In spite of some gaps, the recent Saudi economic history has been punctuated over the last two generations by a comfortable fiscal position, significant expansion and tepid economic growth.

This phase has spawned a significant new economic environment.

This environment has shaped the economic scene with certain features with far reaching implications.

The most important feature is the perennial dichotomy between expansion and growth.

The objective of the expansion was to primarily satisfy domestic nascent services, while the objective of the economic growth policy set is primarily to constitute the elements for economic drivers to generate organic growth.

Naturally, there are overlapping complementarities between economic growth and expansion, especially in the area of investments and in particular in the infrastructure domain.

Instrumentally, expansion is driven primarily by public expenditures while growth is driven primarily by productivity and investments in labor and capital.

A continuing feature of the Saudi economic management is the weak differentiation between growth and expansion.

The lack of discernible policy set is a strategic mistake that policy makers have to undo in time.

Saudi Arabia is a developing country. Thus, a good part of the mixture is expected and needed since there was a meaningful deficit in public services for a growing population and the need to augment the economic base for further growth.

The challenge for the policy makers is to know when the emphasis on economic expansion should end and when the emphasis on economic growth should be the main stay of economic policy.

Economic expansion is necessary and economic growth will not be sustainable without concerted government efforts and for several years.

Expansion is vital until the rules of the game can be altered and that will not happen until a strong central bureaucracy is well calibrated, reasonable infrastructure is well established, and a critical mass in human resources capabilities is available.

Furthermore, it is only realistic to use available funds for the easy economic expansion.

The problem is that the more we use expansion instead of growth the more the path dependency will generate its own constituencies.

Some aspects are legitimate and some can be nefarious.

Economic expansion is sometimes indispensable to ignite or spur growth, especially during recessions.

But it will never displace the need for organic growth.

Organic growth banks on the entrepreneurship spirit, judicious use of capital and labor and other resources, institutional foundations, organizational skills, and better connections between education and economic factors of production.

The ultimate yardstick is the trajectory of productivity.

The economic growth-dominated environment will spur research first applied and gradually theoretical and deeper connections with academic institutions.

Growth is the source of real sustainability while expansion is mainly predicated on rent seeking of government contracts or easy distribution agencies for international companies.

Genuine growth modalities can create large and small self-sustaining Saudi companies as legal and administrative apparatuses improve.

A key aspect of long-term growth is the role it plays in elevating meritocracy to propel further growth while expansion can stifle competency.

Expansion can win more publicity and even score propaganda points while economic growth wins in the longer term.

We practice a mixture of the two with all the attendant risks and apparent symptoms.

A prime example is the Saudization program as expansion argues for a lenient set of polices aiming at economic growth would argue for more competition among Saudis and restriction of economic immigrants that benefit the subsidies dependent economy.

Another bad symptom is the relegation of research and the promotion of higher degrees at the expense of quality education.

There is no easy solution because of the power of the habits and the path dependency effects.

A cultural mind set is entrenched but the trend can be reversed because of the need and the long strides the Saudi economy has taken over the years compared to an earlier epoch or economies at a similar stage.

The first step is to refashion the mindset to focus on this dichotomy.

The second step is to estimate where things are on the historical and future trajectory and then to assess every economic undertaking relative to its  role in expansion or growth.

The parallel movement to undertake is in the realm of institutional building blocks .

— Fawaz H. Alfawaz is economic consultant and a columnist. [email protected].