How Saudi Arabia Collapses

As I stated in a previous article the Saudi government uses state owned oil assets to self fund it’s government. This system cuts the citizenry out of the system and makes basic parliamentary functions like managing finance irreverent for running the Saudi state. Unfortunately for the House of Saud, this system is doomed to failure.

France

The most famous historical example of an absolute monarchy falling to rebellion is France. Under the Bourbon monarchy the King had very little power to raise taxes. The ancient constitution and local traditions made old regime France a heterogeneous assembly of provinces each with their own privileges and tax exemptions that some had held for centuries. Taxes where also different for each of the Estates. The Clergy and Nobles were usually exempt from paying taxes altogether while the commoners held much of the burden.

The French king governed without a parliament. Because of this, they had little power to raise capital. The system was more or less fixed in place, both financially and politically. If he need extra revanue he had to sell bureaucratic offices and noble titles to rich commoners. These were known as Venal offices. In the Ancien Regime in France venal office was a way for successful commoners to gain social mobility and eventual entry into the nobility. The proceeds would then go toward paying government expenses; usually war.

When it broke

The French system of Absolutism broke down in the late 1780s. France owed it’s creditors a massive amount of money. This debt overwhelmed the ability of the government to pay. Selling offices was not enough. Even after imposing a triple Vingtieme (temporary income tax) France could not balance the budget.

France ran out of options. The King couldn’t raise more revenue and the treasury was dry. The government had no way to repay it’s loans without serious structural reform. However, this reform was impossible without consulting the people.Instead of defaulting Louis VXI called in the Estates General to help remedy the situation and reform the government.

The system could not be salvaged. In 1789 the monarchy in France collapsed. The events that followed became known as the French Revolution. Radicals took over the government and imposed a series of revolutionary regimes. This descended into authoritarianism in 1802 when Napoleon assumed the role of Emperor.*

The Saudi Connection

This is the future I see for Saudi Arabia. Financially speaking, the Saudi Kingdom will be in the same situation as France in only a few decades. As I stated in my previous article, oil revenue currently allows the Saudi Kingdom to remain an absolute monarchy in a similar way that selling offices allowed King Louis to avoid involving the general populace in finance and distributing power in France.

At the moment the Saudi Kingdom is undertaking massive debt to fight the war in Yemen. The royal succession has also taken a toll on Saudi finances as the government spends money buying loyalty and consolidating power. Then of course, their is the elephant in the room; the record low oil prices that are wrecking the Saudi budget.To top this off, in 2030 they are expected to begin importing as much oil as they export.

The Collapse of Saudi Arabia

A Saudi revolution would be kick-started by financial upheaval brought on by a decline in oil production.Like France, the Government would quickly acquire too much debt to sustain operations. The government would be forced to shift the tax burden to the populace and move to a western style tax system that extracts money from individual productivity. Personal taxes would need to increase and austerity measures imposed. Not only would the tax burden shift to the workers, but the amount of revenue actually generated is almost certain to decrease dramatically.

The current regime is tolerable because it provides for the people. It subsidizes their necessities and provides most of the nation’s jobs through the government and oil industry. In a collapse, citizens would be hit with a double blow of rising taxes and a quickly disappearing safety net. Living standards would fall drastically. The stability that the regime had provided for it’s citizens and would disappear along with the oil. Without the ability to provide for it’s subjects the regime would quickly lose legitimacy and become a despotism.

The political pressure generated by this economic transition would require major political reforms. Unfortunately for the Kingdom, I cannot think of a situation where a peaceful transition occurs. The current Saudi system does not allow for a redress of grievances or citizen control of finance. It is set up as an absolute monarchy with even less checks and balances than the Ancien Regime of Bourbon France. There is no mechanism for reform. Without a way to relieve pressure on the government the only option is revolution.

 

 

*This is massively oversimplified.For more information I suggest reading The French Revolution and Empire by D.M.G Sutherland.

 

 

 

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