After quoting Jamal Khashoggi from 2017:
Let’s talk about something other than women driving. The NEOM project, the futuristic city that he (the crown prince) plans to invest half a trillion dollars in. What if it goes wrong? It could bankrupt the country.
Palko writes:
“My name is Ozymandias, king of kings: Look on my works, ye Mighty, and despair!” — Neom was just the beginning for MBS
As mentioned before, we live in a time of mad kings, megalomaniacal sociopaths granted dangerous power through wealth and/or political position, prone to wild schemes of empire and grandeur. Even in this crowded field, the ruler of Saudi Arabia manages to stand out, particularly with his willingness to burn through even the impressive coffers of his country building futuristic boondoggles.
He’s like a self-funding Elon Musk.
He then quotes Nadeen Ebrahim and Dalya Al Masri:
At the heart of the project is the “Mukaab,” a 400-meter (1,312-foot) high, 400-meter wide and 400-meter-long cube that is big enough to fit 20 Empire State buildings. . . . due to be completed in 2030.
…
“Back in the day, you would have negative discussions about Saudi Arabia affiliated to human rights abuses,” said Andreas Krieg, research fellow at the King’s College London Institute of Middle Eastern Studies. “But now they’re trying to push new narratives of being a country of development and one that can build futuristic cities.”…
But some have questioned whether the project will even come to fruition. Saudi Arabia has announced similar mega projects in the past, work on which has been slow.In 2021, MBS announced his $500 billion futuristic Neom city in the northwest of the country, with promises of robot maids, flying taxis, and a giant artificial moon. And last year, he unveiled a giant linear city, the Line, which aimed to stretch over 106 miles and house 9 million people.
…“The more absurd and futuristic these projects get, the more I can’t help but imagine how much more dystopian everything surrounding them will be,” wrote Dana Ahmed, a Gulf researcher at Amnesty International, on Twitter.
Saudi officials have insisted that work on the projects is going ahead as planned.
It’s hard to know how to think about this. Is the ruler of Saudi Arabia as clueless as the Axios journalists who wrote, “Tesla CEO Elon Musk has unveiled a video of his Boring Company’s underground tunnel that will soon offer Los Angeles commuters an alternative mode of transportation.” That was “soon” in 2018!
OK, no reason to think the authors of that linked article were clueless. They could well have been crazy like a fox, aiming for a lucrative job in public relations. Putting out an article with such a stupid claim, that’s a commitment device demonstrating a real willingness to continue to write and publish ridiculous things in the future.
Anyway, yeah, they “have insisted that work on the projects is going ahead as planned.” If you take that statement literally, it doesn’t actually say it will be completed in 2030. Yes, it’s “due to be completed in 2030,” but that doesn’t mean that is their plan. The actual plan could well be for the project to be overdue: a much smaller thing to be completed many years later.
Kind of like that dude who owes Defector $500,000. I mean, sure, he said he “would back them with $500,000,” but people say all sorts of things, right?
There’s nothing special about rich people here. All of us make plans that we ultimately can’t carry out. I have lots of ideas for books that, realistically, I’ll never get around to writing. With rich people, the plans can just be bigger, also it’s worth journalists’ while to promote rich people’s ideas, in the hope that some of the money will splash off onto them, or just through some sort of generalized worship of money and success. Bankrupting a country, though, that seems more serious than just circulating stupid graphs.
There is an implicit premise beimg made that bankrupting a country is a huge deal.
The US went bankrupt twice* in the last 100 years and is still going pretty strong.
*June 5th, 1933 and August 15th 1971
Anon:
I can believe that if it’s just an accounting thing, maybe bankruptcy is not such a big deal. In this case, though, we’re taking about a proposed massive waste of physical resources, not just shifting numbers around on a ledger.
This is the real issue. Not only a waste of physical materials, but also a huge waste of labor. If you could have been, say, creating water storage and treatment plants and training teachers and putting in telecom infrastructure and building normal housing for people and such but instead put all that labor and materials into building a giant cube which is never finished and even if it were finished no one would ever use for anything… then it’s a big deal in terms of the population’s well being.
First you waste the resources, then the accounting thing happens.
Is this project even that big though? About $500 billion over a decade or so doesn’t seem like that much anymore. For sure at least that much (~1%) of the US federal budget is lost to waste each year. Eg, ~4% is wasted on payment errors alone:
https://www.gao.gov/blog/federal-payment-errors-known-improper-payments-are-continuing-concern
I also found this:
https://www.my.gov.sa/wps/portal/snp/aboutksa/governmentBudget/
1 SAR = 0.27 USD, so the total budget is ~$300 billion. I dunno, it is alot, but wasting ~15% on boondoggles doesn’t seem extraordinary for a government.
