectual Catholic faith upon society. Free-thinkers and entrepreneurial Jews and Muslims were persecuted, causing a fatal haemorrhage of knowledge and talent. The dogmatic faith and arrogance of the Royal Government was summed up by the refusal of King Philip to dredge Cadiz harbour because he felt that only God had the right to alter nature. And so it was that the Protestant Northern Europeans forged ahead and dominated the next four hundred years of economic history.
The story of imperial Spain is important in two ways. First it shows that any country wishing to become rich must encourage the pursuit of knowledge and critical thought amongst its citizens. The British industrial revolution, the second industrial revolutions in Germany and America, the Meji Restoration in Japan and the Asian Tiger Economies, they were all made possible by pursuing knowledge, adapting to new ideas and allowing ordinary citizens to explore their full potential.
Wealth is based on knowledge and productivity and whilst some countries may appear superficially rich their wealth and power is, actually transitory and fleeting when looked at from the perspective of history.
In the 1930s Saudi Arabia was a poor, conservative, fiercely religious backwater with a population of around 2 million, its capital Riyadh was a sleepy oasis town of 100,000 people. Today there are 27 million Saudi citizens and Riyadh is a metropolis of over 5 million people. Superficially Saudi Arabia may seem like a rich and industrialised nation but at its core it is still the same religious and conservative society of the 1930s.
Saudi Arabia’s economic fortunes were transformed when American geologists discovered oil in the 1930s. American engineers pumped the oil out of the desert and taught the Saudis how to do the same. American oil companies then paid the Saudis for this oil. The Saudi Royals eventually took over all oil production throughout the Kingdom and started spending the fantastic revenues. To put it bluntly Saudi Arabia became rich without earning it, just as Imperial Spain had done. It had found wealth not through hard work, frugality, innovation, entrepreneurship or discovery, but by a pure fluke of geography.
The money used to pay for the oil had been entirely created in economically developed countries. Indeed this wealth was then spent by Saudis in Western economies on Western products and Western services that Saudi Arabia could not produce. The vast Royal Family has squandered billions in order to live lives of sickening greed and opulence, but the ordinary Saudi citizen has also benefited from oil wealth. Despite living under one of the most authoritarian dictatorships in the world, Saudis enjoy lavish welfare benefits, a free healthcare service, free education and Government subsidies. As an example of the Government’s largesse a failed Saudi suicide bomber who killed 6 Iraqis when he blew up the Jordanian Embassy to Iraq in 2003, is given lavish grants by the Government because he claims to be a victim of the explosion as much as anyone else. Other Saudi former Al Qaeda members are also given lavish payments by the state.
But until the recent upsurge of oil prices the Saudi economy was actually shrinking rather than growing. Despite the fabulous oil wealth, per capita income actually fell from $11,800 during the oil boom of 1981 to $6,300 in 1998. This was because the population began to increase exponentially in the 1970s whilst oil remained as the country’s only income. Indeed the population of Saudi Arabia is essentially economically inactive; oil accounts for over 90% of GDP and an incredible 94% of employment is in the oil sector. If the world found an alternative to oil tomorrow, then Saudi Arabia would become the world’s poorest country.
So why are Saudis so economically inactive? Well, in a nutshell, they have no need to work; the oil rich monarchy will provide them with all their needs. Saudi Arabia uses 7 million guest workers from the Third World to do the difficult, dirty and dangerous work that Saudis refuse to do. These workers are paid a pittance, treated appallingly, refused legal rights and denied citizenship. Saudi Arabia only officially banned slavery in 1964, after all. For the jobs that Saudis can’t do they import Western knowledge and expertise. Around 100,000 Westerners work in Saudi Arabia as engineers, architects, managers and advisors. Furthermore Saudi Arabian society is dominated Wahhabism and closed to alternative ideas or beliefs and the education system is dominated by strict adherence to Islam. A recent report by Freedom House showed that Saudi education promoted the hatred of non-Muslims. Furthermore 50% of Saudi Arabia’s potential talented is wasted; women are banned from travelling around without a male relative and they are virtually hidden from Saudi society.
So just like Imperial Spain, unearned riches and the stifling of intellectual curiosity have led to an economy that is in terminal decline.
The Saudi elite have spent 50 years wasting trillions of dollars on themselves and spent billions of dollars exporting the hateful Wahhabist meme across the world; we see the result of that everyday on the news. The lavish welfare state has seen the population increase by a factor of ten in fewer than 60 years and a staggering 40% of Saudis are under 15. The oil, Saudi’s only current source of wealth is starting to run out and the country is heading for disaster if it does not change its ways. The Saudi royals can see it, indeed they’d be blind not to, and with oil revenues running at more than $1 billion a day they intend to spend their way out of disaster.
King Abdullah of Saudi Arabia has a vision which he believes will transform the Kingdom's economy and society. Six major developments will be built across the Kingdom over the next 15 years, the centrepiece being King Abdullah Economic City, 100km (62 miles) north of Jeddah. There will be several universities in the new economic cities, which reforming Saudis believe could be the catalyst for social freedoms. The King also wants to promote the Saudisation of the workforce by offering grants to companies that employ Saudi workers. However at the Delta Marketing water bottling plant, a flagship scheme, just 12% of the workforce is Saudi. The plant’s Jordanian manager, Nidal Abdul Kareem, stated
"Low-educated Saudis have very few choices . . . [They can] work in the unskilfull work with low salaries and compete with the expats. Or they can stay at home without work and some of them unfortunately like to stay at home without work. Sometimes you feel strange that they don't like to work."
And that’s the rub, until Saudis are given incentives to work, until they are given modern and secular educations and until they are allowed control over their own lives then they will not create a productive economy. Indeed it seems unlikely that the modern world will exist within the boundaries of the new economic cities; for example it is still doubtful that the law banning Saudi women from driving will be lifted in the supposedly ‘liberal’ cities. Tellingly the cities are being designed by Western architects and built by Third World labourers overseen by Western managers. The Saudi royals can buy themselves a shimmering city in the desert; they cannot buy a future for their society with money alone.
And the moral of the story? A prosperous future is one thing that money cannot buy.
