STACEY VANEK SMITH, HOST:
Hello? Hello, can you hear me?
ABDUL AZIZ: Hello. Yeah, sorry. Someone called on my mobile. Sorry.
VANEK SMITH: This is Abdul Aziz (ph). He's 26. He lives in Saudi Arabia.
AZIZ: I'm a big fan of PLANET MONEY. So, how could I help you?
VANEK SMITH: When we reached him, he was driving across the Saudi border to Bahrain. He wanted to go see the Quentin Tarantino movie "The Hateful Eight."
ROBERT SMITH, HOST:
It is worth it, I have to say.
VANEK SMITH: Abdul Aziz loves going to the movies.
SMITH: But movie theaters are prohibited in Saudi Arabia, and he really wanted to see it on the big screen.
VANEK SMITH: I was calling him because I wanted to check this thing that I had heard about Saudi Arabia. I wanted to ask Abdul Aziz if it was true. How much do you pay in income tax?
AZIZ: None.
VANEK SMITH: No income tax?
AZIZ: No, no income tax.
VANEK SMITH: Sales tax?
AZIZ: No sales tax.
VANEK SMITH: Property tax? Do you pay property tax?
AZIZ: No, no any kind of tax.
VANEK SMITH: No tax of any kind.
SMITH: And if it seems odd that Abdul Aziz is driving to another country just to see a movie...
VANEK SMITH: It's a 300-mile drive in a Ford Explorer SUV.
SMITH: I know, expensive. Except - ask him how much he pays for gas.
AZIZ: Forty-five halala.
VANEK SMITH: Point five riyal - OK, so that's - OK, so you are paying, like, (laughter) 44 cents a gallon for gas?
AZIZ: Yeah.
VANEK SMITH: That's so cheap. There are all kinds of perks in Saudi Arabia. Health care and education are free. Electricity is so cheap that some people leave their air conditioners on when they go away for the weekend. They don't even have parking meters, and this is all paid for with oil money. I mean, does that just seem normal?
AZIZ: Yeah. (Laughter) Yeah.
SMITH: But let's be honest, nothing is really normal in Saudi Arabia.
VANEK SMITH: Hello and welcome to PLANET MONEY. I'm Stacey Vanek Smith.
SMITH: And I'm Robert Smith. If you are an American, it can be really hard to wrap your head around this concept of Saudi Arabia. It does not allow movie theaters, but there are indoor ski slopes.
VANEK SMITH: They have a great education system, but women are not allowed to drive cars.
SMITH: It's a monarchy. There are public executions. And yet, it is this really important U.S. ally.
VANEK SMITH: All of these contradictions are made possible by a single number, the price of oil. It holds up the entire Saudi economy.
SMITH: Today on the show, what happens when that incredibly important single number falls - because it has, a lot.
(SOUNDBITE OF MUSIC)
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(SOUNDBITE OF MUSIC)
SMITH: The best way to think about Saudi Arabia is this - Saudi Arabia is not a country. It's not just a country. It is a business. It is a corporation that has one single product, oil.
VANEK SMITH: That is not just a metaphor. Almost every dollar in the Saudi economy comes from oil. It's all pumped by this giant company called Saudi Aramco, which is controlled by the royal family.
SMITH: And you cannot even conceive of how big Saudi Aramco is. People estimate that it's worth around $4 trillion. To give you an idea of how big that is, take Apple, Google, Exxon, Wal-Mart, Citibank, and GE. Add all those companies together, and you're still only halfway there.
VANEK SMITH: When a country has that much money, it doesn't really have citizens. It has employees. I asked Abdul Aziz, the guy who has never paid taxes, if anyone he knew worked for the government. And he was like oh, yeah, my entire family - my dad, a lot of my friends. The government jobs, are they hard? Are they serious jobs?
AZIZ: Definitely no. Definitely no. You should be seen in the office, like, once every 40 days.