It’s true but when you miapay someone it’s really a transfer, the govt doesn’t use some resources and the person who receives the money does. It still winds up being useful for the recipient. When you miapay someone and also they use the money to buy a Mercedes and then drop a huge weight on it from a crane… it’s a different story
Mis-pay
Eventually that money gets spent on something that consumes resources. Random people/scammers may spend it less wastefully than the government. But even then, the taxes/debt will increase to compensate.
Right, but consuming resources and setting resources on fire and stomping on them are two different things. For example in China they’re building all these ridiculous buildings which are unoccupied and literally falling apart (pieces coming off in chunks etc). No one will ever occupy them. The labor that went into making them was “set fire and stomped on” and the concrete, wood, steel and the use of the vehicles and soforth is all “set fire and stomped on”.
The US didn’t actually default on its debts, though inflation greatly eroded them.
Depends how you look at it:
https://thehill.com/opinion/finance/575722-the-us-has-never-defaulted-on-its-debt-except-the-four-times-it-did/
Right now if you hold treasuries you expect to be paid back by the government in “dollars”. These dollars have certain properties. But it is possible for them to substitute something else for those dollars with the same name but different properties.
Eg, the new dollars can be “colored” as is already being discussed in Russia:
https://www-interfax-ru.translate.goog/business/919367?_x_tr_sl=auto&_x_tr_tl=en&_x_tr_hl=en-US&_x_tr_pto=wapp&_x_tr_hist=true
If you get paid for your treasuries in dollars that expire and have spending limits (eg, you can only spend $20 a week on gas or whatever), would that be a default? I guess that can be a matter of opinion, it would be the modern version of going off the gold standard though.
I agree that the default of a country is very different from the default of a company or an individual. The reason is simple: A person or a company can simply “disappear”, never to be seen again by the creditor. But a country cannot disappear. There is always another government to which creditors can turn for repayment. If a government refuses to pay, no sensible investor will lend money to that government until they are satisfied that they will be repaid. It is hugely expensive in the short run for a government to default, but it can still sometimes be cheaper than paying back creditors and trying to get a “clean slate” with reduced debt.
But a country cannot disappear.
When was the last time you visited Yugoslavia? I do not mean that a simple default will destroy a country but if a country is in default it may well be in a lot of trouble all around. Some countries do cease to exist, sometimes suddenly.
I may have miscommunicated my argument. When I spoke of a country, I meant a literal piece of earth on a continental plate. When the Yugoslavian government broke up, several new territories emerged, each with its own government. Investors could have gone to the new governments and said “I gave money to the whole lot of you, now I want it back”.
The chances of getting a government in a war-torn or civil-war-torn country, or one that has recently suffered a coup d’état, to pay up are maximally slim. But this is something the investor should have thought about before investing (and usually does). The default is not because the government cannot pay its bills to foreign investors, but because there *is* no government. However, these scenarios are quite rare: Usually someone steps in to fill the power vacuum, and that group can be held responsible for its predecessor’s debts. Whether they will honour them is a very different question.
Most sovereign defaults happen exactly as I have described: government stops paying, investors are furious, debt restructuring negotiations, years of mistrust in the country’s government bonds. Then either confidence is restored, or there is another default. It happens all the time.
Thanks, jrkrideau, for pointing out the additional scenario of “country temporarily loses its government structures”.
>we live in a time of mad kings, megalomaniacal sociopaths granted dangerous power through wealth and/or political position, prone to wild schemes of empire and grandeur
Said many people across many thousands of years. Just read any world history book. Been this way for a while.
I find Neom, and “The Line” especially, fascinating because of their over-the-top stupidity. I often wonder: what’s the number of people involved in the project who actually believe its claims, or believe that they make any sense at all? 1-10? 1? 0?
Can’t wait for part two:
“We live in a time of mad scientists, megalomaniacal sociopaths granted dangerous power through corruption and/or institutional power, prone to wild schemes of control and grandeur”.
Anon:
Write the post! There’s plenty of room here in the comments section.
I will leave writing of such a post or dedicated paper to others, who can possibly write about this possibility and possible danger better and more useful than I ever could. There are likely several papers and books about this all I reason.
I have written some things here and there (also on this blog over the years) that might directly or indirectly concern this all in a way that I feel might be the most appropriate concerning my capabilities and possible usefulness. At this point in time, I feel have done the best I can do, and could have done, in this regard.
I feel like I am retired now in some way, without even ever having held a notable position of some sort.