Beijing's & Jedda's International Shopping Spree Leaves the poor & disenfranchised in the dirt

By EWI BLOG | by Rachel Ehrenfeld, Ken Jensen, Richard Kaplan
Monday, March 4th, 2013 @ 5:36PM

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Over the past decade, Saudi Arabia’s GDP more than tripled. China’s increased by a factor of 6. In the same time frame, both countries reported between 3 and 5 percent unemployment annually. Or so they (and the World Bank) tell us.

These two countries are vested with incredible wealth, which they use not to invest in their subjects (known in the West as citizens), but mostly to buy financial and media institutions, sensitive technologies, natural resources, land and influence around the world. If the GDP numbers above are more or less accurate, the unemployment figures are a total deception.

Some Chinese economists claim the unemployment is at least double the official figure. But in October 2012, when China’s population was estimated at 1.354.04 billion people, former International Monetary Fund economist Eswar Parsad stated that China’s official unemployment rate “has no credibility at all.”

Chinese unemployment figures take into account only registered urban unemployment: workers laid off by state-owned enterprises don’t count.  Rural unemployment and underemployment, and temporary rural urban and rural workers aren’t considered either.

China’s “economic miracle” created enormous dislocations beginning in the early 1990s. Economic reforms to secure high economic growth led to the shedding of excess labor, lay-offs, early-retirement schemes, and an increasing demand for skilled workers that the Chinese workforce could not supply. Between 1992 and 2002, more than a million jobs were lost in Shanghai alone.  From a peak of 145.1 million in 1992, the number of jobs in China’s state sector fell to 82.8 million in 2002.

A few years ago it was estimated that 15 million new workers would enter the Chinese job market annually between 2003 and 2020.  The number of new jobs available annually would average only about 8 million. In the urban-industrial north, some estimates of unemployment have been greater than 25 percent, and for men aged 51-60, it’s 27.5 percent.

International Business Editor of The Daily Telegraph Ambrose Evans-Pritchard reported last month that the Chinese “have pledged stimulus worth $2 trillion.” While some investments are made, “Some of it is a fictional wish-list,” he noted. Economic stimulus is not the same as steady investment.

As for Saudi Arabia, its population has increased by nearly a factor of 5 since 1970 to today’s estimated 28 million. In contrast to the Chinese, and unlike themselves in the past, the Saudis have begun to talk in public about the extent of their unemployment problem. Prince Al-Waleed Bin Talal bin Abdulaziz Al Saud, of all people, has recently said that there are 8 million migrant workers employed in service jobs in Saudi Arabia and over 2 million illegal migrant workers.

Meanwhile, 2 million Saudis are jobless and, apparently, the real number of unemployed could be threefold, according to experts. If Prince Talal — one of the richest men in the world, well known for his foreign, rather than domestic investments — is right about the numbers, the jobless rate among Saudi’s is at least 12.5 percent and may be much higher:

“Media reports and private estimates suggest that between 2 million and 4 million of the country’s native Saudis live on less than about $530 a month — about $17 a day — which analysts generally consider the poverty line in Saudi Arabia.”  Some estimate that as many as a quarter of all Saudis live in poverty. In addition, youth unemployment is rife: more than two-third of Saudis are younger than 30, and the unemployment rate for Saudis in their 20s is nearly 75 percent.

In April 2000, King Abdullah announced the planned establishment of the Saudi Arabian General Investment Authority (SAGIA). Its initial purpose was to attract and process foreign direct investment. In 2006, facing growing al-Qaeda activities, the king announced new plans to create four new “cities” to bring in modern technology, management skills, corporate governance, and new industries. SAGIA was given the job of regulating the Economic Cities Authority (ECA).

The “cities” aim to encourage investments from the private sector, and to create jobs. “Core jobs are expected to be created, which in turn will spur supporting ancillary jobs.” The object here is clearly to create environments to lure foreign investment with the hope of a trickle-down effect that will create jobs for unemployed and underemployed Saudis.

In addition, the King has spent nearly $4 billion to establish a top-flight coed university north of Jeddah. And it is true that Abdullah and others in the Saudi royal family have indeed spent billions to help the poor. But despite that, and well-meant long-range plans for economic development, there is still a glaring disparity between the extent of the wealth created in the Kingdom and the poverty afflicting the Saudi people.

Growing the royal wealth and keeping it safe abroad seems more important than creating jobs or relieving destitution. Not surprisingly, Prince Talal’s assessment was provided by Iran’s Press TV, not by any Saudi media outlet. The Saudis prefer to keep things quiet.  In 2011, for example, three young Saudi video bloggers were arrested and jailed for two weeks for producing an online video about poverty in Saudi Arabia.

While data on Saudi foreign direct investment is among the most difficult to find, there was a report out of the Saudi embassy in 2009 that Saudi investment in the U.S. had reached $400 billion. This number at least gives an idea of the scale of Saudi FDI. And then there’s the case of Prince Talal.Al-Waleed Bin Talal owns a number of hotels, firms, and television stations and Forbes puts his personal fortune at $18 billion. He also owns 95 percent of Kingdom Holding, which has stakes in Apple Inc., Citigroup and General Motors. Talal is also a significant shareholder in Rupert Murdoch’s NewsCorp.

