On its head, by nudging aside the Crown Prince and imposing a nephew as the new Crown Prince and making his 30-year old son Deputy Crown Prince and effective day-to-day ruler of the realm and ahead of hundreds of senior princes.
The young Deputy Crown Prince Mohammad bin Salman, now all of 31 years, wasted no time in essentially admitting much of what those outside the Al-Saud tribe have said for years: (i) the Saudi model of inefficient consumer and input subsidies, lavish military outlays, bloated public sector as employer of last resort and other wasteful expenditures is not sustainable, especially now, in the face of low oil prices and the accelerated global transition to non-carbon energy sources; (ii) bankruptcy looms in 10-15 years if they continue on this path; (iii) a thriving and productive private sector is needed to replace the oversized public sector and to provide good jobs for the rapidly growing labor force, which should include women; (iv) the public sector must be weaned from oil revenues, and increasingly, oil revenues need to be channeled into a super sovereign wealth fund to replace the oil capital in the ground that is being depleted and that is the birthright of all generations of Saudis; (v) transparency in policymaking and its implementation must be initiated; (vi) taxation (possibly Value Added or a VAT system that taxes consumption) is needed to provide revenues for the government in place of oil revenues; (vii) most public assets, possibly including oil resources, must be privatized; and last, and most important of all, (viii) the country must develop institutions (a collection of rules, including the rule of law) that support the private sector, afford confidence, lower business transaction costs and encourage investment, both domestic and from abroad.
Prince Mohammad embraced a report from the management-consulting firm of McKinsey and Company, entitled Vision 2030 (available on the internet), as his blueprint. While we agree with the reports broad recommendations, there is a glaring omission in the report. How can the young prince put these recommendations into practice and build the institutions that must be at their foundation?
What are the major issues and hurdles when it comes to implementation?
Has the Al-Saud clan bought into Prince Mohammads rapid ascension or will they depose him when his father dies? To us the answer is clear, but we leave this to the readers imagination, without even a reference to Shakespeare.
Has the prince had sufficient dialogue with all the important constituencies to persuade them to buy into the plan? Namely, are the members of the Al-Saud clan including his own father, older cousins and even older brothers ready to abandon their obscene lifestyle and cut their access to the treasury? Are the Al-Sauds and their cronies ready to see their rent-seeking (corrupt) business activities ended by institutional reform that prohibits, monitors and punishes corruption? Are ordinary Saudi citizens, who may have been willing to trade their political rights for economic security likely to accept a world of no handouts, accompanied by taxation with a vague promise of jobs in the future? Will they accept a no handout and no subsidy approach when for 45 years or so others before them had it so good? Will they accept hardship while they watch the Al Sauds and their cronies enjoy the ill-gotten fortunes they have amassed? Will the pampered military accept the cutbacks? Again, we leave what are human reactions to the readers judgment.
At this point, an obvious comment is in order. It is always much easier to give handouts than to take them back, especially when it comes to handouts that have been doled out for a long time and are ingrained into the social fabric, which an entire citizenry have come to expect as their birthright.
As we have said, institutional reform must be at the foundation of Prince Mohammads vision. Can he establish institutions (essentially the rules of the economic game with the aim of reducing business transaction costs) that include a legal system that is fair and just, where all Saudis are equal before the law; with transparency in public decision-making; sound business regulations, their monitoring and enforcement; the protection of private property; contract enforcement; and a tax system that is accepted as fair and is universally enforced. We do not see even the beginning of such institution building.
If the above is considered in its totality, one thing should resonate. Namely, these initiatives and reforms are a pipe dream without accompanying political reform. Is the Al-Saud clan willing to consider political reforms that would strip them of their inherited rights for long-term survival? Are they willing to accept a timetable toward a constitutional monarchy, with representative governance? Again, we want the reader to decide but with a little reminder about the Al-Saud mindset. Al-Saud princes believe one fact in their heart of heartstheir father, grandfather, great grandfather or their great great grandfather, as the case may be, took over the land with about forty men, swords, knives and treachery, and Saudi Arabia is theirsit is their ranch. Now the reader should decide if peaceful political reform is possible.
In short, we do not believe that Vision 2030 can be peacefully and effectively implemented. Instead, Saudi Arabia will implode. When it implodes, will the US and the UK come to the rescue of their Al-Saud clients? We believe not. The US and the others have made thousands of hollow speeches in support of human rights and representative governance, but they have continued to support their client as long as they buy arms and do their bidding. The West has shed crocodile tears for the death of civilians and the plight of refugees, yet it continues to sell Saudi Arabia bombs that kill and maim civilians in Yemen. The duplicity of Western powers is beyond the pale. Yet the day when they see the end at hand, they will extricate themselves rapidly as they have no stomach for another Middle Eastern civil war or conflict, especially now that oil matters less.
Prince Mohammad is to be applauded for at least acknowledging the sand that is the foundation of the Saudi system. Saudi Arabia will be wrenched apart. It does not afford sound and long-term business opportunities. Any publicly held company that commits a significant part of its capital to investing in the Al-Saud quicksand would surely deserve to be taken to court by its stockholders.
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