VANEK SMITH: So people, like - some people, like, never go to work?
AZIZ: Yeah. And nobody could fire you. They could just transfer you to other department.
VANEK SMITH: Eighty percent of the people who work in Saudi Arabia work for the government. And the thing Abdul Aziz said about these jobs being really cushy, I heard this from a lot of people - economists, locals, everyone.
SMITH: You know, when I hear all this stuff, it makes me think that Saudi Arabia is, like, one of those cautionary tales told by a business consultant. This - this is what happens when you have too much money that has come too fast and there's almost no competition.
VANEK SMITH: In a lot of ways, Saudi Arabia wasn't prepared for its success. In the 1970s, when the price of oil shot up pretty much over night, Saudi Arabia went from a country of nomadic tribes to being one of the richest countries in the world, kind of like going from being the corner bookstore to Amazon.
SMITH: And Saudi Arabia took all of this money and started building cities out of nothing.
DAVID OTTAWAY: The whole city looked like a construction site. There were just hundreds of cranes.
VANEK SMITH: David Ottaway was there. He was a reporter for the Washington Post at the time, and he visited the capital city of Riyadh just as it was being built. It was crazy, he says. There were all these roads, schools, housing complexes, and they were all going up so fast - even before they had figured out who was going to live there.
OTTAWAY: They were having a terrible time getting any Saudis interested to go live in apartments because, you know, how do you slaughter your sheep for Ramadan? You know, it's a whole different style of living.
SMITH: To entice people to live in the cities, the government started offering all these perks - cheap electricity, cushy government jobs, free education, health care...
VANEK SMITH: ...All of this flowing from oil, and pretty much only oil, because no other industries really grew. There was just oil.
SMITH: There is a name for this - the resource curse. It happens on a small scale in gold rush towns or coal mining towns. And you'd think it would be great, right? You've got this valuable stuff that you can just pull out of the ground. But the reason why it's called the resource curse is that there is no reason to do anything else but pull that thing out of the ground. As a consequence, you end up with this lopsided, vulnerable economy.
VANEK SMITH: And in the case of Saudi Arabia, you are not just talking about a small town. You are talking about an entire country. David Ottaway says for Saudi Arabia, oil is like an addiction.
OTTAWAY: It is so abundant and so easily available. You know, when it's that low-cost and you have the capacity to produce it, the tendency, unfortunately, is to continue to depend on it.
SMITH: The resource curse is really hard to break. What you need is for other parts of your economy to start to grow. You need entrepreneurs. You need, frankly, more people like Abdul Aziz, the Quentin Tarantino fan.
AZIZ: Personally, I don't want to work for the government, ever.
VANEK SMITH: Why not?
AZIZ: Because I like to challenge myself. This is not going to happen with the government.
VANEK SMITH: When Abdul Aziz was growing up, he fell in love with computers, and he decided he wanted to work for a tech startup. Was your family, like, excited when you wanted to work for startups, or were they worried?
AZIZ: No, definitely no.
VANEK SMITH: Why?
AZIZ: Why? Because they were afraid of the security in the job.
VANEK SMITH: This is the problem when you have the resource curse. The idea of starting a business seems risky. Like, why would you ever do that?
SMITH: Even though in the back of everyone's mind, they know the day will come. They know that the world is going to shift away from oil or people will find other places to get it. It was sort of inevitable that the oil in the ground would not be worth as much.
VANEK SMITH: Here are the numbers from the last year and a half. The price of a barrel of oil has fallen from over $100 a barrel to less than 30. David Ottaway was in Saudi Arabia a couple of months ago. He says it was like the reverse of the 1970s. Overnight, the boom stopped.
OTTAWAY: You see construction halting. You see the cranes no longer swinging in the air. They have come to a halt. You hear the canceling of some government projects.
VANEK SMITH: Saudi Arabia was left with a dilemma. What does a company do when it makes one product, and that product is no longer in demand?
