In current
political-science and
international-relations theory, a rentier state ( or ) is a
state
State most commonly refers to:
* State (polity), a centralized political organization that regulates law and society within a territory
**Sovereign state, a sovereign polity in international law, commonly referred to as a country
**Nation state, a ...
which derives all or a substantial portion of its national revenues from the
economic rent
In economics, economic rent is any payment to the owner of a factor of production in excess of the costs needed to bring that factor into production. In classical economics, economic rent is any payment made (including imputed value) or bene ...
paid by foreign individuals, concerns or governments.
[Mahdavy 1970, p. 428]
The academic use of the term rentier states and rentier states theories (RST) became well known after the works of
Hazem El Beblawi and
Giacomo Luciani on the development of oil-rich countries, known as
petrostates, in the
Persian Gulf
The Persian Gulf, sometimes called the Arabian Gulf, is a Mediterranean seas, mediterranean sea in West Asia. The body of water is an extension of the Arabian Sea and the larger Indian Ocean located between Iran and the Arabian Peninsula.Un ...
. They show that rentier states receive income without an increase in the productivity of the domestic economy or political development of the state, that is, the ability to
tax
A tax is a mandatory financial charge or levy imposed on an individual or legal entity by a governmental organization to support government spending and public expenditures collectively or to regulate and reduce negative externalities. Tax co ...
citizens. The unequal distribution of external income in rentier states has thus a negative effect on
political liberalism and
economic development
In economics, economic development (or economic and social development) is the process by which the economic well-being and quality of life of a nation, region, local community, or an individual are improved according to targeted goals and object ...
. With virtually no taxes citizens are less demanding and politically engaged and the income from rents negates the need for economic development.
[Beblawi 1987]
, rentier state theories were a dominant frame of reference for studies of resource-dependent countries in
the Gulf and the
wider Middle East and North African region,
[Yamada 2020] but were also used to analyse other forms of rentierism.
Usage
The usage of rentier states is based on the concept of 'rents'. Rents, as defined by
Adam Smith
Adam Smith (baptised 1723 – 17 July 1790) was a Scottish economist and philosopher who was a pioneer in the field of political economy and key figure during the Scottish Enlightenment. Seen by some as the "father of economics"——— or ...
, are different from wages which must be labored for. They are based on the ownership of land or resources.
David Ricardo
David Ricardo (18 April 1772 – 11 September 1823) was a British political economist, politician, and member of Parliament. He is recognized as one of the most influential classical economists, alongside figures such as Thomas Malthus, Ada ...
defined 'rents' as a reward of the ownership of a resource. When applied to natural resources rents can be seen as "the income derived from the gift of nature".
In a rentier state the economy relies on ''external rents''. Economies based on ''internal rents'' cannot be defined as rentier states, as they would require a productive domestic sector. In such an economy rents would only be a part of the total income, while in rentier economies rents take up a substantial part. Rentier states thus rely on ''external rents'' and not on the productivity of the domestic sector. This creates a rentier economy which influences multiple aspects of a state's society.
[Mahdavy 1970]
Origin
The first use of the term "rentier states" was by economists in the early 20th, century who used the term to describe European states that extended loans to non-European governments.
Lenin
Vladimir Ilyich Ulyanov ( 187021 January 1924), better known as Vladimir Lenin, was a Russian revolutionary, politician and political theorist. He was the first head of government of Soviet Russia from 1917 until Death and state funeral of ...
viewed rentier states (''Rentnerstaat''), or usurer states, as a form of
imperialism
Imperialism is the maintaining and extending of Power (international relations), power over foreign nations, particularly through expansionism, employing both hard power (military and economic power) and soft power (diplomatic power and cultura ...
. He stated that a limited amount of rentier states, or creditor states, would accumulate capital through the export of capital to underdeveloped and politically dependent debtor states. According to Lenin rentier states were a "state of parasitic, decaying capitalism, and this circumstance cannot fail to influence all the socio-political conditions of the countries concerned".
The modern meaning of "rentier states" was first defined by
Hossein Mahdavy in his economic analysis of the
Imperial State of Iran
Imperial is that which relates to an empire, Emperor, emperor/empress, or imperialism.
