Chapter 1
Unpacking the Saudi State
Oil Fiefdoms and Their Clients
After almost two decades of economic drift and stagnation, the Saudi government started an ambitious program of reforms in the late 1990s, putting not only the Kingdomâs long-term economic survival but also standard theories of Saudi politics and economics to the test.
Contrary to both academic pessimists and regime propagandists, there has been great variety in policy outcomesâsome quite successful, others not. On the one hand, after many half-hearted attempts at trade reform, the Kingdom witnessed swift regulatory changes when the government pushed for accession to the WTO in 2005. The Saudi regime also engineered the successful privatizations of Saudi Telecom in 2003 and the national insurance company in 2004â05 more smoothly and transparently than is customary for privatizations in most developing countries. On the other hand, the government has been struggling to streamline large parts of the bureaucracy that deals with foreign investors, despite high expectations of FDI reform and a dynamic new body in charge of revamped foreign investment policies since 2000. Similarly, it has been unable to pursue coherent labor market policies, although this is arguably the most pressing item on the regimeâs laundry list of reforms.
Curiously, the policies that faltered were the very ones on which there probably was the widest agreement among state elites. How to explain that? Received ways of thinking about Saudi political and economic development are of little help in solving the puzzle. Both academic and folklore explanations of the Kingdomâs political economy make much of its character as ârentier state,â a somewhat artificial oil-dependent entity with some characteristic deficiencies.1 In the fields of administration and economic policy, these deficiencies include pervasive administrative corruption and ârent-seekingâ behavior as well as low regulatory capacity of the state. As it does not have to levy domestic taxes, it is politically autonomous from society, but it also lacks a powerful bureaucracy that would be able to implement economic rules consistently.2
Something is to be said for all these ideas, but they are of little use in explaining the mixed record of reforms since 1999: after all, rents are supposed to have a uniformly negative impact. Puzzlingly, moreover, levels of corruption and rent-seeking have had little to do with reform success or failure. The new body in charge of foreign investment reform was by most accounts clean and staffed with well-intentioned administrators, but outcomes in terms of the prevailing bureaucratic atmosphere were mediocre. Conversely, labor policies improved at least somewhat when their implementation was delegated to a particularly weak and ill-reputed agency, the Ministry of Labor, in 2004.
System-wide explanations of rent-seeking or regulatory failure clearly will not do. The argument of this book is that in order to explain the striking heterogeneity of outcomes, we instead have to do something that rentier theorists have been reluctant to do: unpack the state. Oil has undeniably had a profound impact on the Saudi administrative apparatus throughout its modern history. This impact, however, has been far from uniform across the state, neither on the level of organizations nor on the level of individual bureaucratic behavior.
The Argument
The modern Saudi state was created rapidly between the 1950s and the early 1980s through the decisions of a few Saudi royals. These decisions were taken in a top-down fashion but often resulted in the oil-funded recruitment of many clients into the growing state apparatus, not least to co-opt and control societyâessentially exchanging jobs and state services for political quiescence. The fiscal autonomy of the regime elite allowed them to expand the state into different directions, resulting in the parallel existence of state agencies of different quality and composition. In this hierarchical, vertically divided hub-and-spoke system, the only common denominator has been the central role of the Al Saud ruling family as patrons and controllers of the purse and the only macro-level political force in the kingdom. Consequently, on the âmeso-levelâ of politicsâthat of relations between different organizationsâthe state has witnessed little horizontal cooperation. Communication has been largely vertical, with the patrons on top of the system.
This pattern is reproduced on a smaller scale within state agencies, on the âmicro-levelâ of individual organizational units and bureaucrats. Bureaucrats in large parts of the oversized state apparatus tend to be de facto distributive clients of the state, with job entitlements that sap individual motivation. This results in a penchant for referring matters upwards while giving superiors little control over the day-to-day behavior of low-level administrators. The two factors combine with the concentration of power in the Al Saudâs hands to reinforce centralization and the dominance of vertical exchange.
The idiosyncrasies of policy-making in Saudi Arabia are best explained by these state structures and how they interact with society. The distinction of two levels of analysisâmeso and microâis crucial here: while vertical communication dominates on both levels within the state and can stymie policy coordination, state-society relations play out differently on each level. The fragmented state apparatus dominates politics and policy-making on the meso- or organizational level, as rent-based state-building has left no space for the emergence of powerful organized groups in society that could throw around their weight in the policy-making process (business being only a partial exception). Instead, society has been turned into a congeries of fragmented clienteles.