SMITH: We've seen what happens. I mean, you could ask Blackberry or Netscape or Blockbuster Video. I mean, when you see your market slipping away, you start to panic. You start to think, we need to diversify. We need to make something else that someone will buy.
VANEK SMITH: But with Saudi Arabia, the stakes are a lot bigger because when a company goes bankrupt, it's sad. People lose their jobs. But when a country goes bankrupt in the Middle East, you really don't want that.
SMITH: Whatever you think about Saudi Arabia and the ruling family - and it is fine to think that they are a repressive, horrible regime - but think about the alternatives. I mean, you look around the region and you think, who else could be running Saudi Arabia? Someone like ISIS, and that is definitely a scenario you do not want.
VANEK SMITH: Saudi Arabia has, of course, tried to break the resource curse. It's tried to tap into its other resources and develop those parts of the economy.
SMITH: They looked around, they said, like, oh, what else have we got? We've got land. We've got lots of land.
VANEK SMITH: And they have tried to make use of that land. Back in the 1980s, Saudi Arabia made a huge investment into farming...
SMITH: ...Because the dessert is perfect for farming.
VANEK SMITH: It's a very dry place, but they also import almost all of their food. And that's always made them kind of uncomfortable. So they decided to pour billions of dollars into subsidizing wheat farms in the eastern part of Saudi Arabia. They grew so much wheat, they started exporting. The plan was a disaster. The wheat drank up so much water that it caused water shortages in the city. And Saudi Arabia sacked that whole program this year.
SMITH: OK, so what else have they got? They've got a fairly educated population. They could really try and bolster the tech sector - become a kind of Silicon Desert, right?
VANEK SMITH: Which is basically just silicon.
SMITH: It's the Silicon Silicon.
VANEK SMITH: And Saudi Arabia has been trying to set up incubators for startups and encouraging banks to lend more money to private companies. Abdul Aziz's company, which sells computer equipment online, is doing well. But a lot of tech companies in Saudi Arabia are tied in one way or another to oil - to the government.
SMITH: And so when the price of oil goes down, that actually hits tech firms. We talked to one tech entrepreneur, Mohammed. He runs a website business in Riyadh. And he basically has one set of customers - various government agencies. And a few weeks ago, he started getting calls saying, bad news; we've postponed our projects.
MOHAMMED: So we have seen a lot of businesses being canceled.
VANEK SMITH: And a lot of private tech firms are giving up.
MOHAMMED: I think it's going to get really, really ugly.
VANEK SMITH: It's going to get really ugly?
MOHAMMED: A lot of the businesses here, if they are small companies, they live on the government.
SMITH: The list of other options that people talk about for Saudi Arabia does not seem encouraging. There's talk about boosting tourism. They are actually literally the Mecca of people going to Mecca. They could talk about plastics, right? That's what you do when you have a lot of oil - you can make plastics. But you do not get rich selling plastics.
VANEK SMITH: So the government sort of threw up its hands and did something drastic - something that would have been inconceivable just a couple years ago. Abdul Aziz heard about it when he was out at an Italian restaurant with a friend of his.
AZIZ: I remember we ordered pepperoni pizza.
VANEK SMITH: His friend told him he had heard at his job that the government was about to make a big announcement.
AZIZ: He told me that the government next day will raise the prices on gas and water, electricity.
VANEK SMITH: The super cheap gas, water, electricity - all of that was going to get a lot more expensive. And for the first time ever, people were going to have to pay taxes. For certain items, there's going to be a sales tax. What did you think when he told you that?
AZIZ: I was a little bit scared.
VANEK SMITH: Why were you scared?
AZIZ: We don't have taxes before in Saudi Arabia. You don't know how people can react.
SMITH: Abdul Aziz says people were kind of freaked out. There were huge lines of cars at the gas stations. People were filling up their cars and big gas cans because they didn't know what was going to happen in the future.