For the Saudis, it’s clear that its unemployment problem is more threatening than China’s, hence what King Abdullah and the government have done regarding it, however ineffectual that may be to date. The Saudis mean to keep the Arab Spring out of their country, inasmuch as al Qaeda, the Muslim Brotherhood, and Iranian-sponsored Islamists might use the Saudi poor to their advantage and use them to overthrow the monarchy.

As for the Chinese, their method of dealing with unemployment and underemployment has been to misreport it, avoid investing in their own country (except to quell disturbances in this or that province), while, in the meantime, “exporting” large numbers of domestically unemployable Chinese. Most go to Africa, but they can be found everywhere China is attempting to gain influence, including, most lately, the Caribbean.

On June 11, 2011, U.S. Secretary of State, Hillary Clinton, gave a speech in Zambia warning of a new colonialism caused by the Chinese (although she didn’t mention China by name): “It is easy to come in, take out natural resources, pay off leaders and leave.” Clinton described only part China’s MO in Africa.  In addition to buying off and underwriting public works projects for local leaders, the Chinese have been injecting a substantial number their own citizens into the continent as “temporary” workers. This has brought them remittances, continued influence in Africa, and very, very modest relief to their unemployment problems.

In 2009, China became Africa’s single largest trading partner, surpassing the U.S.  It’s direct foreign investment there went from under $100 million in 2003 to more than $12 billion in 2011, according to the New York Times. With this have come Chinese laborers and other “immigrants.”

Migration Information reports that, in 2009, the Chinese population in Africa was estimated at between 580,000 and 820,000: today it’s well over one million according to the same source.

“While most Chinese in Africa are there only temporarily — as contract laborers and professionals — there are a growing number of Chinese migrants choosing to remain in Africa to explore greater economic opportunities. Though many Chinese migrants said they will eventually return to China, countless have already stayed years beyond their original plans.”

These Chinese have come in a variety of ways — some of them seeking economic opportunity on their own. Most have accompanied Chinese-funded public works projects and exported Chinese goods into the continent. The money they send back home has increasingly originated in crime. In addition to money, PRC émigré communities everywhere have been providing their home government with commercial and other intelligence.

Last June, economist Dambisa Moyo inked an improbable op/edfor the New York Times. Moyo ignored the matter of the growing PRC Chinese presence in Africa, and the extent to which they have in fact become the competitors of native Africans for jobs, to explain that China’s increasing presence in Africa served to bring hundreds of millions out of poverty back home:

“To satisfy China’s population and prevent a crisis of legitimacy for their rule, leaders in Beijing need to keep economic growth rates high and continue to bring hundreds of millions of people out of poverty. And to do so, China needs arable land, oil and minerals. Pursuing imperial or colonial ambitions with masses of impoverished people at home would be wholly irrational and out of sync with China’s current strategic thinking.”

Astonishingly, with this Moyo inadvertently identified China’s investment abroad as the principal cause of poverty at home.

As a point of comparison, the extent of China’s foreign direct investment in the United States is less substantial than that of Saudi Arabia. However, it is in the midst of a rapid increase. It has grown nearly seven-fold over the past five years, from $3.4 billion in 2007 to $22.8 billion at the end of 2012.

Politically tyrannical and elite-serving economic regimes such as China and Saudi Arabia seem to invest just enough in their countries to placate the more educated portion of their population, while keeping large numbers of people in poverty.

This modus operandi is an old story.  It’s Stalinism or Maoism by other means.  What the Arab and Northeast Asian parts of the world learned from the twentieth century was that, with single parties (or their equivalent, e.g., large families) and an enormous secret police, you can not only keep your subjects from revolting, you can also make them accept lives of misery.

China, unlike the Saudis, doesn’t fear the spread of religiously motivated “reform” movement such as the Arab Spring. Demonstrations in China are not always reported and often are treated harshly to discourage future protests. Thus far, they’ve succeeded. Keeping a lid on the opposition enables China to fulfill its national plan to export their goods, sell arms, buy property, commodities, industries and influence, wherever they can. Whatever is their national plan to improve the lives of their own citizens, seems to have been put on a slower burner.

Fearing incitement by al-Qaeda sympathizers who call to end the monarchy’s corrupt hold on the country, as well as a possible uprising by the Shiite minority, keep the Saudi royal family edgy. While they have managed to control widespread demonstrations thus far, the destabilization in the region presents a real threat. To mitigate it, the Saudis do what the Saudis have always done — provide funds to disenfranchised groups to go elsewhere to spread the holy jihad.

When cash is king — both China and Saudi Arabia qualify – tyrannical regimes are unlikely to sit on the bench when the opportunities in the international field are so numerous and tempting. With more money in their pockets, they will continue to repress their own, to assure the continuation of their authoritarian regimes at least in the near future.

Further Reading:

1. DAILY BEAST: China’s Africa Problem

2. BBC Africa and China: Workers Face Clash of Cultures

3. NPR: No One Trusts China’s Unemployment Rate

4. Nick Eberstadt: Demographic Clouds on China’s Horizon

5. FORBES: Saudi Arabia Makes Big Bet On Solar

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