The Saudi domestic setup is unsustainable. There are about 30 million people in the Kingdom, but 10 million are foreign workers and many of those are basically slaves. The mean IQ of Saudi Arabia is tough to nail down, but the consensus puts it in the high 80’s at the optimistic end. Some old data suggest the mean is somewhere just north of 80, which is what you see in sub-Saharan Africa and American prisons. Add in the fact that most young Saudis don’t work and you have a dearth of human capital. The general rule is you need a mean IQ of 95 to have a modern economy.
This is important because the Saudis recognize that they are running out of cheap oil to sell at huge profits. They are not going to run out of oil in our lifetime, but the cost of getting their crude out of the ground is going up and technology is allowing producers in the US to compete further up the price curve. That’s why they have this ambitious plan to restructure their economy to move away from simply being a giant oil company. They plan to open up the economy, diversify the tax base and shift work from foreign workers to Saudi workers.
Plans are great, but they rarely survive contact with reality. A country full of low-IQ nitwits, as the result of a culture of cousin marriage, is not going to turn into Silicon Valley overnight. Throw in the repressive Saudi religious culture and any attempt to open up the economy is going to run into trouble. Westerners working in the Kingdom live in compounds because the Wahhabi religious authorities demand it. Osama bin Laden was set off on his war with the West because Americans were stationed in the Kingdom during the Gulf War. Imagine what happens when Westerners are given easy access to the country.
That returns us to the central problem and why things will get much worse in the Middle East over the next decade. About 70% of the native Saudi population is under 30. They don’t work and they grew up in Wahhabi schools. The Saudis tended to export the fanatics to places like Afghanistan so they could go on jihad and never return. The more useful ones get pulled into the Saudi security services.
Imagine this process reversing and outside groups like ISIS recruiting these fanatics to make jihad on the House of Saud. Suddenly, ISIS or something similar is operating in Riyadh. There are plenty of signs this is happening now, but information is suppressed by the Kingdom for good reason. Still, smart people think this is a more of a now problem than a future problem.
And The Rat-Faced Man:
What can we learn from this? Well, basically, work produces value, but for you, the capture of value is much harder than its production. Your work probably produces positive externalities that aren’t returning to you in any significant way. (If nothing else, you’re paying into social supports for Boomers that you’ll never enjoy yourself.) It’s not so different from company scrip or other similar scams—those were about capturing the employee’s produced value.
What’s more, the system is designed to keep you from noticing how the issues are framed. We’re encouraged to believe that “the system works” when in fact non-clueless people milk the system shamelessly. Just being close to power can be higher value than the entire productive capacity of a square state full of highly productive but naïve and square-headed people still living in a mental world of public-spiritedness, small-town honesty and quiet, humble, good deeds. (Notice that “higher value” need not have anything to do with “more productive”).
The key term to Everyman’s dream all over the world, whether he’s Joe Lunchpail or Sarawut Ricebowlpipatpong, is value capture, not merely value production. If you aren’t capturing your value, odds are it’s going to some rat-faced man. Better figure out how to become your own.
Both smart, successful men who see a good deal wrong with how things are going. Like Porter, Malcolm, Julian, Curt, and Bob.
Ignore them at your peril.