Editing Rentier state

{{Short description|Government which derives all or most of its income from foreigners}}
{{About|rentier states|other uses|Rentier (disambiguation){{!}}Rentier}}

In current [[political science|political-science]] and [[international relations|international-relations]] theory, a '''rentier state''' ({{IPAc-en|ˈ|r|ɒ|n|t|i|eɪ}} {{respell|RON|tee|ay}} or {{IPAc-en|r|ɑ̃|ˈ|t|j|eɪ}}) is a [[state (polity)|state]] which derives all or a substantial portion of its national revenues from the [[economic rent]] paid by foreign individuals, concerns or governments.<ref name="Mahdavy 1970, p. 428">Mahdavy 1970, p. 428</ref>

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 [[petrostate]]s, in the [[Persian Gulf]].<ref>Ross 2001</ref> 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]] citizens. The unequal distribution of external income in rentier states has thus a negative effect on [[political liberalism]] and [[economic development]]. With virtually no taxes citizens are less demanding and politically engaged and the income from rents negates the need for economic development.<ref name="Beblawi 1987">Beblawi 1987</ref>

{{As of|2020}}, rentier state theories were a dominant frame of reference for studies of resource-dependent countries in [[Persian Gulf|the Gulf]] and the [[Greater Middle East|wider Middle East and North African region]],<ref name="Yamada 2020">Yamada 2020</ref> 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]], are different from wages which must be labored for. They are based on the ownership of land or resources.<ref>{{cite book |last1=Smith |first1=Adam |title=The Wealth of Nations |date=1776 |chapter=Chapter XI}}</ref> [[David Ricardo]] defined 'rents' as a reward of the ownership of a resource.<ref>{{cite book |last1=Ricardo |first1=David |title=On the Principles of Political Economy and Taxation |date=1817 |chapter=Chapter III}}</ref> When applied to natural resources rents can be seen as "the income derived from the gift of nature".<ref>{{cite book |last1=Marshall |first1=Alfred |title=Principles of Economics |date=1920 |chapter=Book II Chapter IV}}</ref>

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.<ref name="Mahdavy 1970">Mahdavy 1970</ref><ref name="Beblawi 1987"/>

=== 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.<ref>Ross 2001, p. 329</ref> [[Lenin]] viewed rentier states (''Rentnerstaat''), or usurer states, as a form of [[imperialism]]. 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".<ref>{{cite book|last=Lenin|title=Imperialism, the Highest Stage of Capitalism|year=1917 |url=https://www.marxists.org/archive/lenin/works/1916/imp-hsc/ch08.htm |chapter=VIII. PARASITISM AND DECAY OF CAPITALISM}}</ref>

The modern meaning of "rentier states" was first defined by [[Hossein Mahdavy]]<ref>{{cite book |last1=Ulrichsen |title=A dictionary of politics in the Middle East |date=2018 |isbn=9780191835278 |url=https://www.oxfordreference.com/view/10.1093/acref/9780191835278.001.0001/acref-9780191835278-e-244}}</ref> in his economic analysis of the [[Imperial State of Iran]].<ref name="Mahdavy 1970"/> 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”.<ref name="Mahdavy 1970, p. 428"/> According to Mahdavy the payments for the passage of ships through the [[Suez canal]] and the payments to countries in the [[Middle East]] to allow the passage of [[Pipeline transport#Oil and natural gas|oil pipelines]] are forms of external rents. Also the revenues of the export of [[Petroleum|oil]] can be seen as external rents.<ref name="Mahdavy 1970, p. 428"/> 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 [[monopoly|monopolistic positions]] and [[price fixing]]. He also shows that within the Middle East there is no significant relation between oil export and production processes of domestic economies.<ref>Mahdavy 1970, p. 429</ref>