Imperial or The Imperial may also refer to:
Places
United States
* Imperial, California
* Imperial, Missouri
* Imperial, Nebraska
* Imperial, Pennsylvania
...
.
He defined rentier states as countries that receive on a regular basis substantial amounts of external rents. External rents are in turn defined as “rentals paid by foreign individuals, concerns or governments to individual concerns or governments of a given country”.
According to Mahdavy the payments for the passage of ships through the
Suez canal
The Suez Canal (; , ') is an artificial sea-level waterway in Egypt, Indo-Mediterranean, connecting the Mediterranean Sea to the Red Sea through the Isthmus of Suez and dividing Africa and Asia (and by extension, the Sinai Peninsula from the rest ...
and the payments to countries in the
Middle East
The Middle East (term originally coined in English language) is a geopolitical region encompassing the Arabian Peninsula, the Levant, Turkey, Egypt, Iran, and Iraq.
The term came into widespread usage by the United Kingdom and western Eur ...
to allow the passage of
oil pipelines are forms of external rents. Also the revenues of the export of
oil can be seen as external rents.
Mahdavy denies the idea that oil royalties are a compensation for the extraction of resources. He shows that in the Middle East governments and companies are able to make larger profits through
monopolistic positions and
price fixing
Price fixing is an anticompetitive agreement between participants on the same side in a market to buy or sell a product, service, or commodity only at a fixed price, or maintain the market conditions such that the price is maintained at a given ...
. He also shows that within the Middle East there is no significant relation between oil export and production processes of domestic economies.
The use of the term "rentier states" became well known through the works of
Beblawi and
Luciani.
They expanded on the more economic analysis of
Mahdavy by looking at the potential social and political effects of rentierism and focused on how rents were distributed and generated. According to Beblawi an essential characteristic of rentier states is the fact that only a few are engaged in the generation of rent (wealth) and a majority involved in the distribution or utilization of it. Often it is the government that is the main recipient of the external rent. It is precisely these characteristics that bring forth a specific ''rentier mentality''. Different from conventional economics is that this mentality breaks from the work-reward system. In a rentier state income or wealth is gained not from productivity or risk bearing, but rather from chance or situation.
Other usage
Rentier state theories can also be applied to nations which trade on their strategic resources, such as an important
military base
A military base is a facility directly owned and operated by or for the military or one of its branches that shelters military equipment and personnel, and facilitates training and operations. A military base always provides accommodations for ...
:
Egypt
Egypt ( , ), officially the Arab Republic of Egypt, is a country spanning the Northeast Africa, northeast corner of Africa and Western Asia, southwest corner of Asia via the Sinai Peninsula. It is bordered by the Mediterranean Sea to northe ...
and
Jordan
Jordan, officially the Hashemite Kingdom of Jordan, is a country in the Southern Levant region of West Asia. Jordan is bordered by Syria to the north, Iraq to the east, Saudi Arabia to the south, and Israel and the occupied Palestinian ter ...
have traditionally extracted ''strategic rent'' from the United States given their regional geopolitical importance. ''Semi-rentier states'', such as
Kyrgyzstan
Kyrgyzstan, officially the Kyrgyz Republic, is a landlocked country in Central Asia lying in the Tian Shan and Pamir Mountains, Pamir mountain ranges. Bishkek is the Capital city, capital and List of cities in Kyrgyzstan, largest city. Kyrgyz ...
and
Tajikistan
Tajikistan, officially the Republic of Tajikistan, is a landlocked country in Central Asia. Dushanbe is the capital city, capital and most populous city. Tajikistan borders Afghanistan to the Afghanistan–Tajikistan border, south, Uzbekistan to ...
, rely on migrants’ remittances or international economic aid. According to political scientist
Gerasimos Tsourapas, states hosting
forcibly-displaced population group(s), or ''refugee rentier states'', may seek to strategically extract outside income linked to their treatment of these group(s), as in the cases of
Jordan
Jordan, officially the Hashemite Kingdom of Jordan, is a country in the Southern Levant region of West Asia. Jordan is bordered by Syria to the north, Iraq to the east, Saudi Arabia to the south, and Israel and the occupied Palestinian ter ...
,
Lebanon
Lebanon, officially the Republic of Lebanon, is a country in the Levant region of West Asia. Situated at the crossroads of the Mediterranean Basin and the Arabian Peninsula, it is bordered by Syria to the north and east, Israel to the south ...
