The Cornell Studies in Political Economy series, in which The Price of Wealth appears, is known for producing valuable contributions to the international political economy literature; Kiren Aziz Chaudhry's new book adds to Cornell's reputation as a leading publisher in this field. What is most remarkable about this volume, however, is that it makes a valuable theoretical contribution while also containing such a rich and much needed account of the political economic development of the kingdom of Saudi Arabia and the Yemen Arab Republic (YAR).
In The Price of Wealth, Chaudhry seeks to explain how two countries so apparently similar early in this century (no major colonial legacy, the absence of a unified national market, etc.) could have such different institutional reactions to the boom years of the 1970s and the bust years of the 1980s. To do so, the book contains a brief but rewarding review in Chapter One of the extant literature on how international forces effect national economic institutions and how these institutions mold outcomes. Chaudhry finds that neoinstitutional economists and Marxists alike have failed to acknowledge the crucial role of the creation of a national market and have tended to ignore the origins of institutions and their variance across temporal and geographical space. In order to get at these crucial issues, Chaudhry selects for intensive inductive examination of Saudi Arabia and the YAR.
The rich odyssey through the political and economic histories of these two countries begins in Chapters Two and Three, respectively, with accounts of state formation and institution-building in the two countries. Informed by interviews and extensive archival work, Chaudhry highlights the factors which led by 1973 to surprisingly quite different state institutions and markets. One interesting early finding is that models of state formation developed for and from European experience, seemingly irrelevant for Saudi Arabia due to the latter's largely nomadic population at the tum of the century, actually reveal more about Saudi state development than do the examples of other non-European states, which had state institutions (imposed by colonial powers) in place upon independence. These chapters represent perhaps the most compelling pieces in print on Saudi and Yemeni state formation. Particularly for the Saudi case, Chaudhry provides a more realistic and varied account than has been the norm in works like Holden and Johns' The House of Saud and Lacey's The Kingdom, which often glorify the leadership of Abdul Aziz ibn Saud, the founder of the modern Saudi state, at the expense of objective analysis of the institutional setting.
In the next two chapters, Chaudhry turns to analyses of the oil boom's impact on state and societal institutions. Noting that the two states witnessed similar erosions of regulatory and extractive institutions during this period, the author expertly traces the different processes by which such common outcomes obtained - and the implications thereof. In Saudi Arabia, the tax bureaucracy eroded as the state began to construct exclusively distributive institutions. The consequences, notably the strengthening of state financial institutions and the tightening of ties between the government and business, were to be crucial for developments in the bust period of the 1980s. Likewise, the Saudi state would have to confront recession in the 1980s without basic state information about private sector activity, lost when the regulatory and tax institutions eroded, and in the absence of extensive civil institutions, which were made obsolete by state largesse. In Yemen, on the other hand, the fading of the extractive bureaucracy as remittance income from Yemenis in the Gulf states (and huge amounts of foreign aid) rolled in resulted in the replacement of government institutions by regional and local societal arrangements such as the Local Development Associations (LDAs) in the southern part of the country, and the rise of an informal banking sector largely immune from state control.
Chaudhry observes that no one theory of institutions is able to explain the creation and evolution of such varying institutional arrangements in the pre-boom and boom periods in the two countries. These well-documented and cogently written chapters provide a firm foundation for the core of the book - analysis of the effects of the 1980s bust on these two states' economies and institutions. Both states faced severe financial crises: Saudi Arabia from the collapse of oil prices, Yemen from the concomitant reduction of remittance income and the drastic contraction of foreign aid. Both responded with attempts to reinstitute taxes, slash government spending, and regulate the banking sector. However, the ability of the two governments to enact such reforms differed- in ways, Chaudhry argues, that mainstream theoretical approaches could not predict. Indeed, the seemingly powerful Saudi government had to back off quickly from its plans to reinstitute taxes and to cut government subsidies due to pressure from the very business communities which the state had helped create in the boom period (which had strong economic and kinship ties with the Saudi ruling elite).. The government could not even attempt to elicit support from local or regional civil institutions since the e had been decimated during the boom as well. Yemen was more successful in its attempts to rejuvenate its moribund extractive institutions both because it could co-opt the LDA leadership and because the largely southern, Sunni business sector was quite detached from the Shia government bureaucrats and had little influence thereupon.
The implications of the events of the 1980s are clear. Although these two countries had little history of social movements, the dawn of the 1990s brought a variety of sectarian and regional groups to the fore in Yemen and both Westernized elite and Islamist movements in Saudi Arabia. While Yemen still has enormous hurdles on the road to economic development and must learn to effectively use the resources from the growing oil sector, at least the government has some basic ability to extract from and regulate the Yemeni economy. However, the kingdom's debt, both domestic and foreign, continues to grow as the distributive institutions of the boom period persist in an era of massive budget deficits; even technocratic inroads into the cabinet in recent years have proved unsuccessful in overcoming reform resistance from the closely tied Saudi business and ruling elites.
Several minor weak points of the book need to be addressed. The author's apparent need to justify concentration on Yemen and Saudi Arabia leads to an attempt to generalize the findings, even though the experiences of Saudi Arabia and Yemen since the tum of the century are admitted to be largely unique. In Chaudhry's own words, "this book is really about Yemen and Saudi Arabia" (p. 29), and the author need not apologize for concentrating so much on these important and understudied cases. More upsetting is the author's coverage of the Yemen Arab Republic. Throughout the book Chaudhry concentrates on the southern areas, focusing on the northern tribal areas only when issues of cross-border smuggling or the like arise in the narrative. Sadly, the rich discussion of southern institutions such as the LDAs is not paralleled by analysis of less formal institutional arrangements in the north. Discussion of the implications of the YAR's interaction with the People's Democratic Republic of Yemen from the late 1960s to 1990 is similarly rather limited. Finally, Chaudhry to a large extent avoids the international political and strategic environment in which Saudi Arabia and Yemen find themselves. A few pages at the end of Chapter Seven address the effects of international developments, in the Arab world and beyond, but other than brief mentions of Yemeni unification and the 1990-1991 Gulf War, the less economic aspects of international relations are given short shrift. To be fair, perhaps Chaudhry can only be expected to do so much - perhaps it is the very mastery shown in the rest of the volume which leaves the reader wishing for Chaudhry's further insight on these topics.
As a whole, then, these disappointments are minor in comparison to the abundant gain from reading The Price of Wealth. It is important to note that the "thick description" making the book so rewarding for some audiences also makes it a poor choice for the general reader or for undergraduate classes. The book is better suited for graduate courses in international political economy, especially those concentrating on institutional origins and evolution or those lacking a Middle Eastern element, and should be read by anyone already somewhat knowledgeable about the international political economy of the Middle East who desires more detail on the formation of the Yemeni and Saudi states, institutional evolution during the boom and-bust years, and the origins of events comprising today's headlines.