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Western Democracy in the GCC – What Would It Take?

February 21, 2011

As leaders topple, regimes change and nerves jangle across the Middle East and North Africa, debates rage about democracy, human rights and the rule of law. Suddenly the reputation of George W Bush – whose calls for democracy in the region were ridiculed by those who stated that the region has no history of that form of government – is being viewed (by some) in a kinder light.

If we divert our attention from current events in Libya, Iran, Bahrain and Yemen, and focus specifically on the kingdoms, emirates and sheikhdoms of the GCC nations, what are the chances of their moving to what we in the West think of as democracy? And what are the changes of mindset that they would need to go through to succeed in putting in place what Winston Churchill once referred to as the “least worst form of government”?

This post is more than a five-minute read. I apologise, but I don’t apologise. I don’t hold with the convention that blog posts should always be short and sweet. Sometimes to explore a subject you need more than a few hundred words.

First  let’s look at the origins of the regimes in place today. Most of the ruling families acquired their positions through tribal leadership in times when the population of the Arabian Peninsula was far smaller than it is today. In the case of the Gulf states, the ruling families acted as local fiefdoms within the Ottoman Empire. They would acknowledge the Sultan in Istanbul as their overlord, pay tribute and taxes, but were otherwise left to rule their people as they thought fit. When the Empire collapsed, these Emirs came under the “protection” of British India, and the local rulers accepted guidance from the local British representative, known as the Resident.

Saudi Arabia, on the other hand, came into being largely by conquest. The first King, Abdulaziz, expanded his domain from central Arabia to most of the peninsula. In the process, he displaced the ruler of the Hejaz in the west, Sharif Hussein, and won the allegiance – through battle and marriage – of the tribal leaders in the north, east and south-west of what is today the Kingdom of Saudi Arabia. However, when I talk about the Gulf countries, I include Saudi Arabia.

In the tradition of the Arabian tribes, allegiance to a ruler has never been unconditional. Neither is it inevitable that the eldest son of a ruler will succeed him. Even today, after the passing of King Abdullah, the new king will assume his role only after his family and other tribal leaders swear the oath of allegiance – the bayh. In other words, the king is acclaimed by a form of oligarchic consensus. Across the Gulf States too, leaders are in place through similar systems of personal loyalty.

And these systems seemed to work fine when the leaders in question ruled populations of tens to hundreds of thousands, when their fiefdoms were lacking physical resources, and when the lives of their rulers, while more comfortable than those of many of their subjects, were not so wildly different. The population of Bahrain, for example, at the time oil was discovered, was less than 20,000.

When oil was discovered in the Gulf, things started changing. After World War II, as Bahrain and Saudi Arabia dramatically stepped up production, other Gulf states discovered oil, and rulers started benefiting from wealth beyond the dreams of their ancestors. A further step change came in 1973, when Saudi Arabia’s King Faisal led the OAPEC oil embargo. The result was a tenfold increase in the price of oil.

The post-embargo price increase fuelled massive development in the Gulf countries. In most of them, a large slice of the new-found oil wealth was spent on roads, airports, schools universities and housing projects. Senior members of the royal families became very wealthy, not only through stipends directly from oil revenues, but also through commissions from foreign firms and businesses in which they had substantial stakes.

What has remained opaque in many Gulf countries is the degree to which oil revenues have accrued directly to the ruling families, as opposed to those revenues declared in annual budgets. In Bahrain, the oil revenue, as I understand it, goes straight to the government. This is not the case in some other countries.

Every GCC country publishes an annual budget, and spends money more or less according to that budget. In some cases – in particular, charitable donations, special welfare initiatives or emergency foreign aid – expenditure is characterised as gifts from the ruler or senior members of his family. Since there is no individual taxation in any of the countries, such personal gifts in reality come directly or indirectly from the wellhead. But they serve to accentuate the bond between the leader and his people.

And this leads to a crucial dynamic in society across the Middle East, not just within the GCC countries. That of ownership. Do the ruling families believe that they own the wealth that comes out of the ground, or do they see themselves as custodians on behalf of their people? When you arrive at any GCC airport, one of the first things you are likely to see will be portraits of the ruler and at least two of the most senior members of his family. You will find the same portraits in the streets, in hotels, in every government building, in company offices and in private offices of executives.

This is not the same as the “cult of the personality” favoured by the old communist regimes and the likes of Saddam Hussein. In Iraq you would find portraits and statues of Saddam in every conceivable guise – soldier, tribal sheikh, hunter, man of faith and father of the nation. Much as Roman emperors associated themselves with various deities in statues and coins, before they went to join the pantheon of gods themselves.