, and
Turkey
Turkey, officially the Republic of Türkiye, is a country mainly located in Anatolia in West Asia, with a relatively small part called East Thrace in Southeast Europe. It borders the Black Sea to the north; Georgia (country), Georgia, Armen ...
in the context of the
Syrian refugee crisis. Building on international relations theory and work by
Kenneth A. Oye, Tsourapas differentiates between ''blackmailing'' and ''backscratching'' ''refugee rent-seeking strategies''.
Dependent upon it as a source of income, rentier states may generate rents externally by manipulating the global political and economic environment. Such manipulation may include
monopolies, trading restrictions, and the solicitation of
subsidies
A subsidy, subvention or government incentive is a type of government expenditure for individuals and households, as well as businesses with the aim of stabilizing the economy. It ensures that individuals and households are viable by having acce ...
or
aid in exchange for political influence or conversely the solicitation of loans in exchange for the reserve currency, e.g., the United States.
Key characteristics
Hazem Al Beblawi suggested four characteristics of a rentier state:
# In a rentier economy rent situations predominate.
# The economy relies on a substantial external rent – and therefore does not require a strong domestic productive sector.
# Only a small proportion of the working population is actually involved in the generation of the rent, whereas the majority is only involved in the distribution or utilization of it.
# Perhaps most importantly, the state's government is the principal recipient of the external rent.
Examples
The emergence of the new
oil states and their increasing importance in
world trade in the 1970s brought a renewed interest in thinking on rentier economies in the aforementioned disciplines of
political science
Political science is the scientific study of politics. It is a social science dealing with systems of governance and Power (social and political), power, and the analysis of political activities, political philosophy, political thought, polit ...
and
international relations
International relations (IR, and also referred to as international studies, international politics, or international affairs) is an academic discipline. In a broader sense, the study of IR, in addition to multilateral relations, concerns al ...
.
Examples of rentier states include oil-producing countries in the
MENA
The Middle East and North Africa (MENA), also referred to as West Asia and North Africa (WANA) or South West Asia and North Africa (SWANA), is a geographic region which comprises the Middle East (also called West Asia) and North Africa together ...
region including
Saudi Arabia
Saudi Arabia, officially the Kingdom of Saudi Arabia (KSA), is a country in West Asia. Located in the centre of the Middle East, it covers the bulk of the Arabian Peninsula and has a land area of about , making it the List of Asian countries ...
,
United Arab Emirates
The United Arab Emirates (UAE), or simply the Emirates, is a country in West Asia, in the Middle East, at the eastern end of the Arabian Peninsula. It is a Federal monarchy, federal elective monarchy made up of Emirates of the United Arab E ...
,
Iraq
Iraq, officially the Republic of Iraq, is a country in West Asia. It is bordered by Saudi Arabia to Iraq–Saudi Arabia border, the south, Turkey to Iraq–Turkey border, the north, Iran to Iran–Iraq border, the east, the Persian Gulf and ...
,
Iran
Iran, officially the Islamic Republic of Iran (IRI) and also known as Persia, is a country in West Asia. It borders Iraq to the west, Turkey, Azerbaijan, and Armenia to the northwest, the Caspian Sea to the north, Turkmenistan to the nort ...
,
Kuwait
Kuwait, officially the State of Kuwait, is a country in West Asia and the geopolitical region known as the Middle East. It is situated in the northern edge of the Arabian Peninsula at the head of the Persian Gulf, bordering Iraq to Iraq–Kuwait ...
,
Qatar
Qatar, officially the State of Qatar, is a country in West Asia. It occupies the Geography of Qatar, Qatar Peninsula on the northeastern coast of the Arabian Peninsula in the Middle East; it shares Qatar–Saudi Arabia border, its sole land b ...
