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New Texts Out Now: Steffen Hertog, Princes, Brokers, and Bureaucrats: Oil and the State in Saudi Arabia

[Cover of Steffen Hertog, [Cover of Steffen Hertog, "Princes, Brokers, and Bureaucrats"]

Steffen Hertog, Princes, Brokers, and Bureaucrats: Oil and the State in Saudi Arabia. Ithaca: Cornell University Press, 2011.

Jadaliyya (J): What made you write this book?

Steffen Hertog (SH): The original idea behind the research project was to analyze how liberalizing economic reforms were changing the social and political structures of an oil-rich (or “rentier”) state like Saudi Arabia. That was the plan before I did my fieldwork, but my experience there pretty much turned the whole thing on its head. Instead of change, I found deep historical continuities in the way politics and state-business relations function in Saudi Arabia, and I also found that several of these continuities did not quite fit the “resource curse” theory of rentier states.

While Saudi Arabia has indeed been struggling with blatant over-employment and corruption in the public sector ever since the modern state was created in the 1950s, it also calls a number of world-class institutions like national oil champion Saudi Aramco or heavy industry giant SABIC its own, which have been operating successfully and autonomously from the rest of the state for decades. On the policy level, Saudi Arabia had a similarly uneven record throughout the 1990s and 2000s. While there were several successful privatizations and the government managed to establish of a modern capital market fairly smoothly, other reforms in labor policy or in the bureaucratic environment for foreign investors were much less successful.

This led me to unpack the Saudi rentier state and, instead of theorizing about it as a homogenous entity, look at its individual components and their political history. When and why is oil money used for patronage and the building of bureaucratic fiefdoms, when and why is it used for developmental purposes? In this context, I did a great deal more historical and archival research than originally planned, as I felt that there was no adequate history of the genesis of the modern Saudi state. While there are some good popular history accounts, most available social science literature provides a caricature of corruption and bureaucratic incapacity—or in some cases, of improbably high pre-oil capacity—that is wrong in important parts.

The historical half of my book provides a concrete sociology of how princely decisions about how to allocate rapidly growing oil rents have shaped different state institutions in drastically different ways, and how these resource flows have shaped power relations between and within these institutions, as well as between these institutions and different actors in society. In short, it is an account of how the Saudi system came to look the way it does now. How bureaucratic politics, policy-making, and state-business relations work in today’s Saudi Arabia is then explained in more detail in a number of recent case studies about foreign investment reform, labor market “Saudization,” and WTO entry. The book also has a comparative ambition, but one main thrust of the work is to understand Saudi Arabia in its own right—after all, it is not only the quintessential rentier state, but also perhaps the most important state in the whole Middle East.

Pragmatically speaking, I wrote the book due to the access I enjoyed in Saudi Arabia. The country went through a relatively liberal phase after 2003 that allowed me rather unconstrained field research and archival work for more than a year and repeated visits thereafter. I had the chance to work within the Saudi bureaucracy for an extended period, which gave me a useful ethnographic perspective on my subject that complemented elite interviews and archival work in Saudi Arabia, the United Kingdom, and the United States.

J: What particular topics, issues, and literatures does it address?

SH: The main topics the book touches on are the debate about the “resource curse” and the post-World War II history of the Saudi state and its impact on local society. I also attempt to contribute to broader debates about state-society relations and public administration in developing countries, touching on and critiquing concepts like state capacity and state autonomy.

One of the main themes that I believe travels well beyond the Saudi context is that of declining state autonomy for rentier states. Governing elites often enjoy great leeway in how to use their oil money at an early stage of development, but soon get tied down in distributional obligations that radically curtail their manoeuvrability—even, and perhaps especially, in authoritarian systems. In Saudi Arabia, the particularly large early autonomy of royal elites has given a number of princes a larger-than-life impact on the shape of the state. Many idiosyncrasies and redundancies of today’s immobile Saudi bureaucracy are outcomes of princely alliances and conflicts that happened half a century ago, outcomes that have become nearly irreversible as the state and its various clienteles have grown.

The real peculiarity of today’s Saudi state is not its general efficiency or inefficiency, but the huge degree of fragmentation of the very different institutions it consists of, all with their own political history and with very different social clienteles attached. The Saudi state apparatus includes organizations as different as tribal militias; an Islamic judiciary that in many regards lives in the seventh century; highly modern and secular state-owned companies like Saudi Aramco that are kept at arm’s length from the Al Saud family; and an impenetrable security apparatus under direct princely control with its own cities, schools, universities, and hospitals. The building of such parallel fiefdoms began in the 1950s with the first oil money and deepened in the 1970s with the boom, when ruling elites had the luxury of creating a new institution for every new policy or political problem they faced. While some parts of the state are efficient by modern bureaucratic criteria, its different components communicate little among themselves.