VANEK SMITH: There was also all this anxiety about utilities. No one knew how much their water and electricity bills would be now that the government was rolling back the subsidies. In fact, the bills have just started coming in in the last couple weeks. Samar Fatany lives in Jeddah, a city on the Red Sea.
SAMAR FATANY: It's my favorite city in the world (laughter).
VANEK SMITH: She's a newspaper columnist. She and her husband just got their bill. Did your electricity bill go up?
SAMAR FATANY: It did, yes.
VANEK SMITH: By how much?
SMITH: She asked her husband. They did some math. Her electricity bill went up by 40 percent, to $180 a month.
VANEK SMITH: Are you changing the way you use electricity at all?
SAMAR FATANY: Oh, yes. You see my husband going after everyone in the house - don't have, don't put the lights on (laughter). If you forget the lights off in one room, why is this light on when nobody's sitting here? Yes, for sure.
SMITH: It's like me walking around the house and yelling at my kids, oh, you've got to turn off the lights. What are you doing? You're burning money there.
VANEK SMITH: Are we air conditioning the neighborhood? So we're laughing, but this is a major change to the Saudi way of life. It is possible that this crisis and all of these changes could lead to something good. It could force the government to change.
SMITH: For instance, one way that the country is talking about raising money is by going public. They would sell shares in Aramco, the oil company. The prince sort of dropped this idea in an interview a few weeks ago with The Economist magazine.
VANEK SMITH: David Ottaway, the former Washington Post reporter, says this would be a huge deal.
OTTAWAY: Transparency would be a real shock for Aramco and the royal family. If they had to explain to the public how much money they're spending on building palaces and providing to princes - you know, there are probably 5, 6,000 princes.
VANEK SMITH: There are 6,000 princes?
OTTAWAY: Most of them don't get very much, but they get some money. And, you know, this is all coming out of Aramco. So are they going to make public how much money they're giving to the royal family? I really doubt it.
SMITH: But if you really need money, you're going to have to get it somewhere. If it's not coming from investors, then it's going to have to come from your own people. And they may ask for things.
VANEK SMITH: And this is where the new taxes that Saudi Arabia has been imposing might actually be a good thing. Abdul Aziz actually first mentioned this to me. He said he was kind of excited to start paying taxes because he thinks it'll help people feel like they have more of a right to have a say in the government.
SMITH: They'll actually feel like citizens instead of just employees of an oil company.
AZIZ: Most people here, especially the older generation, they feel, like, gratitude to the government for anything the government do because it's not their money the government's spending on us. So when they start paying, they will say, like, we deserve this. This is our money.
SMITH: We deserve this. This is our money. That's what he hopes people will say because even though everybody complains about taxes, everybody hates taxes, it really does bind a country together. It really does make a government more accountable.
VANEK SMITH: Abdul Aziz says he thinks the price of oil going down has been a good thing for his country. Of course, when I asked him if he hoped it would stay down, he said no, of course not. I want the price of oil to go back up.
SMITH: Everybody in Saudi Arabia wants the price of oil to go back up. I mean, that's definitely plan A - wait this whole thing out. And the country does have a reserve fund of around a trillion dollars - a trillion dollars - which sounds like a massive amount of money. But everyone says at the rate that Saudi Arabia's spending, that's only going to last a few years.
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SMITH: You can email us - planetmoney@npr.org - or find us on Facebook.
VANEK SMITH: Our episode today was produced by Jess Chang.
SMITH: And if you'd like to check out another of NPR's fine podcast offerings, may we suggest the Pop Culture Happy Hour? It is a fun conversation about movies, TV shows, books and music. You name it, they talk about it. You can find Pop Culture Happy Hour at npr.org/podcasts, or on the NPR One app. I'm Robert Smith.
VANEK SMITH: And I'm Stacy Vanek Smith. Thanks for listening.
SMITH: Sweet.
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