,
Libya
Libya, officially the State of Libya, is a country in the Maghreb region of North Africa. It borders the Mediterranean Sea to the north, Egypt to Egypt–Libya border, the east, Sudan to Libya–Sudan border, the southeast, Chad to Chad–L ...
and
Algeria
Algeria, officially the People's Democratic Republic of Algeria, is a country in the Maghreb region of North Africa. It is bordered to Algeria–Tunisia border, the northeast by Tunisia; to Algeria–Libya border, the east by Libya; to Alger ...
as well as a few states in Latin America, all of whom are members of
OPEC
The Organization of the Petroleum Exporting Countries (OPEC ) is an organization enabling the co-operation of leading oil-producing and oil-dependent countries in order to collectively influence the global oil market and maximize Profit (eco ...
.
African states such as
Nigeria
Nigeria, officially the Federal Republic of Nigeria, is a country in West Africa. It is situated between the Sahel to the north and the Gulf of Guinea in the Atlantic Ocean to the south. It covers an area of . With Demographics of Nigeria, ...
,
Gabon
Gabon ( ; ), officially the Gabonese Republic (), is a country on the Atlantic coast of Central Africa, on the equator, bordered by Equatorial Guinea to the northwest, Cameroon to the north, the Republic of the Congo to the east and south, and ...
,
Angola
Angola, officially the Republic of Angola, is a country on the west-Central Africa, central coast of Southern Africa. It is the second-largest Portuguese-speaking world, Portuguese-speaking (Lusophone) country in both total area and List of c ...
,
Ghana
Ghana, officially the Republic of Ghana, is a country in West Africa. It is situated along the Gulf of Guinea and the Atlantic Ocean to the south, and shares borders with Côte d’Ivoire to the west, Burkina Faso to the north, and Togo to t ...
,
Uganda
Uganda, officially the Republic of Uganda, is a landlocked country in East Africa. It is bordered to the east by Kenya, to the north by South Sudan, to the west by the Democratic Republic of the Congo, to the south-west by Rwanda, and to the ...
and
South Sudan
South Sudan (), officially the Republic of South Sudan, is a landlocked country in East Africa. It is bordered on the north by Sudan; on the east by Ethiopia; on the south by the Democratic Republic of the Congo, Uganda and Kenya; and on the ...
are also important oil producers with rentier economies, earning income from trading natural resources.
Rentier state theory has been one of several theories advanced to explain the predominance of authoritarian
regime
In politics, a regime (also spelled régime) is a system of government that determines access to public office, and the extent of power held by officials. The two broad categories of regimes are democratic and autocratic. A key similarity acros ...
s in the Middle East and the apparent lack of success of
democracy in the region.
While many states export resources or license their development by foreign parties, rentier states are characterized by the relative absence of revenue from domestic taxation, as their naturally occurring wealth precludes the need to extract income from their citizenry. According to Douglas Yates, the economic behavior of a rentier state Hazem Beblawi has argued that this could create a "rentier mentality,"
while political scientist
Fareed Zakaria
Fareed Rafiq Zakaria (; born January 20, 1964) is an Indian-born American journalist, political commentator, and author. He is the host of CNN's '' Fareed Zakaria GPS'' and writes a weekly paid column for ''The Washington Post.'' He has been a c ...
has posited that such states fail to develop politically because, in the absence of taxes, citizens have less incentive to place pressure on the government to become responsive to their needs. Instead, the government essentially 'bribes' the citizenry with extensive social welfare programs, becoming an ''allocation'' or ''distributive state''. The budget, in effect, is little more than an expenditure programme.
Moreover, because control of the rent-producing resources is concentrated in the hands of the authorities, it may be used to alternately coerce or coopt their populace, while the distinction between public service and private interest becomes increasingly blurred. There is, in the words of
Noah Feldman
Noah Raam Feldman (born May 22, 1970) is an American legal scholar and academic. He is the Felix Frankfurter Professor of Law at Harvard Law School and chairman of the Harvard Society of Fellows. He is the author of 10 books, host of the podcas ...
in his book ''After Jihad'':
Outcomes
Consequently, in these resource-rich rentier states there is a challenge to developing
civil society
Civil society can be understood as the "third sector" of society, distinct from government and business, and including the family and the private sphere.[democratization
Democratization, or democratisation, is the structural government transition from an democratic transition, authoritarian government to a more democratic political regime, including substantive political changes moving in a democratic direction ...]
. Hence, theorists such as Beblawi conclude that the nature of rentier states provides a particular explanation for the presence of authoritarian regimes in such resource rich states.