The heterogeneity of the Saudi state now makes some reforms much harder than others—even for internally efficient administrative bodies. Both the state’s fragmentation and the pervasive clientelism embodied in mass (over-)employment in the public sector constrain policy-making. Cross-cutting reforms involving many organizations and reforms involving the lower levels of bureaucracy are very difficult, while reforms that can be pursued through individual institutions can be highly successful—especially if their implementation is delegated to autonomous islands of bureaucratic efficiency.

J: How does this work connect to and/or depart from your previous research and writing?

SH: I alluded to some of the arguments in the book in a 2007 International Journal of Middle East Studies article and in a chapter in the Saudi Arabia in the Balance volume edited by Paul Aarts and Gerd Nonneman in 2005. The book, however, has a much more cohesively developed theory, a more continuous and detailed historical narrative, a stronger comparative component relating my Saudi findings to state-society relations and bureaucratic politics across the developing world, and detailed cases studies on WTO entry, FDI reform, and Saudization policies until 2010.

In parallel to the book, I have further developed my arguments about when “islands of efficiency” emerge in rentier states in a Business History article in 2008 and a World Politics article in 2010. I am currently toying with the idea of a book about the politics of state-owned enterprises in rentier states, building further on this work.

J: Who do you hope will read this book, and what sort of impact would you like it to have?

SH: At least the empirical material should be of interest to anyone with an interest in the “resource curse” debate and Middle East political economy. I think it is also written accessibly enough to be relevant for anyone dealing with Saudi Arabia and the Gulf states in a practical capacity, be it in business, diplomacy, journalism, advocacy, or simply as local residents. Quite generally, I hope to speak to everyone with an interest in the politics of bureaucracy in the developing world, including development practitioners. But most of all perhaps, the book is written for Saudis with an interest in the politics and economic development of their country. The feedback that I value the most comes from Saudis who know the processes I analyze from first-hand experience.

J: How would you like to see this book affect current political and intellectual debates regarding Saudi Arabia?

SH: I think much of the debate about Saudi Arabia is still is stuck somewhere between demonization and pro-Saudi propaganda, and does little justice to the complexity and huge internal variety of the Saudi system. So I guess I would just like to add to the understanding of the country, the constraints that it operates under, and the ways in which niches of social and technocratic diversity have been carved out in a system that looks all Islamic and Al-Saud-dominated from the outside.

This is not really a policy-oriented book, but it engages with ways in which distribution of rents can undermine economic development and hamstring policy. Understanding these constraints should be a first step towards more meaningful reforms, notably of public sector and labor markets—challenges that the country will have face independent of the shape of its political regime, and that will be increasingly debated in years to come.

Departing from my analysis of rent distribution in Saudi Arabia, I have started to think about fairer and more transparent ways of sharing the oil rent that do not undermine the cohesion of the bureaucracy and don’t take nationals out of the productive economic circuit as current policies of over-employment in the public sector do. So I am currently working on a paper about a “citizens’ income” for Gulf Cooperation Council rentier states, a concept under which direct distribution of rents is separated from employment and instead made a citizenship-based right. This would give more economic autonomy to nationals and reduce the distortions and inequities of current distribution regimes.

J: What other projects are you working on now?

SH: In addition to the project about citizens’ income, I am finishing a book about why there are so many engineers among Islamic radicals, together with the sociologist Diego Gambetta—originally a small side project that has taken on a life of its own over the years. I am also working on an article explaining the survival of Arab monarchies, and a paper explaining differences in foreign policy styles of different rentier states. But my wife and I are expecting our second child in November, so whoever might be interested in any of this will probably need to be patient!

Excerpts from Princes, Brokers, and Bureaucrats: Oil and the State in Saudi Arabia

When I entered the telex room of a notable Saudi ministry in the summer of 2003, it dawned on me that something was wrong with communications between the different parts of the Saudi government. A Sudanese expatriate employee with a massive turban sat before several flickering twelve-inch amber computer monitors dating from the 1970s. Occasionally, an old matrix printer in a corner, which at first appeared to be decommissioned, would come noisily back to life and hammer out a message on its endless reel of paper.

