Saudi Arabia is now diversifying its oil-based economy as fast as it can. It is doing so, some say, because its oil may be running out — or at least will be insufficient to supply energy to the world in the decades to come.
I suggest not. If it were so so, then Saudi Arabia, with large very hot desert areas and plenty of cash, would be developing solar power on a grand scale. It isn’t. Instead, it is building new universities, mainly of science and technology and expanding the curricula in its schools — at present significantly devoted to recitals from the Koran.
Saudi Arabia is doing so, I suggest, because its rulers have noted that any country which disproportionately relies on one resource or technology for its income comes unstuck economically sooner or later. The phenomenon is called the ‘Dutch Disease’, named after the previous policy of Holland relying on its North sea gas resources too much for too long. In contrast, all of the half-dozen or so advanced countries have highly diversified economies and, because of it, are able to carry out a lot of trade with one another.
By concentrating on this single sector, thousands of small and medium sized businesses went to the wall in the 1070s and ’80s. But when Russia came along to supply large amounts of natural gas to Europe, Holland was in trouble. It only regained its place as a leading advanced nation by de-emphasizing its reliance on gas — thus allowing other sectors to regain their former health.
The royal family of Saudi Arabia would have have noted all this — noting in particular that Russia has now fallen foul of the Dutch Disease! — and, because it, too, wants to join the ‘inner club’ of advanced nations, knows what it will have to do — diversification. Whether it will succeed or not in the moderately near future is doubtful but remains to be seen.