September 14 ,2012
Transforming Saudi Arabia
Few countries have experienced the depth and rate of change that Saudi Arabia has undergone in the last 60 years. That comes as a surprise to most casual observers because for most people Saudi Arabia appears to be one of the most hidebound and conservative societies on the planet, a place where women cannot legally drive a car, where a royal family rules absolutely, and where non-Muslims cannot build their own houses of worship.
All that is true, but we should consider both the relative and the absolute when judging Saudi Arabia. In 1950, it was a massive empty desert, larger than all of Western Europe but with less than 4 million people scattered throughout it, with no cities worth the name, and a Bedouin society intensely conservative in its world outlook. It just so happened that it was also becoming clear that it sat on the world’s largest reserves of high quality crude oil. The 250 billion barrels sitting under its sands made Saudi Arabia a global force by the 1970s as surging oil demand met limited supply and the first oil price shock hit in 1973. Since that time the Kingdom has been awash in money.
Initially, the funds were spent to rapidly provide the population a modern standard of living in a material sense. Saudi men, no matter how ill-educated and suited to modern work, were given government jobs with hefty salaries. The country built infrastructure from the ground up including highways, housing, medical facilities, and shopping centers to buy everything the world could sell from Italian luxury goods to BMWs to McDonald’s. Meanwhile, a massive population boom turned the few of 1950 into 23 million today. That population boom is leveling off, but demographers expect it to keep rising to around 40 million in 40 years.
In less than two generations, the Saudis have gone from mostly an illiterate people living in tents to enjoying a modern urban lifestyle with universal primary and secondary education. It is hard to imagine that Saudi Arabia did not ban slavery till 1962.
But despite these dramatic changes, there was something unnatural about the transformation. Modernization in the West was a slow, 200-year process, which involved a total change in the society and its structure and values, and a massive increase in the productivity of each citizen through higher education. That did not happen in Saudi Arabia, instead it has been the artificial result of oil revenues. Outside of oil, Saudi Arabia does not produce much of value to the rest of the world. It staffs its medical centers and universities with expatriates because there are not enough talented Saudis. It has not created any world class companies despite massive amounts of cheap capital.
This is the next step that the Saudis need to take, but how to make that leap? Surprisingly, the Saudis have decided to spend their oil money on foreign education for their youth. Before 9/11 there were about 6000 Saudi students in the United States. After 9/11 that number dwindled to less than 2000. But a few years ago, the Saudis decided to go completely in the other direction. There are now 60,000 Saudis studying in the US at university, and another 120,000 in schools in Europe, Australia, and Japan. Considering that there are only about 2 million Saudis of college age, this is a very large number. The Kingdom provides these students full tuition plus a living stipend. I would guess the bill comes to over 5 billion dollars per year. And according to the Saudi Ambassador to the US, who I sat next to during the White House Iftar, they plan to double those numbers. He himself was born in 1962 and has an advanced degree from Georgetown.
I told him that in 10 years, these kids will transform Saudi Arabia. The Ambassador said that was exactly the point. When there are 1-2 million foreign educated young men and women in Saudi, the society will be kickstarted into the future. I see a very different Saudi Arabia taking shape by 2025, and what role the Royal family will play then is hard to guess. Comments can reach me at nali@socal.rr.com.