This was the way Saudi ministries communicated with each other in 2003, after billions had been poured into modernizing the Kingdom's administration, after three consecutive years of massive oil revenues.

It was an interesting case of bureaucratic archaeology in its own right, but the telex room was also a piece of the broader empirical puzzle I had been investigating for some time: during the previous decade, practically all of the Saudi political elite had converged on a raft of economic reforms, including privatization, Saudization of labor markets, capital markets reform, liberalization of foreign investment rules, and—to the extent that there were clear views at all—WTO accession. State elites had become quite willing to redefine the role of the administration, and the private sector, having grown capital-rich over the years, was now willing to assume new developmental tasks.

But although policy consensus appeared widespread, the record of Saudi economic reform since 1999 had been decidedly uneven. This intrigued me, as it fit neither the official narrative of wisely guided development nor the Western clichés of inescapable Saudi corruption. Why did the regulation of the Saudi labor market prove so elusive, while more specific projects, such as the privatization of Saudi Telecom in 2003, were conducted successfully? Why was it so much harder to improve the regulatory environment for foreign investors in the 2000s than building a world-class infrastructure a quarter of a century earlier? Why did some policies get implemented while others foundered in bureaucratic limbo?

Saudi Arabia's mixed record did not square easily with the accepted ways of explaining the Kingdom's political economy. In particular, theories of the "rentier state," for which the Kingdom has always served as a primary example, painted with too broad a brush. While they did provide a useful way to think about some generic problems of oil-based development, they were less useful in explaining degrees of success and failure—arguably the most interesting puzzle in a complex system like Saudi Arabia, by no means a developmental failure. Rentier theories predict that oil income will allow states to act independently of demands in society, and that oil income will empower the state to the detriment of society, at the cost of weakened regulatory power of state institutions and pervasive rent-seeking. All true of Saudi Arabia—in some regards. Yet none of these predictions capture the complexities of Saudi policy-making or the variation in outcomes.

The Sociology of Sharing the Wealth

Eventually, I realized that the Saudi story pointed up a crucial weakness of rentier theory: although the literature predicts that resource-rich states and economies will exhibit specific features—and is often right in these prognostications—the accounts of how these outcomes come about, where they exist, are usually brief and general. Much of the rentier state debate lacks empirical analysis of the causal mechanisms on any but the most general level.

Attention to specific causal mechanisms, however, is what we need to address the Saudi puzzle of highly heterogeneous reform outcomes, in which rentier effects seem to obtain on some occasions but not on others. This need for specificity is the guiding motif of this book. I argue that oil has mattered a great deal in shaping the Saudi state, its power structures, and its policy-making patterns but not always in ways we might have expected and through avenues we can understand only if we grasp the specific ways that oil has affected the power structures within the Kingdom over time.

To tease out the channels through which oil income has influenced Saudi politics, I chose a strategy that required more than a year of field research and archival work on three continents: tracing the sociology of rent distribution in the kingdom. If oil income matters, how so? What exactly is done with it? What do people do when they build a rentier state and negotiate policies within it? Who gets access to state resources and how? What kinds of power relations are established in the process? To tackle these issues, I had to look at concrete social networks within and around the Saudi state. Rentier theories work mostly with macro-aggregates such as "state," "society," or "business." My research supplies meso- and micro-foundations to rentier processes, explaining the impact of rent distribution on specific institutions, societal groups, and social networks. It is probably the first to do so systematically.

Grasping the concrete impact of oil money on power relations has allowed me to delimit—and, on occasion, contradict—some of the bigger claims from the rentier state debate and to improve the causal underpinning of others. Starting with the onset of oil-based state building in the 1950s, this book traces the causal path from external rent incomes, via the interaction of rent with local social structures, to policy outcomes in the 2000s as conditioned by these structures.

A first major finding is that elite decisions are of enormous import in shaping the state, especially at the early stage of state building. There is no automatic mechanism that produces corruption, rent-seeking, and a weak bureaucracy. While Saudi royals have on many occasions used their fiscal authority to build personal fiefdoms or to employ veritable armies of idle bureaucratic clients, on others they have used their resources to build efficient administrative bodies by purchasing international expertise and offering attractive career paths to ambitious nationals. If anything, large increments of oil income have increased the menu of institutional options available to the elite, resulting in a state apparatus with highly varied components.