The use of the term "rentier states" became well known through the works of [[Hazem El Beblawi|Beblawi]] and [[Giacomo Luciani|Luciani]].<ref name="Beblawi 1987"/><ref name="Yamada 2020"/> They expanded on the more economic analysis of [[Hossein Mahdavy|Mahdavy]]<ref name="Mahdavy 1970"/> 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.<ref>Beblawi 1987, p. 385</ref> 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.<ref>Beblawi 1987, p. 385-386</ref>

=== Other usage ===
Rentier state theories can also be applied to nations which trade on their strategic resources, such as an important [[military base]]: [[Egypt]] and [[Jordan]] have traditionally extracted ''strategic rent'' from the United States given their regional geopolitical importance.<ref>{{Cite journal|last=Richards|first=Alan|date=1991|title=The political economy of dilatory reform: Egypt in the 1980s|journal=World Development|volume=19|issue=12|pages=1721–1730|doi=10.1016/0305-750X(91)90015-A}}</ref><ref>{{Cite book|title=A History of Jordan|last=Robins|first=Philip|date=2004|publisher=Cambridge University Press|isbn=0521591171|pages=29–30|oclc=826289226}}</ref> ''Semi-rentier states'', such as [[Kyrgyzstan]] and [[Tajikistan]], rely on migrants’ remittances or international economic aid.<ref>{{Cite book|url=http://edinburgh.universitypressscholarship.com/view/10.3366/edinburgh/9780748643042.001.0001/upso-9780748643042|title=Sovereignty After Empire: Comparing the Middle East and Central Asia|last1=Cummings|first1=Sally N.|last2=Hinnebusch|first2=Raymond|date=2011-07-31|publisher=Edinburgh University Press|isbn=9780748643042|pages=282–304|doi=10.3366/edinburgh/9780748643042.003.0013}}</ref> According to political scientist [[Gerasimos Tsourapas]], states hosting [[Refugee|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]], [[Lebanon]], and [[Turkey]] in the context of the [[Refugees of the Syrian Civil War|Syrian refugee crisis]].<ref>{{Cite journal|last=Tsourapas|first=Gerasimos|date=2019|title=The Syrian Refugee Crisis and Foreign Policy Decision-Making in Jordan, Lebanon, and Turkey|journal=Journal of Global Security Studies|volume=4|issue=4|pages=464–481|doi=10.1093/jogss/ogz016|doi-access=free}}</ref> Building on international relations theory and work by [[Kenneth A. Oye]], Tsourapas differentiates between ''blackmailing'' and ''backscratching'' ''refugee rent-seeking strategies''.<ref>{{Cite journal |last1=Tsourapas |first1=Gerasimos |last2=Zartaloudis |first2=Sotirios |title=Leveraging the European Refugee Crisis: Forced Displacement and Bargaining in Greece's Bailout Negotiations |url=https://onlinelibrary.wiley.com/doi/10.1111/jcms.13211 |journal=JCMS: Journal of Common Market Studies |date=2022 |volume=60 |issue=2 |pages=245–263|doi=10.1111/jcms.13211 }}</ref>

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]] 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.<ref>Beblawi 1987, p. 384-385</ref>

