The World Bank issued a stark warning in its 2018 outlook for the Saudi economy: “The Kingdom likely faces a looming poverty problem.” The bank has since noted in its 2019 and 2020 outlooks that “while no official information is available on poverty, identifying and supporting low-income households is challenging.” Dependent on world oil prices, the curve of gross domestic product (GPD) per capita in Saudi Arabia was never a straight line upward. Instead, it ebbed and flowed.
Austerity for the Poor and Prosperity for the Rich
In one example, Saudi GDP per capita dropped by almost half from a peak of $17,872 in 1981 to $8,685 in 2001, the year in which 15 Saudi middle-class nationals constituted the majority of jihadists who flew airplanes into New York’s World Trade Center towers and the Pentagon in Washington. It was also the year in which many Saudis struggled to make ends meet amid depressed oil prices and then-King Abdullah’s efforts to introduce a measure of Saudi fiscal restraint. Many people held two to three jobs.
“Prior to the Gulf War, we didn’t pay rent in student dormitories — now we do,” a Saudi student enrolled in Saudi Arabia’s prestigious King Fahd Petroleum and Minerals University told this writer at the time. “In the past, it didn’t matter if you didn’t complete your studies in five years. Now you lose your scholarship if you don’t. Soon we’ll be asked to pay for tuition. Before the Gulf War, you had 10 job offers when you graduated. Now you’re lucky if you get one,” the student said referring to the US-led reversal of the Iraqi invasion of Kuwait in 1990.
“There’s nothing to do here but sit around, watch television and smoke shisha,” added Abdulaziz, one of the student’s friends. “There’s nothing we can do to change things. That’s why we get married early, only to discover that it was a mistake.”
Saudi GDP per capita has dropped again, although less dramatically, from $23,337 in the year that the World Bank warned about looming poverty to $20,110 in 2020. On a positive note, the bank reports that while “poverty information and access to survey data to measure welfare conditions have been limited,” Saudi Arabia has seen “gains in administrative capacity to identify and support low-income households.” It warned, however, that the middle class could be most exposed to the pains of austerity and fiscal restraint.
A Different Saudi Arabia
To be sure, the Saudi Arabia at the turn of the century is not the same kingdom as today. Saudis made up one of the largest contingents of foreign fighters in the Islamic State group that seized territory in Syria and Iraq in 2014. Despite this, Saudi citizens are unlikely to respond to a unilateral rewriting of a social contract that promised cradle-to-grave-welfare and potential economic hardship by drifting toward militancy and extremism at a time that a young crown prince has promised massive change and delivered some.
Crown Prince Mohammed bin Salman has liberalized social mores, rolled back the influence of ultra-conservative clerics, created greater leisure and entertainment offerings, and enhanced women’s rights and professional opportunities. This forms part of his plan to wean Saudi Arabia off its dependency on oil exports and diversify the economy. He has simultaneously tightened the political aspect of the kingdom’s social contract involving the public’s absolute surrender of all political rights, including freedom of expression, media and assembly.
In exchange, Mohammed bin Salman’s Vision 2030 reform plan promises, according to the World Bank, to protect citizens from the pain of economic change by “modernizing the social welfare system, redirecting price subsidies toward those in need, preparing and training those unable to find employment, and providing tailored care and support to the most vulnerable citizen.” In doing so, the government has sought to soften the impact of higher energy prices and the tripling of value-added tax and expatriate levy.
More than social protections, Vision 2030 is about creating jobs for Saudis in a country where unemployment was 11.7% in the first quarter of this year. In the last three years, the Saudi private sector reportedly created a third of the 1.2 million jobs the kingdom needs to generate by 2022 to meet its unemployment target. The country’s statistics agency said the first-quarter unemployment was Saudi Arabia’s lowest in nearly five years. But the decline was partly driven by people dropping out of the labor force rather than new job creation.
Jobs for Saudis
In May, Mohammed bin Salman asserted in a wide-ranging interview that “we have 200,000 to 250,000 people getting into the job market each year and public sector jobs are limited.” Taking tourism as an example, he said the development of the industry would create 3 million jobs, 1 million of which would be for Saudis who, over time, could replace expats who would initially fill two-thirds of the openings.
“Once we create three million jobs, we can Saudize them in the future. There are also jobs in the industrial sector and so on,” Prince Mohammed said. He predicted at the same time that the percentage of foreigners in the kingdom could increase from a third of the population today to half in the next decade or two.
Writing about the changing social contract in Saudi Arabia, Mira al-Hussein and Eman Alhussein cautioned that the government needs to manage rapid economic and social change, in part by providing clearer information to the public. The scholars identified issues involving rights of foreigners versus rights accorded children of mixed Saudi and non-Saudi marriages, the rollback of religion in public life and austerity measures as potential points of friction in the kingdom. “The ramifications of existing grievances and the increasing polarization within Gulf societies … as well as the extensive social engineering programs have pitted conservatives against liberals. Arab Gulf States’ ability to redefine their social contracts without turbulence will depend on their tactful avoidance of creating new grievances and on solving existing ones,” the authors wrote.
The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy.