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this is the short end of that individuals who reject the idea is
comparative advantage and benefits from international trade
in the nineteen seventy seventy rabia ended up as a much wealthier country
and large part because the price of oil had gone up so much
the saudis and set out in decided that they were going to grow more food
now upon reflection saudi arabia is not naturally a low-cost country for growing
most foodstuffs
the kingdom of saudi arabia essentially has no lakes or rivers to speak out and
only a small part of the country gets enough natural rainfall to grow food so
for the most part the decision to grow more food in saudi arabia meant the
decision to subsidize water irrigation
in particular the saudi set out to grow more week
over the years nineteen eighty to nineteen ninety-two they expanded their
wheat production by a factor of twenty nine saudi arabia became the sixth
largest we'd exporter in the world they were even exporting we do with the
soviet union
and such a dry country manage this where they did it by massive subsidies to
wheat growing and massive subsidies to water here occasion for wheat
so in saudi arabia wheat production would cost around
five hundred dollars a ton
when the market price was at the same time about a hundred and twenty dollars
a ton
by growing their own we the saudis are making it almost five times more
expensive
the saudis also wasted a lot of water to grow while this week it required three
hundred billion cubic meters of water most of it non renewable to put that in
perspective that's about equal to six years flow of water of the nile river
into egypt
over time however the saudis decided they simply couldn't afford all of these
expenses
and in the year two thousand eight they decided to essentially give up on their
wheat growing program with the goal that we production in saudi arabia would
essentially be gone by two thousand sixteen
it's already the case that there are plenty of wheat farms out there in saudi
arabia with the equipment is sitting there unused simply gathering rest
in this case it would have been much cheaper for the saudis to have relied on
international trade from the very beginning
the saudis made this mistake of starting to grow wheat in the first place in part
because they thought they could achieve national self-sufficiency in part
because they could show the population that they were somehow modernizing as a
nation in part because they simply got carried away from having so much surplus
cash and also because subsidizing we was a way of handing out goodies to a
growing farm lobby
to read more on this episode you can google saudi arabia we'd or see the
discussion in my own book an economist gets lunch