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The Saudi Arabian Resource Curse: Cultivating Socio-Economic Ignorance on Overdependence?

By Saumya and Sanya Seth

When shell shocks translate into economic shocks, it’s not only the resource-deficient countries who are on the receiving end. This column elucidates the resource curse paradox by positioning the case study of Saudi Arabia at the center of the concept. It delineates the disadvantageous position of this resource-rich country during the period of shock and its recovery phase. Furthermore, it paints in words the implications of oil abundance on the imperfect correlation that exists between religion and women’s rights in Saudi Arabia.

Taboo – a game of words, had my mind stirred…My reaction was absurd, the instant when “SHOCK” was the word I heard.

I was reminded of a recent war that had been averted because near at hand is the eventful day of 24th Feb 2022 that left the world shell-shocked!

While I refer to the word ‘shock’, I am trying to emphasize the multifacetedness that this word acquires as we transpose it from a guessing game to a war-stricken world. Just a transposition denies its singular usage (the description of a state of sudden surprise). Subjecting it to the ongoing Ukraine-Russia war allows it to refer to a moment/ period of revelations owing to the surrounding disturbance and distress. Trying to decipher the nature of this war as a social, political, or economic one is a tough row to hoe. As the catastrophic effects of the war were not constrained to the economics of supply and demand, the shock waves even traversed holistic subject boundaries of the societies. Though only Ukraine and Russia witnessed the shell shock, its crescendo effects in the economic sphere: such as uncertainty in the economic markets, specifically oil markets, and the resulting inflation in the OECD countries, shocked the world’s economies and societies. 

Blessed with the penchant for certainty and predictability, researchers devised “War Oil Crisis Simulators”, which could play an instrumental role in predicting and analyzing the oil price behavior for global oil securities. These have been rendered inefficient due to the looming uncertainty about the impacts of the hitherto imposed sanctions along the oil value chain and supply chain. The forthcoming trade shifts and currency depreciations also make it a potential area for concern for both developed and developing countries. However, do the economic implications of war selectively haunt the resource-deficient countries? No. The upshots of such a socio-economic crisis escalate through the boundaries of resource-rich and silk-stocking countries. We can add flesh to our argument using the example of such a paragon country, Saudi Arabia.

OIL AND THE SAUDI ARABIAN ECONOMY:

A member of OPEC, this kingdom possesses 17 percent of the world’s proven petroleum reserves. Saudi Arabia’s role as a global exporter renders it an advantageous position in terms of the bleak influence of the OPEC countries on its foreign policy. In this dynamic world, an economy being overly dependent on its oil industry can be seen as a curse. We say so because of the recurrent changes in a country’s conditions concerning its economy and security. For instance, a shift in demand – The attempts of some countries to transition towards a sustainable country wherein they focus on reducing the usage of sparsely available and polluting resources like oil and petroleum can shake the stability of the country’s economy or a prolonged period of war respectively. The concept of the “Resource Curse” paradox aptly delineates the downside of being a heavily oil-dependent economy. Being one of the leading global exporters of a pivotal natural resource, Saudi Arabia has developed an overdependence on extractive industries stimulating the investment required in the industry to maintain the state’s finances. As the GDP growth of countries is a function of productivity and inputs of capital and labor, the fluctuation of oil prices and sometimes unfavorable trade balance initiates instability, i.e. drives the growth or decline in domestic production. Furthermore, fewer employment opportunities proffered by oil industries lead to an inefficient allocation of skilled labor. 

OIL AND THE SAUDI ARABIAN SOCIETY:

Just as we try to look beyond the numerous deep oil wells that crowd the Saudi Arabian economy, I chance upon something embedded even deeper in the Saudi society. Its religion. Let’s begin with some facts:

The national religion of Saudi Arabia is Islam. (1) No citizen is legally bound to be a Muslim. (2) Acquiring nationality by non-muslims is conditional on conversion to Islam. (3) It is forbidden to 

publicly worship religions, other than Islam. (4)

For the sake of leading a convenient ‘normal’ life, Islam and its adherence seem nothing but a choice in Saudi Arabia. But the difficulty doesn’t lie in adopting the religion, more so it’s to do with the strict laws that Islam subsumes, especially for women. The narrative of women’s rights in Islam becomes abundantly clear as the likes of former US First Lady Laura Bush and Mrs. Cherie Blairr defended women’s rights and expressed their desire to initiate efforts that would free women from the “confines of Islam.” Readings of the Quran and Sunnah echo the “governmental and social structures of Saudi Arabia” (5)  and the sheer lack of women’s rights is witnessed in the rather brutal, male chauvinistic laws that prohibit women from reporting domestic violence and punish them for complaining against rape. Unsurprisingly, Saudi Arabia ranks 138th/144 on the global gender gap report, published by the World Economic Forum. (6)

Did the quotidian gross mis-simplification just get the better of your cognitive ability too? (That, Saudi Arabia is an Islamic country. Hence, there is a lack of women’s rights.) Subtle grammatical hints like the ‘.’ often don’t come to our rescue in such situations. While our readers aren’t entirely wrong in making this assumption, an economics student’s argument would be: There is a correlation between religion and women’s rights in Saudi Arabia, but it’s not perfect. 

Women in Saudi Arabia lack rights even in the economic sphere. The Female labor force participation rate is well around 30%. Again, one of the many culprits (for curbing women’s rights) is the abundance of Oil. The different economic activities, segregated formally as sectors, have influenced employment patterns. Specifically, trade sectors like garments and textiles preferentially employ women owing to their skill and expertise as opposed to average male colleagues. However, non-trade sectors like construction and retail, which involve strenuous physical labor and are inherently dominated by males, are not easily accessible for women, especially in the Islamic states, having patriarchal barriers. Oil-dependent economies aggravate the problem as most jobs in the labor market are reserved for men, averaging men as the sole breadwinners in most such countries (Islamic communities). Thus, bejeweling their assumed male superiority and slashing women’s independence, financially and percussively socio-politically too. As a piece of evidence to beg innocence against the  defense of Saudi Arabian regimes, “ Oil-poor Morocco had 26% female labor force participation in 2011, in comparison to 15% in oil-rich Algeria, yet both are predominantly Muslim states.” Thus, the oil-dependent economies generally have the least space for women in their functioning, and religion is just another character in the story.  Another poor social implication of an oil-dependent economy is the trend of declining literacy rates. Lured by the high wages rendered to employees/ extraction workers of the industry, people force children to work at early ages resulting in the increased school dropout rate. This is harmful not only to the future prospect of the economy but also calls for the violation of children’s rights. Yet again, the oil-wealthy Saudi Arabia stands at a disadvantageous position, proving the curse of ‘its resource’.

THE WAY FORWARD:

Interestingly it feels like Henry Collins was giving us a piece of advice when he said, “We make money on the disaster”. Thus we could also learn from the lesson that the shell shock and its percussive socio-economic shock, led the world and especially the oil-dependent economy of Saudi Arabia to witness i.e Dire need for Diversification awaited by its economy. We ought to consider it even at the cost of weakening fiscal position and increased government expenditure in non-oil pro-growth ventures, citing a socially and economically prosperous future. This could act as an ultimate solution to ensure a stable global position for Saudi Arabia and to help it mend the aggravated socio-economic problems (except the elimination of those which are by-products of religion) resulting from uncertainties like war.

Saumya and Sanya Seth are students of economics at Ashoka University.

Image credits – Business Insider

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