Portraits of Gulf rulers tend to be dignified and conservative – more akin to those of Queen Elizabeth to be found at every British Embassy. Nonetheless, the fact that they are to be found everywhere accentuates the impression that government is embodied in the persons of the ruler and his family. This is fine when things are going well – not so fine in a crisis when the finger of blame points not at the government that is failing to perform, but at the rulers themselves.

The patriarchal ethos is also reflected in business. There are few companies where the company is seen to be bigger than its leaders or owners. Saudi Aramco is one of them, partly because of its earlier history as an organisation founded on American corporate lines. Publicly listed companies have a mixed record in communicating with their shareholders. Corporate governance and investor relations tend to be fairly low down the agenda of executives and boards of directors.

So one of the key elements in a transformation of the Gulf states into Western-style democracies is for loyalty to the nation and to the ruling families not to be seen as one and the same. This was a journey that the United Kingdom took over the best part of five hundred years. Today, the British still sing “God Save the Queen” as their national anthem. The state prosecutes individuals and companies in the name of the Queen. Royal Assent is required for new legislation, but never withheld. The Queen opens Parliament, and delivers a speech outlining the legislative programme for the forthcoming session using the phrase “my Government….”. However, the speech is written for her by the government.

Equally, if England wins the football World Cup, the Queen is not congratulated, and if the nation suffers an economic calamity, it is the government that is ejected, not the Queen. And so it has been, with a wrinkle or two on the way, since 1705, when the Act of Union brought the Kingdoms of England and Scotland together.

This form of constitutional monarchy is far from the system in place in the Gulf countries today, where the notion of allegiance is still intensely personal, and where the ruler will often take and be accorded personal credit for the achievement of his government. Queen Elizabeth, though a person, is a symbol.  Gulf rulers have an active influence over all aspects of their subjects’ lives. Moving to a Western style of constitutional monarchy would take a major change of mindset on the part of the rulers and the ruled.

Even if the current unrest in the region results in regime change in one of the Gulf states – perhaps the replacement of a ruling family with an elected president – such a change will not necessarily result in a constitutional democracy as seen in the US, France and Turkey. Current and former Arab leaders such as Hosni Mubarak, Bashir Al-Assad, Zine Ben Ali and Muammar Gaddafi know their cultures, and have mined the same seam of personal loyalty as do the ruling families of the Gulf. “L’état c’est moi” has typically trumped the notion of the leader being at the service and disposal of the people, no matter how much their rhetoric claims otherwise.

What of the ruled? The cornerstones of Gulf societies have always been respect for family and elders, and belief in God. The implicit contract between the rulers and ruled is that the rulers will look after their people as a father would look after his family. The association of public development initiatives with ruling families has never been clearer than in Saudi Arabia, where universities, airports, research institutes and streets are all named after the current king, his family members and predecessors.

That social contract has held strong for as long as the ruling families have kept their side of the bargain – provided for their people in terms of education, jobs, decent housing and the ability to raise families and have comfortable retirements. People may grumble at the wealth of their leaders, but provided they themselves are guaranteed the essentials of life, they have traditionally been happy to accept the bargain.

But over the past 30 years, as populations have mushroomed across the region, oil prices have risen and fallen, and conflict has raged in neighbouring countries such as Lebanon, Palestine, Iraq and Yemen, that bargain has become increasingly difficult for the Gulf states to keep.

The oil wealth has not only been used to create roads, airports, schools and universities. It has also funded the import of huge numbers of foreigners to do the dirty work of building the roads, sweeping the streets, cleaning the offices, watering the palm trees and looking after the children.

Especially in the cities, foreigners do the manual work that the grandparents of today’s citizens would happily have done themselves. The whole of the Gulf region has become addicted to foreign labour. And that addiction is perpetuated by the fact that immigrant labour, at the manual end of the spectrum, will do the work at a far lower wage than would be acceptable to a citizen of the region.

Opinions, widely held by expatriates in some countries, that nationals “do not want to do real work” and that “there are plenty of jobs available if they were prepared to get their hands dirty” is both simplistic and unfair.

It is true that there is an overwhelming preference among Gulf nationals to work in offices, preferably as managers, and above all, preferably in government. Government jobs are seen as secure. The working hours are often short compared to those in the private sector. Salaries, while not astronomic, are at least enough to allow employees a reasonable standard of living.

As to arguments about dirty hands, many nationals will claim that they would be unable to find decent housing and raise a family on wages paid to a labourer in Baluchistan who lives as a single man in a dormitory.

At the same time, youth unemployment in the region is high. Although family support systems tend to cushion the young unemployed from the worst effects of having no job, they cannot easily mitigate the sense of frustration felt by those who feel that they are serving no useful purpose in society.

The imbalance between high youth unemployment and high dependency on foreign labour is just one of the elements threatening the status quo, and causing citizens to look again at the social contract between rulers and ruled.

Another key factor is that education programmes across the Gulf have seen hundreds of thousands of young people gain degrees at home and abroad. These are people who are more likely to question the old ways, and less likely to pay deference to the established order. They, along with young professionals and teenagers, are the prime users of the social media. They return to their families with expectations that the government will provide them with jobs and salaries suitable to their perception of their status. When that doesn’t happen – or doesn’t happen quickly enough, they in turn become frustrated and resentful.

The media, social as well as conventional, is perhaps the most important factor of all. Well before recent events, Facebook and other sites have provided a forum without borders for Arab youth. Add to that the modern alternatives to national TV stations which are not necessarily toeing the government line, and you have a generation of people who questioning conventional norms more than ever.

But even if, as seems likely, the demands of the younger generation lead to significant reform, will that reform take their countries closer to a western model of democracy?

The biggest step change towards the western model of constitutional democracy would be to reform the social contract. There is little chance of that happening with the stroke of a pen or an announcement from the ruler. To move from entitlement to responsibility will not happen overnight.

One approach that would kill several birds with one stone would be the introduction of personal taxation. Not a popular concept anywhere, I suspect. But even a moderate level of taxation would have profound implications.

Taxation would have three primary effects.

First, it would be a way to wean countries off the hand-out culture – the feeling that all you have to do to keep your people happy is to pump the oil and gas out of the ground, spend it on infrastructure and public services, and provide a financial safety net for those in greatest need. The Gulf countries do recognise that they need to reduce their dependence on oil and diversify into other wealth-generating models. Many talk about transforming their countries into knowledge economies, where the true assets of the nation are not natural resources, but the inventiveness and knowledge of its people.

But these initiatives are funded primarily through use of the oil patrimony. If the wealthier members of society were asked to contribute to that transformation through a moderate level of taxation, the result would be more oil left in the ground for future generations.

Second, when introducing taxation, the countries would have to apply the principle of “no taxation without representation”. Taxpayers would need to have a say in how their money is spent. They would start feeling that money spent by government is “my money”, not the government’s, and certainly not the ruling family’s. The form of representation would very likely need to be electoral.

Third, taxation would need to be applied equally to nationals and expatriates. For the majority of senior expatriates, the lure of employment in the Gulf countries is the absence of taxation. If taxation was introduced, many would leave. Maybe not immediately – the job markets in their home countries are not exactly booming at the moment – but over time. This would create opportunities for nationals to step up into their roles.

The process would have to be managed carefully, and it would need to be carefully regulated. In the 1980’s, Saudi Arabia announced taxation for expatriate workers. When it became clear that to avoid a mass exodus of much-needed skills, the private sector would need to pay the tax for its key expatriates, the scheme was rapidly shelved after strong pressure from business leaders. If the process was a GCC-wide inititative, this would prevent one GCC member from gaining a short-term advantage over another by providing tax privileges now unavailable in the countries introducing taxation.

So governments would need to consult the private sector, and implement a carefully-phased programme that did not have any dramatic impact early on. Certainly, there could be no question of directly taxing those on low incomes, although increased indirect taxation might be feasible.

The introduction of taxation as part of a package of measures that included more financial transparency in government and greater electoral representation would be one way to change the dynamic between the ruler and the ruled forever in the Gulf region. It would be the fastest way to move the Gulf countries towards a western model of constitutional democracy.

The idea of moving towards Western models might be the last thing on the minds of many young people in the region. They could point out that democracy in the West has many flaws that they would not wish to see in their countries. And the region’s leaders would be keen to ensure that any changes were not dramatically counter-cultural. But perhaps the net-savvy youth of the region can, if given the chance, come up with representative models that leapfrog the tried and tested systems in the West. Perhaps the social media offer opportunities for more effective means of consultation and democracy than the once-in-a-while systems in place in the West.

So it’s possible to imagine that the legacy of the conservative nations of the Gulf could end up not being all the things the West currently associates with the region – oil wealth, concrete and conspicuous consumption – but new systems of government from which the rest of the world can learn.

Arabs who look back with nostalgia at the invention and creativity of their world a millennium ago are perhaps ignoring a black swan gliding up the river towards them. Could a political renaissance that inspires and informs the world be the lasting monument to Tahrir Square, Pearl Roundabout and, maybe, Tripoli’s  Green Square?

10 Comments
  1. Andrew Morton permalink

    Thanks for this, Steve.I imagine of all the people I know, you must be the best informed about these matters. We’re all focussing on the Arab states at the moment, but I see this as a great global shift and there’s evidence that places like Iran and China will also have to face the consequences of the kind of universal awareness the internet has brought about. The outcome remains disturbingly uncertain. – it’s a classically chaotic situation we’ve all been thrown into, and although we all hope good may come of it, I get the feeling that Western leaders must be feeling somewhat nervous about the practical implications of this big word “democracy”.How fast can the world catch up on the centuries of socio-economic development that were a prerequisite of democracy in the West?

    • Andrew, thanks for your comments. See the next post for more thoughts on the subject….

  2. Steve Harrison permalink

    Well done, Steve, on another well-judged piece.

    I am not a taxation expert, but the only doubt I cast over your hypothesis is that the statement “If the process was a GCC-wide inititative, this would prevent one GCC member from gaining a short-term advantage over another by providing tax privileges now unavailable in the countries introducing taxation”.

    I consider it unlikely that the GCC would agree on such a move together, to prevent taxation arbitrage (notably from FDI). The “first mover” in the Gulf towards personal taxation would risk significant leakage of foreign-funded projects to neighbouring states. That may be considered a price worth paying by some administrations, but some GCC states would be better equipped financiallly to cushion such a blow (and thuis less needy of taxation in the first place?).

    • Thanks for your comment Steve. You know much more about this than me!

      I think you’re dead right in saying that there would be unlikely to be unanimity on this issue within the GCC. Each state has its own interests, and faltering attempts to introduce a single currency show how hard it would be to arrive at a common policy on an even more contentious issue!

      But whatever the likelihood of one member taking the leap, I still believe this would be a long-term game-changer for the region.

  3. Just a thought, and a lengthy one, my apologies too…

    Rather than the third world always trying to catch up, isn’t there some way we can slow the pace of life down in the West to help others catch up? A bizarre suggestion I admit, but the speed at which we are hurtling through life has meant no time for the necessary balances and checks in our societies, hence scepticism from others and our declining status.

    However, when things have settled down sufficiently:

    Does the region, in an effort to jump start that renaissance, need a ‘Festival of the Arab World’, perhaps located here where oil – the liquid gold of the region – was first discovered? Or maybe Egypt the seat of Arabic civilisation or more interesting still, Saudi if they feel ready to welcome and open up to such an idea.

    After WW2 The Festival of Britain of 1951 brought together all the top British talent at the time in a showcase aimed at re-invigorating and inspiring the young generation who were to pick up the pieces and put the country back together again. It was described by Deputy Labour leader Herbert Morrison, as ‘a tonic for the people’ and although not popular with some who thought it was a waste of money, or Winston Churchill who afterwards destroyed much of it, it did get the bright minds of the day into action and restored confidence in the nation’s skills and ideas which hitherto had largely been directed towards the war effort.

    Rather than hastily building yet another harbour-side business, commercial and residential development, or a Ferrari World and numerous FIFA football stadiums which may be dismantled or never again be used, a dedicated exhibition championing purely Arab talent could be an eye opener for us all that would change present mindsets, inspire the youth and highlight areas of necessary development.

    I know at least one extremely talented, as yet un-championed, local architect who might be considered for such an event. He has a complete portfolio of exquisitely harmonious ideas that could turn tiny Bahrain into an even more beautiful modern-day Monaco. It fuses regional vernacular and renaissance styles to create an entirely unique architectural identity. A renaissance of low level architecture would offer an interesting contrast to towering skyscrapers and would also create opportunities for new skills and guilds. Done sincerely and over an appropriate timescale so as to train local craftsmen and not create a future semi-Disney-World-Arabia ghetto, it would put the country on the map as a unique tourist destination. Raw materials to create ornate structures are of course not readily available here but can intricate carvings be made in concrete? I guess not, otherwise we wouldn’t have the bland, uninspiring slab buildings that exist all over the Levant today, or is it all down to cost at the expense of beauty?

    It takes time and great dedication to craft and beautify. Material need, speed and cost have been the dictators in this era especially so in this region in its race to catch up with the West. Is it time to somehow slow life down to allow such an ideal to take place here in the Arab world, which, even with extensive air-conditioning, still remains too hot throughout the long summer months to labour in hard and fast? However, the fact remains that when you’ve toiled and built something substantial, beautiful and functional yourself for yourself it’s worth defending and working hard to maintain. That ethic just doesn’t exist to a necessary extent here, not yet, and not whilst others carry out that hard labour.

    What I’m describing sounds retrograde to nations who’ve been through social, political religious and aesthetic renaissances, but the Middle East hasn’t. It’s time has come. Even if large scale, low-level architectural reform is a pipe dream, at the heart of a renaissance is private philanthropy for the weal of man and to encourage the study of wise words and deeds and achievements of all past civilizations in order to promote future progress with greater substance. These subjects of course are being taught in Universities across the region but what about in schools and homes?

    Curriculums are undoubtedly already full, but more lessons in universal study and some serious, private, philanthropical investment could inspire a John Nash or Baron Haussmann of the Middle East, even perhaps its own 21st century Leonardo or Michaelangelo, Darwin, Einstein or Hawkin – not working in a university or privately owned laboratory in the West, but in one right here in the Gulf, possibly even in Bahrain. For all we know there is already such a person in the making. Like anything of real excellence and integrity, it does take time and the gift of the right nurturing circumstances, be they climatic, religious, social or political. The fire in the belly of protestors today, with the great encouragement of serious financial commitment can translate into a fire in the belly of future inventors, creators and builders and to people in all walks of life who want a better, dare I say, more aesthetically beautiful future that relates to them personally, ‘their’ region and historical evolution.

    • I think that’s a great idea Serena, and by the way, you write beautifully, so why aren’t you blogging yourself?

      Like you, I’m not deeply impressed by grandiose architecture, especially of the vertical sort. One of my favorite cities in the Middle East is Muscat, where there are strict rules prohibiting the buildings of more than a certain height. Rumour has it that one of the Sultan’s ministers transgressed, and the Sultan had his building demolished!

      And I fully agree with you that it would set a different tone if the people who did the building were the Bahrainis themselves.

  4. Looking at the list of tax-free havens around the world, to entice investment by high net worth individuals or corporations, almost all have the 3 golden benefits – no tax, great climate, visually attractive, be that natural or built (I’ve not been to the Isle of Man). Countries that have geographical and geological limitations rely greatly on their tax-free status. Would it be true to say the world needs tax havens to offset global cartels/monopolies of high-tax countries, so whilst other GCC states might have to move towards taxation, can Bahrain afford to in light of its limited size and resources?

    I still feel that had it got it’s ground level, island-life organised and beautified before reaching for the skies it might have been on a better footing having attracted more high-net worth investors and visitors. With the open lifestyle we enjoy, Im sure it would have. The rich and beautiful love to live in places that are rich and beautiful and characterful, and companies like investing in them because they attract and inspire imaginative, motivated people from outside and from within. Once the right balance of wealth is achieved then maybe a platform for taxation exists.
    .

    • Thanks Serena. I’m neither rich nor beautiful, so I couldn’t comment on what motivates them! I wasn’t really coming at the tax issue from the point of view of attracting or repelling foreign investors or high net worth individuals. I was more thinking of the national populations. Bahrain still derives 83% of its revenue from oil. As the 2030 vision makes clear, the country badly needs to diversify. Foreign investment brings jobs, but much of the income from those investments accrues to the investors, not to the state. The additional jobs created result in more foreigners being brought into the country, which in turn puts more strain on the country’s infrastructure.

      Taxation would be a way to boost the state’s revenues by exacting a contribution from those who can afford it. The additional benefit would be the increased transparency and accountability that would have to accompany a personal and corporate tax regime.

      Not that I’m expecting such a move any time soon. But I do think it should be an item for debate in any reform agenda. As for whether it could be made to work in the region, I leave that to the economists and politicians!

  5. stephen harrison permalink

    Serena, we’ve worked hard to ensure that Bahrain is not seen as a tax haven. The OECD moved Bahrain onto its “White List” of respectable financial centres, after some concerned Bahrain’s zero-rated income and corporation tax. Another feature of the less-respectable financial centres – true tax havens, in the OECD sense – apart from the factors you listed, is that they are lightly regulated. Bahrain is the opposite (and so is IoM).

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