In current political-science and international-relations theory, a rentier state ( RON-tee-ay or ) is a state which derives all or a substantial portion of its national revenues from the economic rent paid by foreign individuals, concerns or governments. 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. 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. As of 2020, 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, 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. David Ricardo 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.
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 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". The modern meaning of "rentier states" was first defined by Hossein Mahdavy in his economic analysis of the Imperial State of Iran. 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 and the payments to countries in the Middle East 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. 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 state" 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. In rentier economies, high government transfers and subsidies often raise women's reservation wages, which can act as a disincentive for female participation in the workforce. Conversely, when these states face fiscal deficits due to low oil prices, they often reform fossil fuel subsidies, which can push households toward a two-wage earner model and increase female labor force participation.
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. Semi-rentier states, such as Kyrgyzstan and Tajikistan, 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, Lebanon, and Turkey 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 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:
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