The Saudi state apparatus has played a crushingly dominant role in national politics. Saudi politics has been highly centralized around the regime elite, whose patronage and largesse undermined the autonomy of social groups. Yet the disjointed nature of state growth and the hub-and-spoke structure of a system almost entirely centered around the royal family have led to great heterogeneity and indeed fragmentation of social groups and, crucially, state institutions at the lower levels of the polity.

And while politics has been decidedly top-down and dominated by vertical relationships, the regime quickly built up large-scale fiscal obligations toward its various clients in society, be they groups or individuals. Over time, this paternal largesse has proved difficult to reverse, much reducing the leadership's autonomy in freely disposing of its oil money, a dynamic that highlights the great importance of distributional decisions made at earlier historical junctures. The large cascades of rentier clients accrued over time have been useful in pacifying society on the political level, but their immovable presence in and around the bureaucracy makes reform and day-to-day administrative control more difficult.

After a dash of rapid development and change through expansion, the Saudi state has thus emerged as a surprisingly fragmented, immobile behemoth—albeit one with some very efficient and capable parts. To explain why in today's Saudi Arabia some reforms work while others do not requires that we "unpack" the state. We need to understand its structure and its relations to society on the meso-level of specific organizations and social groups as well as the micro-level of individual clients.

The meso-level fragmentation of the Saudi state means that the capability to coordinate and integrate policies between different institutions and networks is low—witness the failing amber screens in the telex room, where messages arrived as if sent from another continent. Conversely, reform policies that involve only a few organizational players or are coordinated through powerful international actors are managed more successfully. Even then, however, the success of implementation is conditioned by how many micro-level actors need to be activated and steered in the process, be they administrators in the clientelist bureaucracy or the individuals in society whom they are supposed to regulate. While Saudi society is weak in terms of collective organization, small-scale social networks in the bureaucracy can often scupper policy. Meso-level "width" and micro-level "depth" of a policy are crucial determinants for its success or failure. The differentiation of rentier politics on meso- and micro-levels allows for a more nuanced understanding of the "state capacity" of rentier bureaucracies, a factor that can vary strongly within a system depending on the institutional context.

In-depth analysis of the paradigmatic Saudi case allows us to give the rentier state debate stronger foundations. It adds nuance to the assertion that rentier states are autonomous from society. Initially, in fact, oil income did give regime elites large fiscal leeway. This autonomy can strongly decline over time, however, as the state gets tied down in society as it incurs micro-level distributional obligations that are difficult to reverse.

The Saudi case confirms the theoretical expectation that rents empower the state vis-à-vis society. The mechanism underlying this outcome is that dependence on rents tends to make social groups subordinate to the regime and to undermine their internal cohesion. Yet large oil surpluses also seem to tempt political elites to add ever more organizations to the state apparatus to address both political and administrative problems, resulting in the fragmentation of the state itself. This is a heretofore undocumented outcome of rent income that seems to obtain in other rentier cases, too.

As important an insight is that "flabby" bureaucracies with limited regulatory powers, generally attributed to rent income, are more contingent than the literature would have us expect. Depending on how the leadership decides to use its newfound income in the state-building process, they may appear or may not. If they do, then the underlying causal mechanism is the use of bureaucratic employment as a patronage resource that saps individual-level bureaucratic incentives. In other cases, handpicked technocratic clients of the Al Saud have built up lean and well-managed "islands of efficiency" in the Saudi state apparatus, with separate recruitment and incentive systems and, in some cases, explicit mandates to bypass the rest of the bureaucracy. Unlike what has been argued before, I find that the presence or absence of national-level taxation has little to do with the state's regulatory powers.

The rent-seeking and corruption that the literature predicts do occur in Saudi Arabia, not least as some state institutions double as the private fiefdoms of senior players in the regime. The extent of corruption varies greatly from institution to institution, however, and it usually is not the main cause for unsatisfactory policy results. Those have more to do with state fragmentation and clientelist inertia in the bureaucracy.

What I call "segmented clientelism"—a heterogeneous system of formal and informal, rent-based clientelism in which vertical links dominate—allows for a finer-grained analysis than do rentier state theories per se. It allows us to understand where rentier-derived phenomena kick in and where not as well as which concrete power relations underlie them.

[Excerpted from Princes, Brokers, and Bureaucrats: Oil and the State in Saudi Arabia, by Steffen Hertog, by permission of the author. © 2011 by Cornell University Press. For more information, or to purchase this book, please click here.]

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