Since the 1990s, similar modernization programs have continued, as Saudi Arabia has redirected revenues from oil exports toward infrastructure development, privatization, and economic diversification. Recently, King Abdullah bin Abdul Azziz, launched the construction of a US$6.7 billion financial district in Riyadh and partially privatized the Saudi stock exchange in the hopes of making Saudi Arabia the top financial center in the Middle East. The country joined the WTO in 2005, after the signing of the US-Saudi Trade Investment Framework Agreement, which forced it to dismantle many preexisting trade barriers. The regime has also begun to dismantle previously insurmountable barriers to foreign direct investment, which it hopes will further its goals of diversifying its private sector and becoming a leading financial player in the region.

Of course Saudi Arabia’s economy is still far from perfect. But in the last half-century the remarkable nature of the country’s economic transformation cannot be disputed. Funded almost completely by oil revenues, Saudi Arabia has gone from a country of fractured tribes living in sand-swept villages, to a thriving, industrial nation dotted with skyscrapers, superhighways, airports, and factories.

Setting a New Paradigm: Resisting Reform

And yet, despite the economic similarities between Saudi Arabia and the developed states of the West, the US House of Representative still voted on June 22 to withhold the minimal amount of foreign aid that the United States regularly grants to the kingdom, citing among its reasons Saudi Arabia’s dismal human rights records and its lack of progress in liberalizing its political system. It was a tangible sign that, despite claims over the last two years that Saudi society is “changing,” the country still has a long way to go before its social, legal, and political structures begin to resemble the modern character of its economy.

Although much has changed in Saudi Arabia since the country’s founding in 1932, the Saudi government has remained remarkably consistent with regard to its policy-making vision. It seeks to improve the economic welfare of the country’s citizens while also enforcing (sometimes ruthlessly) the country’s customs and traditions. The first half of this policy has been rigorously pursued through the reforms described above, but the latter half has manifested itself in repressive laws and a closed political system that are always justified on the basis of protecting Saudi Arabia’s Islamic heritage.

But this still does not explain why Saudi Arabia has bucked the prevailing consensus on the integral link between political and economic reforms. It does not explain the paradox of why, as Saudi Arabia’s populace has become richer, better educated, and more diversely opinionated, there has been almost no internal pressure for political liberalization. But, in the end, almost every trend in Saudi society can be explained by the single most important factor that has shaped the Saudi state—oil. And the complacency of the new Saudi middle class is ultimately no exception. The government, through its pet company Saudi Aramco, controls virtually all oil extraction and refining in the country and maintains its profligate social and economic spending through revenues from this oil production. The result is an economic welfare state of the most bizarre type, so bizarre that it has been given its own name by experts in the region—a rentier state. In such a state, rather than imposing taxes on its populace to raise the necessary cash for public projects, the government relies on a system of continuous revenues to fund not only economic development projects, but also a unique “welfare” program that tends to manifest itself in the form of simple public handouts. As long as the government can maintain these handouts, most citizens simply ask no questions—with no taxation, they demand no representation.

This system has been the primary factor behind the Saudi regime’s ability to maintain the same closed structure and enforce the same oppressive laws since its inception, guaranteeing the Al Saud family almost full carte blanche as they shape the country’s future and insulating them against the ramifications of poor or careless economic decisions. The resulting paradox is that as Saudi Arabia gets richer, its rulers find it easier to guarantee absolute rule. Prosperity in this case does not breed democratic change, but rather pushes Saudi society in precisely the opposite direction.

This unique phenomenon is perhaps best observed during the times that the Saudi economy has faltered. In the 1980s, when Saudi Arabia experienced its first major economic slowdown, public clamoring for political change garnered a promise from King Fahd to establish a consultative assembly (Majlis Al Shura) that would act as an advisory body to the Al Saud government. The promise turned out to be little more than hot air, however, with Fahd preferring to handle political dissidents with swift, repressive, and often violent justice. Indeed it was not until the years directly following the Gulf War, when international oil prices collapsed and public spending was cut, that middle-class technocrats and young Islamic fundamentalists generated enough public opposition to pressure the Fahd regime to honor its promise and establish the Majlis Al Shura—with all delegates appointed by the government. Then in the late 1990s, shrunken oil earnings again motivated the Saudi populace to speak out. These calls for change coincided with increasing pressure from the West for Saudi Arabia to reform its repressive political structure, and culminated in the kingdom’s first elections in 42 years. In 2005 Saudi men (women were excluded) were allowed for the first time to vote for half of the members of their local town councils (which have only an advisory role in government planning)—the other half of the members were, of course, appointed by King Abdullah. Despite the fact that only 25 percent of eligible voters participated (part of that Saudi apathy that has been instilled by 30 years of government handouts), these elections were hailed around the world as a major first step away from authoritarianism and were construed as a sign that, finally, Saudi Arabia was making efforts to reform.

Four consecutive years of sky-high oil prices and unprecedented economic growth have demonstrated the opposite. Indeed, far from motivating further reform of the authoritarian bureaucracy, these revenues have allowed King Abdullah to consolidate his already tight grip on power. The “democratically elected” town councils have proven to be even more ineffective and powerless than predicted. A law enacted in 2005 prohibits any employees of the government (government workers comprise two-thirds of the native workforce) from speaking out publicly against the regime’s policies. The signatories of a 2004 petition advocating the transformation to a constitutional monarchy have been forbidden to travel, and the authors of a more recent petition advocating reform have been arrested on trumped-up charges of terrorism. Despite a slew of promises from the regime in 2005, there have been no discussions as of yet regarding the establishment of further elections, even for the toothless town councils. Maybe if oil prices suddenly fall again (which looks unlikely) there will be another round of internal pressures and, perhaps, another election, but current trends indicate that the Saudi regime is perfectly content to continue as it always has—developing its economy with all the latest in modern technology and structural reforms, while keeping a tight grip on political power.