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What is Rentier State Theory?

Ques. What is Rentier State Theory? Examine its relevance in understanding states in contemporary MENA region.

Answer

    • Rent-seeking is related to the phenomenon of the rentier state. This label applies to countries that earn most of their revenue from exporting a natural resource or leasing natural resources to foreign companies. It forms an important concept within the political economy approach in comparative politics. 
    • Although the model of a ‘rentier state’ initially builds on the concept of rent as defined by the economist David Ricardo at the beginning of the 19th century, it is most often associated with the political and social situations of a certain number of hydrocarbon-rich Middle Eastern and North African states. 
    • However, a number of scholars also associate the concept of rentier state with European imperialism based on exploitation of resources from their colonies in developing world. According to Luciani economies then become “allocation” states, distributing the rents they accrue, uninhibited by the need for taxation levied on productive economic sectors. 
    • Hazem Beblawi introduced a rentier state theory using three key characteristics. 
      • Firstly, in a rentier state, rent is the predominant income. 
      • Secondly, a substantial amount of that rent is gained externally, i.e. sustaining an economy in the absence of “a strong productive domestic sector”. 
      • Thirdly, this external rent is earned by “only few”, or only “a small fraction of the society”, introducing the idea of the few versus the many. 
      • Lastly, in a rentier state, the government takes on the role of “the few” and therefore largely receives the mentioned external rent.
    • Some social scientists have argued that rentier states are unlikely to be accountable to their citizens as they are not dependent on tax revenues for their survival. This can lead them to be more tyrannical than other governments. Bebalwi and Luciani term this as “No Taxation-No Representation.”
    • Most of the major Middle Eastern and North African oil states – including Iran, Saudi Arabia, UAE, Egypt – have at various times earned the label rentier state. The phenomenon of the rentier state is one of the explanations for the lack of democracy in many states rich in key resources such as oil. 
    • Ross in his analysis of rentier states in MENA region argues about the “repression effect”, that is resource wealth allows these countries to spend a lot on internal security, thereby blocking democratic aspirations of the people. This is further illustrated by Arab Spring and how it was widespread mainly only two of the rentier states, namely Bahrain and Libya. 
    • Most of the major MENA oil states have at various times earned the label rentier state. This has applied most obviously at times when the global price of oil has been high, though, and the long-term decline in the place of oil in the world economy may be having important implications. 
    • The long-term result, suggests Seznec, might be that Gulf states like Saudi Arabia’s political economy moves away from being ‘the epitome of a rentier state’ and instead begins to resemble those of more advanced industrial democracies. 
    • UAE’s investments primarily upon tourism and real-estate as drivers of economic growth are pointed out as examples of economic diversification by Acuto.
    • Similarly, scholars like Herb point to the insufficiency of rentier state theory without taking into context other important factors like historical context, socialisation, religious values etc prevalent in the regions.

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