Economics and politics - comment and analysis

Saudi Arabia’s economy: a “Chinese Road” to Arab Capitalism? Part II

(Erster Teil und dessen deutsche Übersetzung)

However promising they may be, aggregate indicators mask the same challenge as faced elsewhere in the region of productively employing a growing young labour force and reducing unemployment rates, which are stuck above 10% but which official forecasts’ wishful thinking puts at only 5%.  This significant challenge is further complicated by the extraordinary reliance of the Arab Gulf economies in general, and Saudi Arabia especially, on a complex system of what Adam Hanieh has referred to as the “spatial structuring of class”, a process of class formation that links the development of social relations across different spaces in the region (in: Lineages of Revolt, Haymarket Books, Chicago, 2013, p 126.). This has entailed a highly regulated import of mainly low paid, migrant Asian (and Arab) workers, who have to work and to live in miserable conditions. They provide the bulk of the labour that Arab Gulf capital needs in order to expand and deepen and reproduce the ruling elite, generation after generation, one capitalist strata upon the other, through a system—kafala— that binds workers to Saudi employers  as their guarantors and allows for extreme forms of exploitation. Recently, on top of the miserable conditions downward “adjustments” have been enforced on the migrant workers in Saudi Arabia (the number of such workers has reached as much as 9 million) to apprehend a “Saudisation” of the work force, which has become a top policy priority. This led to the mass deportations of some two million migrant workers in 2013 and untold misery for 120,000 Ethiopians in particular, who were subject to especially racist treatment and brutally transported home (Vijay Prashad, “Contract Slavery” in Frontline, 23 December 2013).

Only under the autocratic, indeed anachronistic, governance model of the Saud family and its well-woven marriage of the interests of the state and the increasingly empowered capitalist-financial classes could such a primitive labour exploitation system be permitted to exist in the 21st century. And only with the ability to resort to such a “spatial structuring of class” and an economic model that allows for maximum retention and political distribution of rents and related privileges that powers this particular form of Arab state capitalism, can these last remaining absolute monarchical states in the region (and in the world) hope to survive. But how sustainable is such a political and economic system, and to what extent do other authoritarian paths to state capitalism offer lessons that perhaps Saudi Arabia could benefit from if there is ever to be a peaceful transition from autocracy to democracy?

Conventional wisdom would have it that technocratic structural adjustment and reform of the inadequate regulatory framework holds hope for making Saudi Arabia’s labour market and economy more productive, inclusive and competitive. The government is openly committed to significant new expenditures on the social sectors and infrastructure, introducing new social safety net measures, as well as creating job opportunities for the youth, and meeting demand needs for housing.

As for another primary Saudi policy goal, namely improved incentives in the labor market, a recent report by the ILO, for example (International Labour Organization, “Tricked and Trapped: Human Trafficking in the Middle East”, Geneva, April 2013.), advocates reforms that have little bearing on the political realities of the monolithic Saudi system. As Vijay Prashad drily points out “The ILO makes several recommendations that are likely to be ignored—reform the kafala system, bring all workers under the protection of domestic labour laws, increase the power of labour inspectorates for worksite monitoring, and build up worker organisations”. While admittedly the ILO would not wish to advocate for political revolution, even their timid, mainstream formulae actually would require real regime change were they to be seriously pursued.

The Saudi state’s capitalist model may have been shaken by the prospect of social change from below stalking the region, and the alarmed tones emitting from ILO and human rights organizations regarding the incompatibility of this economic governance mode with global rights and standards are telling in themselves. But like other entrenched autocratic regimes in the region faced with grave socio-economic challenges (the revival of the pre-2011 Egyptian ruling classes is yet another example), Saudi policy makers have no option (nor imagination) but to revert to the sort of policy stance that fits with IMF and related orthodoxy, and hope for the best.

They simply cannot contemplate the sort of political and social transformations that have to accompany the capitalist transformation underway if it is to succeed in its own terms, despite its many unresolved internal conflicts. The Chinese road to (and from) socialism, and now to a form of state capitalism, which ensured, or at least promoted, a long term reduction of poverty, improved living conditions and opportunity for the broad masses of working and peasant classes, while building a powerful, modern and gradually liberalizing economy. However, the Saudi road to a hybrid mode of Arab state and financial capitalism has been geared largely to ensuring the enrichment and perpetual rule and wide-ranging influence of a number of Arabian tribal families in the name of Sunni Islam and the Arabs, while subsuming economic development to the lowest rungs of policy concern. Authoritarianism in China continues to cede way to pluralism and globalized consumers, and its one-party state has been more adept in power sharing and even in fighting corruption than the Saudi ruling family. The latter can only resort to allowing a gradual and selective penetration of globalization into Saudi society, while practicing stern repression of any form of political, social or artistic expression, all sanctioned by an obscure strand of medieval conservative Islamist (Wahhabi) religious doctrine.

No doubt, the Saudi regime doesn’t stand alone in the face of its people or the Arab peoples’ desire for liberty and democratic governance. Its geo-strategic value to the West and Israel, as well as its strong integration into global capital and finance networks, with a seat at the G20 table, will serve it well in weathering the economic and political challenges that lay ahead. The imminent overthrow of these regimes has been on the agenda of many Arab nationalists, revolutionaries and pundits since the 1960s at least and yet these regimes have only grown stronger over the decades. However, it is also arguable that they have never faced quite the same potent mixture of rapid social transformation and protest, economic inequality and youthful political yearning that remains omnipresent. The unresolved contradictions between Arab capital and labour, and growing income inequality and class differentiation may continue to be relegated to the background of the more dramatic and explosive sectarian strife being fuelled from Iraq to Syria and Lebanon. And the Egyptian people may well be pacified or distracted from their social and economic demands by the new populist authoritarian regime emerging in Cairo. But these deep schisms and the attendant social struggles that they imply will remain decisive dynamics within the coming conflicts in the region.