240 P. MAHDAVI AND N. UDDIN
support using rents to provide public goods and patronage, buying off
more people with larger packages of money than their non-rentier state
counterparts.
While Karl Marx, and to a lesser extent Adam Smith, is widely credited with the appellation of the ‘rentier state,’ two scholars of the Middle
East are cited as the first to apply this moniker to a theory of political
economy. The first is Hussein Mahdavy, an Iranian economist, who is best
known for making the claim in 1970 that the existence of an external
fiscal revenue source, such as oil sales or foreign aid, widens the gap
between citizens and their government. In his words, ‘a government that
can expand its services without resorting to heavy taxation acquires an
independence from the people seldom found in other countries.’ 2 This
assertion has come to be the foundation on which rentier state theory is
built.
It took nearly two decades before Mahdavy’s work was revisited, this
time by the Egyptian economist and onetime Prime Minister Hazem
Beblawi, who took up the self-prescribed onus of propagating Mahdavy’s
theory. In his 1987 book with Giacomo Luciani, The Rentier State,
Beblawi explores the instrumental value of the theory by applying it to
the ‘prominence of the oil economies in the Arab region.’ 3 Beblawi’s
most accredited contribution to the rentier state theory is to make the
theory more than a simple classification system of the different types
of economies in the world. In its most concise form, Beblawi’s general
hypothesis is that rentier states will suffer ‘a serious blow to the ethics
of work’ that ‘pervert[s] the economic system’ and leads to an inefficient burgeoning of ‘a huge bureaucracy.’ 4 In addition to reducing labor
productivity, resource rents hinder the development of fiscal accountability and discipline. This was best captured by Luciani’s later argument
of an ‘allocative strategy’ of rentier states. In short, Luciani posits that
petroleum sales provided the oil-rich MENA countries with the means
to spend lavishly on providing public sector jobs and targeted benefits
to loyal elites, which increased overall support for incumbent regimes. 5
Non-rentier states, by contrast, lack the fiscal means for such allocation
and instead rely on measured redistribution of revenues from taxation.
The Political Resource Curse 6
These theoretical propositions served as the foundation for a new
paradigmatic contract between states and their citizens, and subsequently,
support using rents to provide public goods and patronage, buying off
more people with larger packages of money than their non-rentier state
counterparts.
While Karl Marx, and to a lesser extent Adam Smith, is widely credited with the appellation of the ‘rentier state,’ two scholars of the Middle
East are cited as the first to apply this moniker to a theory of political
economy. The first is Hussein Mahdavy, an Iranian economist, who is best
known for making the claim in 1970 that the existence of an external
fiscal revenue source, such as oil sales or foreign aid, widens the gap
between citizens and their government. In his words, ‘a government that
can expand its services without resorting to heavy taxation acquires an
independence from the people seldom found in other countries.’ 2 This
assertion has come to be the foundation on which rentier state theory is
built.
It took nearly two decades before Mahdavy’s work was revisited, this
time by the Egyptian economist and onetime Prime Minister Hazem
Beblawi, who took up the self-prescribed onus of propagating Mahdavy’s
theory. In his 1987 book with Giacomo Luciani, The Rentier State,
Beblawi explores the instrumental value of the theory by applying it to
the ‘prominence of the oil economies in the Arab region.’ 3 Beblawi’s
most accredited contribution to the rentier state theory is to make the
theory more than a simple classification system of the different types
of economies in the world. In its most concise form, Beblawi’s general
hypothesis is that rentier states will suffer ‘a serious blow to the ethics
of work’ that ‘pervert[s] the economic system’ and leads to an inefficient burgeoning of ‘a huge bureaucracy.’ 4 In addition to reducing labor
productivity, resource rents hinder the development of fiscal accountability and discipline. This was best captured by Luciani’s later argument
of an ‘allocative strategy’ of rentier states. In short, Luciani posits that
petroleum sales provided the oil-rich MENA countries with the means
to spend lavishly on providing public sector jobs and targeted benefits
to loyal elites, which increased overall support for incumbent regimes. 5
Non-rentier states, by contrast, lack the fiscal means for such allocation
and instead rely on measured redistribution of revenues from taxation.
The Political Resource Curse 6
These theoretical propositions served as the foundation for a new
paradigmatic contract between states and their citizens, and subsequently,