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Concept
Rentier state
Summary
In current political-science and international-relations theory, a rentier state is a state which derives all or a substantial portion of its national revenues from the 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.
Rentier state theories have now become a dominant frame of reference for studies of resource-dependent countries in the Gulf and wider Middle East and North African region, but are also used to analyse other forms of rentierism.
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.
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