Sunday, August 21, 2011
Beyond the Rentier State - The Distributive State in the Arab World
After living in the Gulf, I started working on a paper about the "distributive state": that model the Gulf states use to parlay their rents into social and political stabilities. That model is running into some problems today, but its guiding logic is salient in how Gulf rulers are attempting to deal with unrest there. These are my thoughts from about 4 years ago.
In the past decade, Gulf city-states have burst onto the world stage, striving to become international centers of political, economic, and social activity. The blossoming of the Gulf has encouraged real and rhetorical speculation that rapid economic development will result in prosperity, liberalism, and stability in a tumultuous region. These bold hopes ignore a number of formidable obstacles laid plain by an examination of the unique case of state formation and the ruling paradigm in the Gulf.
In contrast to optimistic flat-earth analyses taken with the sparkling development projects in the region, this paper will argue that sustainable growth and political stability are anything but assured, given the disconnect between state, society, and economy there. Due to the absence of compelling military or industrial competitive pressures and the availability of resource and strategic rents to the ruling elites, Gulf monarchies have been able to pursue a unique distributive strategy of state development and societal control. In this distributive state, the government seeks rents, building considerable economic power independent of the low productive capacity of the society. A portion of these rents is distributed to a society largely disengaged from the processes of wealth production, creating major disincentives for political and economic productivity. As a result, state, society, and economy are disparate spheres coming into increasing conflict as crises of identity, demography, labor policy, and unbalanced development loom. Policymakers must realize that Gulf states face a long and unstable road of social, political, and economic balancing and integration before reaching an inclusive and sustainable order.
The recent turn of popular attention toward the Gulf has not been sufficiently accompanied by an increase in scholarly interest. Scholarship on social, political, and economic issues still tends to be focused on the larger, more transparent, and more vibrant states of North Africa and the Levant, not to mention the focus placed on Iraq by events there since 2003. Yet, while commentary, both within the region and without, continues to echo refrains about Egypt being the heart of the Arab world, the center of gravity in the region, politically, economically, socially, and geo-strategically, is decisively shifting toward the Gulf. For this reason, it is critically important that scholars treat the unique political, social, and economic conditions there.
In contrast to overly simplistic assertions regarding culture, religion, and traditional modes of rule, the distributive state model has great power to explain low levels of education, productivity, and political activity in the Gulf, as well as the staying power of monarchical autocracy there. The argument here is threefold. First, Gulf states formed in unique circumstances of high resource-endowment and a relatively stable security environment. While the region has witnessed numerous border disputes, great power interest and the enforcement of new international norms prevented the sort of Darwinian competition that transformed Europe from a patchwork of small principalities into a few powerful nation-states. Resource endowment alleviated the need to cultivate industrial productivity and a national workforce. Second, these formative conditions drove the creation of a peculiar form of state: the distributive state. Endowed with oil resources, Gulf monarchs built their legitimacy on the distribution of rents and the promotion and protection of a conservative cultural order in turn for acquiescence to autocratic monarchical rule. This has proved to be a highly potent ruling bargain. Finally, the distributive policies of the state have created obstacles to the integration of society and economy.
Faced with the prospect of dwindling resources and increasing global competition, these states have recently turned to the task of diversifying their economies through a number of developmental strategies. As these states lead the way in the developmental process, they face a painful process of rebuilding their raison d’être and enlisting their populations in the creation of a new compact binding state, society, and economy. Until this process of transformation is established, there can be no hope for sustainable stability and reform in the region. Without a move away from the distributive state model, rent-seeking and rent-distributing behavior will continue, corrupting society and eventually bankrupting the state.
The issue of the rentier economy has been salient in literature on the region. The term originated in 1970 in reference to the Iranian economy and connotes a reliance on external rents such as resource revenues, strategic rents such as large scale foreign aid or transit fees, and tourism revenues. Literature on rentierism has noted the damage it does to social organization, the work-reward linkage, and political involvement. Furthermore, because society has little involvement in wealth creation, issues such as citizenship, family affiliation, and linkage to tribal or bureaucratic elites has much more effect on individuals’ economic outcome than any other factor. Much of the literature has focused on the authoritarian outcomes of rentier economies. Because the society is not productive and the state has independent income sources, there is no need for the state to extract from society and therefore no demand from society for participation and representation in government. Critical argument here is that, while many seemed to assume that overturning the rentier paradigm would be fairly simple, i.e. once the economic situation turned and the government acceded, liberalization would quickly follow, the reality is that the distributive state created legacies that are proving hard to overturn. The state is leading development in many ways, but the society is not ready to follow.
If we only think of rentier economics causing a certain set of problems, then it is easy to follow a line of logic that states that, with the removal of the rent source and the diversification of the economy, those rentier pathologies will disappear as well, providing for reform and liberalization. This is decidedly not the case, especially with the chosen regime model in the Gulf. The distributive state has entrenched rentier logic in the very state-society compact.