Rentier state

A rentier state is a term in political science and international relations theory used to classify those states which derive all or a substantial portion of their national revenues from the rent of indigenous resources to external clients. This theory was first postulated by Hossein Mahdavy in 1970. It was also in this article that the concept of External Rent was first introduced.

Usage

The term rentier state has been used since the 20th century. It is most frequently applied to states rich in highly valued natural resources such as petroleum but can also include states rich in financial instruments such as a reserve currency. It is also be applied to nations which trade on their strategic resources (such as important military base.) Dependent on 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.

Formal definition

Hazem Beblawi suggested four characteristics that would determine whether or not a state could be identified as rentier:

1. if rent situations predominate
2. if the economy relies on a substantial external rent – and therefore does not require a strong domestic productive sector
3. if only a small proportion of the working population is actually involved in the generation of the rent
4. and, perhaps most importantly, which the state’s government is the principal recipient of the external rent.

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.

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. In order to do business, foreign enterprises engage a local sponsor (al-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.

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, 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, and money going instead to Iraq, Syria and the PLO who were considered more assertive.

See also

• Resource curse
• Rent seeking
• Rentier capitalism
• Kleptocracy

External links

• What is a Rentier State?
• State Formation Processes in Rentier States: The Middle Eastern Case
• The Rentier State Model and Central Asian Studies: The Turkmen Case
• Dauderstädt, Michael: Dead Ends of Transition Rentier Economies and Protectorates
• Ismail Küpeli: Keine Demokratie im Rentierstaat Syrien? Munich 2008, ISBN 978-3-640-11110-7 (ebook about the rentier state Syria)