== Examples ==
The emergence of the new [[oil state]]s and their increasing importance in [[International trade|world trade]] in the 1970s brought a renewed interest in thinking on rentier economies in the aforementioned disciplines of [[political science]] and [[international relations]].<ref name="Beblawi 1987"/> Examples of rentier states include oil-producing countries in the [[MENA]] region<ref>{{Cite web|url=https://pomeps.org/wp-content/uploads/2019/02/POMEPS_Studies_33.pdf|title=POMEPS Studies 33: The Politics of Rentier States in the Gulf – Project on Middle East Political Science|website=pomeps.org|language=en-US|access-date=2019-02-02}} [https://web.archive.org/web/20190202212742/https://pomeps.org/2019/01/30/pomeps-studies-33-the-politics-of-rentier-states-in-the-gulf/ Abstract].</ref> including [[Saudi Arabia]], [[United Arab Emirates]], [[Iraq]], [[Iran]], [[Kuwait]], [[Qatar]], [[Libya]] and [[Algeria]] as well as a few states in Latin America, all of whom are members of [[OPEC]].<ref name="Beblawi 1987"/><ref>{{Cite journal |jstor = 421917|title = The State in the Middle East and North Africa|journal = Comparative Politics|volume = 20|issue = 1|pages = 1–18|last1 = Anderson|first1 = Lisa|year = 1987|doi = 10.2307/421917}}</ref> African states such as [[Nigeria]], [[Gabon]], [[Angola]], [[Ghana]], [[Uganda]] and [[South Sudan]] 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]]s in the Middle East and the apparent lack of success of [[Democracy in the Middle East|democracy in the region]].<ref>{{Cite journal |jstor = 1519880|title = Oil Wealth and Regime Survival in the Developing World, 1960-1999|journal = American Journal of Political Science|volume = 48|issue = 2|pages = 232–246|last1 = Smith|first1 = Benjamin|year = 2004|doi = 10.1111/j.0092-5853.2004.00067.x}}</ref><ref name="Abulof">{{cite journal|doi=10.1057/jird.2014.32|title='Can't buy me legitimacy': The elusive stability of Mideast rentier regimes|journal=Journal of International Relations and Development|volume=20|pages=55–79|year=2017|last1=Abulof|first1=Uriel|s2cid=147600985|url=https://www.researchgate.net/publication/273528594}}</ref> 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{{cquote|embodies a break in the work-reward causation ... [r]ewards of income and wealth for the rentier do not come as the result of work but rather are the result of chance or situation.<ref>{{cite web |url=http://www.semp.us/biots/biot_227.html |title= SEMP – Evidence based disaster management|website=www.semp.us |archive-url=https://web.archive.org/web/20051029103149/http://www.semp.us/biots/biot_227.html |archive-date=October 29, 2005}}</ref>}} Hazem Beblawi has argued that this could create a "rentier mentality,"<ref name="Beblawi 1987"/> while political scientist [[Fareed Zakaria]] 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.<ref>Beblawi 1987, p. 387</ref>

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.<ref>Beblawi 1987, p. 388</ref> There is, in the words of [[Noah Feldman]] in his book ''After Jihad'':{{cquote|no fiscal connection between the government and the people. The government has only to keep its people in line so that they do not overthrow it and start collecting the oil rents themselves.<ref>Feldman, N. (2003). ''After Jihad: America and the Struggle for Islamic Democracy'', New York, Farrar, Straus and Giroux, p. 139.</ref>}}

== Outcomes ==
Consequently, in these resource-rich rentier states there is a challenge to developing [[civil society]] and [[democratization]]. 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.<ref name="Beblawi 1987"/>

Beblawi identifies several other characteristics particularly associated with rentier oil states. For example, where the government is the largest and ultimate employer, the [[bureaucracy]] 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.<ref>Beblawi 1987, p. 389</ref>

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.<ref name="Abulof" />

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 Accords|Camp David]], and money going instead to Iraq, Syria and the PLO who were considered more assertive.<ref>Beblawi 1987, p. 393</ref>

== 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]] to explain a multitude of outcomes. Such dominance was not the intention of Luciani:<ref name="Yamada 2020"/>

{{blockquote
|text=Indeed, it has never been my understanding that the rentier state paradigm should be either the sole or the overwhelming tool of interpretation of the political economy of oil-producing countries. I believe that reliance on a stream of rent accruing directly to the state from the rest of the world is an important consideration, but surely not the only one.
}}

[[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.<ref>{{cite journal |last1=Herb |first1=Michael |title=No Representation without Taxation? Rents, Development, and Democracy |journal=Comparative Politics |date=1 April 2005 |volume=37 |issue=3 |pages=297–316 |doi=10.2307/20072891|jstor=20072891 }}</ref>

==See also==
* [[Debt-trap diplomacy]]
* [[Kleptocracy]]
* [[Rent-seeking]]
* [[Rentier capitalism]]
* [[Resource curse]]