On the smaller, micro-scale of day-to-day bureaucracy, hierarchies are also steep, but centralized control is much less effective. Outside of the Kingdomâs insulated islands of administrative excellence, clientelist bureaucratic employment undermines performance incentives and monitoring mechanisms, which leads to lax enforcement of rules and the pursuit of individual-level social interests. Small-scale personalized networks between state and society can make the large resources of the fragmented and hierarchical Saudi state available to society, thereby softening the administrationâs rigidity but also potentially decreasing the consistency with which policies are implemented.
The regimeâs use of oil rents has shaped state-society relations differently on different levels: the regime dominates on the organizational level, and it is usually politics within the state that shapes policy-making processes. Once policies are to be implemented, however, they are often subverted by society on the micro-level, where the stateâs many individual clients are difficult to police. It is the interplay of meso- and micro-politics in the Saudi distributive system that determines policy outcomes. In the fragmented Saudi context, it makes little sense to analyze âstateâ and âsocietyâ as coherent (macro) aggregates, as rentier theories often implicitly do.3 Oil-based distribution has fragmented society on the meso-level but empowered it on the micro-level.
Saudi politics are shaped by the rent-based structures of âsegmented clientelismâ: âClientelismâ denotes unequal, exclusive, diffuse, and relatively stable relationships of exchange within and around the state apparatus, on both meso- and micro-levels. It is âsegmentedâ because of the parallel and often strictly separate existence of institutions and clienteles in the Saudi distributional system, only partially balanced through cross-cutting small-scale networks.
This system is indeed built on rents and distribution. Unlike the standard accounts however, my explanation does not take either category as an abstract aggregate but analyzes the actual power structures and social relations that mediate them over time. It therefore allows for heterogeneous state structures and historical contingencies. The timing of elite decisions has a strong impact on the stateâs meso-level shape, as the stateâs malleability has declined as it has grown larger. Client groups in society, moreover, are not static but can develop their expectations and capacities, as is the case with the Saudi private sector.
How Special Is the Saudi Case?
The underlying premise of the accountâthe dominance of vertical linkages in a fragmented state based on clientelist power relationsâis simple, yet its historical details are necessarily complex. Both dimensions of analysis beg the question of how special the Saudi case is.
All states are heterogeneous systems. Entities as different as Mubarakâs Egyptian bureaucracy and the U.S. federal administration consist of large fiefdoms that are often hard to bring in line.4 In this sense, some aspects of the Saudi story might not be that exceptional. Yet they point to problems of economic reform and policy-making that are seldom scrutinized systematically, as most political scientists still implicitly treat the state as a unitary actorâcertainly in the case of authoritarian regimes. In this sense, my account of veto players within the fragmented Saudi state apparatus opens avenues for new comparative research on politics within the state that could cross-cut authoritarian and democratic systems.
Beyond proposing broad-brush comparisons, however, I would argue that the heterogeneity of the Saudi state is exceptional even relative to other fragmented systems. This has to do with how rents and royal decisions combined to shape the Saudi state over time. Oil surpluses have enabled the building of veritable states within the Saudi state; The Ministries of Defense and Interior, the National Guard, and the religious bureaucracy have reached a level of internal autonomy that is almost unrivalled among modern states. The parallelism of infrastructures within the state and the low level of interagency coordination are striking even by the messy standards of policy-making in Cairo or Washington. The related dominance of vertical over horizontal links in Saudi politics is highly unusual: many states have strong hierarchies, but it is rare for one to have so few countervailing forces that can integrate politics. The Kingdom knows no ruling party, no parliament, and no organized pressure groups that could force a stronger horizontal integration of the system.
Macro-historians might argue that such a system is not so new. Human history has seen many large, hierarchical, and heterogeneous clientelist systems, even if most predated the twentieth century.5 Yet in Saudi Arabia, large parts of the central state play important, direct, and simultaneous roles in the lives of its citizenry, giving special salience to institutional fragmentation. This makes the Kingdom different from more conventional clientelist systems in, say, nineteenth-century Latin America, where the reach and resources of the central state were much more limited and clientelism was more mediated through local social elites and not usually formalized through state employment and other services. Rent-based clientelism in Saudi Arabia is characterized by the overwhelming role of a state that is also fragmented in itself.
The concluding chapter will say more about how the concepts developed here shed light on other cases. Suffice it to say that no other place looks exactly like Saudi Arabia, yet many of the individual causal processes described here makeâyet under-researchedâcameos elsewhere. They never do so in precisely the same overall con...