Redesigning the Rentier Social Contract: Citizen Appeasement Strategies in Light of Saudi Arabia’s Vision 2030

Abstract

For many decades, Saudi Arabia’s rentier social contract had been left untouched and the country experienced impressive economic development and political stability. As in many rentier states, the social contract was clear: citizens enjoyed the benefits of rent distribution by the state through subsidies and public sector employment, as well as free public education and healthcare in return for noninvolvement in politics. The state had a solid ‘no taxation no representation’ system in place and for the most part, the majority of the population seems to have been content with this arrangement. However, in 2016 and following shocks to the Saudi Arabian economy due to the fall in oil prices, a plan for changing the status quo was released. Vision 2030 is a long-awaited state-led development plan that aims to diversify and privatize the Saudi economy so that it is less susceptible and dependent on the volatile prices of oil. Moreover, the plan aims to retract the role of the state and its spending; thus reducing or taking away many of the subsidies that citizens were accustomed to and even introducing indirect taxation. The state, realizing the socioeconomic burden that Vision 2030 placed on citizens, developed a set of mitigation measures to appease citizens in the short term for these losses. This problem, faced by Saudi Arabia, is somewhat unique. Although the literature acknowledges the difficulties of maintaining a rentier state system, there is a lack of information on social appeasement strategies that can soften the transition away from such a state, in the short run. Or, in other words how rentier states can stably redesign the social contract without causing political instability. This thesis thus considers the mitigation measures put forth by the Saudi state, analyzes them and addresses their shortcomings. Specifically, the mitigation measures put forth directly target the private sector businesses and the low-income social classes. I argue that these measures may not be sufficient because of the way in which they neglect the existing social contract. For more universal appeasement, this thesis considers case studies from other resource rich countries and argues for three key strategies that have helped countries appease their populations in their wealth management and income distribution. The three strategies I focus on are: preventing rent seeking through political participation and institutional anti- corruption mechanisms, development of oil funds, and changing the ownership scheme of resources. Moreover, I address some policy recommendations that have contributed to a smooth reform process in other countries, including: leadership, reform pacing, and civil society. These strategies, I argue, will both help the state redesign the social contract while avoiding social discontent in the process and will contribute to the overall goals of Vision 2030.