==References==
=== Citations ===
{{reflist}}

=== General and cited references ===
* {{Cite journal| issn = 0271-3519| volume = 9| issue = 4| pages = 383–398| last = Beblawi| first = Hazem| title = The Rentier State in the Arab World| journal = Arab Studies Quarterly| date = 1987| jstor = 41857943}}
* {{Cite book| edition = 1| publisher = Routledge| pages = 428–467|editor1= M. A. Cook | last = Mahdavy| first = Hossein| title = Studies in the Economic History of the Middle East| chapter = Patterns and Problems of Economic Development in Rentier States : the Case of Iran| location = London| date = 1970}}
* {{Cite book | chapter-url=https://www.oxfordreference.com/view/10.1093/acref/9780191843266.001.0001/acref-9780191843266-e-139 |isbn = 9780191843266|title = A Dictionary of Business and Management in the Middle East and North Africa|chapter = rentier state|publisher = Oxford University Press|date = 2019|editor-first=Mark |editor-last=Neal}}
* {{Cite book | chapter-url=https://www.oxfordreference.com/view/10.1093/acref/9780191835278.001.0001/acref-9780191835278-e-244 |isbn = 9780191835278|title = A Dictionary of Politics in the Middle East|chapter = rentier state theory|publisher = Oxford University Press|date = 2018|editor-first=Kristian Coates |editor-last=Ulrichsen}}
* {{Cite journal| doi = 10.1353/wp.2001.0011| issn = 1086-3338| volume = 53| issue = 3| pages = 325–361| last = Ross| first = Michael L.| title = Does Oil Hinder Democracy?| journal = World Politics| date = 2001| s2cid = 18404}}
* {{Cite journal| doi = 10.1080/13530194.2020.1714267| issn = 1353-0194| volume = 47| issue = 1| pages = 1–5| last1 = Yamada| first1 = Makio| last2 = Hertog| first2 = Steffen| title = Introduction: revisiting rentierism—with a short note by Giacomo Luciani| journal = British Journal of Middle Eastern Studies| date = 2020| doi-access = free}}

== Further reading ==
{{refbegin}}
* {{Cite book| last1 = Beblawi| first1 = Hazem| last2 = Luciani| first2 = Giacomo | title = The Rentier State| date = 1987| url = https://www.taylorfrancis.com/books/e/9781315684864| publisher = Routledge| isbn = 978-1-315-68486-4}}
* {{cite journal |title=Revisiting Rentierism: The Changing Political Economy of Resource-Dependent States in the Gulf and Arabian Peninsula |url=https://www.tandfonline.com/toc/cbjm20/47/1?nav=tocList |journal=British Journal of Middle Eastern Studies |date=2020 |volume=47 |issue=1}}
{{refend}}

==External links==
* [https://web.archive.org/web/20120209131411/http://www.semp.us/publications/biot_reader.php?BiotID=227 What is a Rentier State?]
* [http://www.columbia.edu/itc/journalism/stille/Politics%20Fall%202007/Readings%20--%20Weeks%201-5/The%20Rentier%20State%20in%20the%20Middle%20East.pdf State Formation Processes in Rentier States: The Middle Eastern Case]
* [https://web.archive.org/web/20050924114402/http://www.alternativesjournal.net/volume1/number1/akuru.htm The Rentier State Model and Central Asian Studies: The Turkmen Case]
* Michael Dauderstädt: [https://web.archive.org/web/20070305152550/http://www.fes.de/fes4/publikationen/tare_workshop.htm Dead Ends of Transition Rentier Economies and Protectorates]
* Ismail Küpeli: ''[http://www.grin.com/e-book/112630/keine-demokratie-im-rentierstaat-syrien (Keine) Demokratie im Rentierstaat Syrien?]'' Munich, 2008, {{ISBN|978-3-640-11110-7}} (ebook about the rentier state Syria)

[[Category:Economic systems]]
[[Category:Economy of the Middle East]]
[[Category:Political science terminology]]
[[Category:Petroleum economics]]