Beblawi identifies several other characteristics particularly associated with rentier oil states. For example, where the government is the largest and ultimate employer, the
bureaucracy
Bureaucracy ( ) is a system of organization where laws or regulatory authority are implemented by civil servants or non-elected officials (most of the time). Historically, a bureaucracy was a government administration managed by departments ...
is frequently bloated and inefficient – and indeed comes to resemble a rentier class in society. Moreover, local laws often make it impossible for foreign companies to operate independently. This leads to a situation where citizenship becomes a financial asset. To do business, foreign enterprises engage a local sponsor (''kafil'') who allows the company to trade in his name in return for a proportion of the proceeds – another type of rent. In addition, the oil rent leads to secondary rents, usually stock market or real estate speculation.
Rentier state theory foregrounds important puzzles in contemporary politics. For example, as Abulof asks, "If rents increase regime stability, especially authoritarian durability, why, then, are rentier regimes, particularly in authoritarian petro-states, more prone to civil wars?" Looking at the Middle East, "why have certain rentier states (such as Kuwait, Oman, Qatar, the Kingdom of Saudi Arabia, and the United Arab Emirates) remained so remarkably stable, while others (such as Algeria, Bahrain, Iran, Libya and Sudan) have become—either before or during the Arab Spring—scenes of violent unrest?" Abulof points to political legitimacy as a determining factor, and argues that authoritarian rentier regimes are in fact more fragile than they seem to be.
The crucial nature of oil has led to a situation where non-oil states have started to behave like rentier states. This can be seen for the region as a whole – so some states have been able to exploit location rent due to their strategic location, for example, as sites for military bases. More significantly, inter-state relations in the region have been affected as oil states try to ensure stability and tranquillity for their rent by buying allegiance from neighbouring states – in effect, sharing the oil rent. Beblawi highlights the case of Egypt whose receipt of financial aid from oil-rich neighbours declined significantly after
Camp David
Camp David is a country retreat for the president of the United States. It lies in the wooded hills of Catoctin Mountain Park, in Frederick County, Maryland, near the towns of Thurmont, Maryland, Thurmont and Emmitsburg, Maryland, Emmitsburg, a ...
, and money going instead to Iraq, Syria and the PLO who were considered more assertive.
Criticism
Giacomo Luciani, one of the original theorists on rentier states, criticizes the dominance of rentier state theories. These theories are often solely used to analyse resource-rich countries in the
Greater Middle East
The Greater Middle East is a geopolitical term introduced in March 2004 in a paper published by the Carnegie Endowment for International Peace as part of the United States' preparatory work for the Group of Eight summit of June 2004. The pap ...
to explain a multitude of outcomes. Such dominance was not the intention of Luciani:
Michael Herb criticizes the relationship between rentierism and regime type. Using a counterfactual measure which excludes the effect of oil on the economy, Herb shows that oil-rich countries fit the same patterns as other countries. He did not find a consistent support for the thesis that rentierism has a negative effect on democracy scores. Herb does however emphasize that rentierism is a distinctive condition that influences development.
See also
*
Debt-trap diplomacy
*
Kleptocracy
Kleptocracy (from Greek , "thief", or , "I steal", and from , "power, rule"), also referred to as thievocracy, is a government whose corrupt leaders (kleptocrats) use political power to expropriate the wealth of the people and land the ...
*
Rent-seeking
Rent-seeking is the act of growing one's existing wealth by manipulating the social or political environment without creating new wealth.
Rent-seeking activities have negative effects on the rest of society. They result in reduced economic effi ...
*
Rentier capitalism
Rentier capitalism is a concept in Marxian economics, Marxist and heterodox economics to refer to rent-seeking and exploitation by companies in capitalist systems. The term was developed by Austrian social geographer Hans Bobek describing an eco ...
*
Resource curse
References
Citations
General and cited references
*
*
*
*
*
*
Further reading
*
*
External links
What is a Rentier State?State Formation Processes in Rentier States: The Middle Eastern Case* Michael Dauderstädt
* Ismail Küpeli:
(Keine) Demokratie im Rentierstaat Syrien?' Munich, 2008, {{ISBN, 978-3-640-11110-7 (ebook about the rentier state Syria)
Economic systems
Economy of the Middle East
Political science terminology
Petroleum economics