Saudi Arabia

Fareed Zakaria has a great Newsweek article on Saudi Arabia, it's battle with terrorists and prospects for the future. Here is a particularly significant point:

Saudi Arabia is not a rich country. one is struck by that fact driving through its cities. For a brief decade and a half it was wealthy, before population growth and economic stagnation set in. It's a middle-income country but crucially one where the government has access to large revenues without taxing its public. That means the regime can spend easily, on arms from America and Britain, on mosques in Indonesia and, of course, on itself. Saudi Arabia's per capita GDP is now half that of Israel's; it ranks 70th in the world, after Slovakia and Bulgaria. If present trends continue—an exploding population, a declining educational system, a rotting welfare state—Saudi Arabia will be a poor country in 25 years. But with a rich royal family, if it still exists.

In many ways oil has been a curse for Saudi Arabia and the other oil rich Arab states. Oil provides all the money for government, military and even is used to buy off the populace to a degree. Because of this the governments of these states don’t have much influence to improve the lot of their people. Revenue for the government is based upon what oil companies will pay for the privilege of extracting the oil rather than the wealth of the citizens so there is no incentive for the government to make sure a sound economy is built. This is most obvious in Saudi Arabia.