The Political Economy of Saudi Arabia

The Regional Co-operation for Development (RCD) was set up by the regional members of the Central Treaty Organization (CENTO), Iran, Turkey and Pakistan, in July 1964 to strengthen their socio-economic development. However, a number of financial, political and administrative difficulties made progress under RCD slow. Despite assurances to the contrary, the probable impetus behind the formation of RCD was the unease with the politico-military aspects of CENTO. However, RCD's political significance grew steadily, and that of CENTO declined correspondingly. Nevertheless, recognizing that RCD could not provide an effective military substitute, Iran and Turkey still attached value to CENTO. After twelve unsatisfactory years, the three regional Heads of State held a summit in Izmir on 22 April 1976, making amendments to the 1964 declaration. The Treaty of Izmir was signed in 1977 as the legal framework for RCD. Yet, RCD was unsuccessful. In January 1985, Turkey, Iran and Pakistan established a new organisation called the Economic Co-operation Organization (ECO).     

The Al Saud family and the future of Saudi Arabia

Summary

We have started by asking the question: why are there international income inequalities? We have ascribed them to differences in applied productive knowledge. This raised the question: why can productive knowledge be communicated and diffused within an advanced nation, but not between nations or within underdeveloped nations? What are the obstacles to the international diffusion of benefits ?

We have found these in two areas: obstacles to communication and absence of suitable technologies. The obstacles to communication can again be divided into those due to costs of transfer and those due to intentional restrictions or the exercise of monopoly power. But even perfect communication would not meet the need for quite different technologies from those developed in high‐income countries.

Measures that reduce the Communications Gap might make the Suitability Gap wider and vice versa, but a set of integrated actions attacking both gaps has a chance of success. Technical knowledge cannot be marketed like other products or factors because it possesses peculiar features: (i) indivisibility, (ii) inappropriability, (iii) embodiment in other factors, (iv) uncertainty and (v) impossibility to know its full value until bought. Policies for closing the two gaps are interdependent, so that the pursuit of any one in isolation might make matters worse. What is needed is a set of integrated actions, attacking both the Communications Gap and the Suitability Gap. Transfer must be supplemented by indigenous capability; adaptation by invention and innovation.