Page 21 - Issue-27

ELITE

Classroom

Holi da y Rul es
rentier economies & Democratic

impossibility

Antony Gobriel , 2nd year economics
The theory of modernization presupposes the modification.Rentier activities are thus the
extractive sectors involved in the extraction and
correlation between economic development and
sale of natural resources such as minerals and
democratization. Since the creation of a
energy resources, as well as remittances of foreign
businessman class, employing millions of people,
workers, external aid flows and transit rights on
puts pressure on the government, and the creation
international transport corridors. There is also the
of a middle class is always reflected in an increased
internal pension that a company pays to the
political participation. The counterexample of this
government to have access to the market.Every
theory is the Middle East, which since
State has a share of rent in its economy, so the
decolonization, its economic growth has never been
State is said to be rentier when this share is
reflected by a real democratization. Hazem Beblawi
decisive in the GDP of the country, when the
and Giacomo Luciani ’ s theory of the “rentier state ”
proportion of the population that contributes to the
solves this problem. It explains that the increase in
production of this rent is rather small, and when
GDP per capita isn ’t enough, as we need to
the revenue of this rent is external.
determine the source of this growth.
From the graph, we observe that the share of rent
The concise definition of the rent is the undeserved
is much higher in the Middle East than in the
income, in the sense that its source isn ’t work. But
United States and China.
more precisely, the rent is the additional income to
It consists, for the most part, of income from the
the production factor, which exceeds the one we
sale of oil or remittances from workers living
will have, using these factors in the second most
abroad, the majority of which are in oil-exporting
efficient economic activity. For example, an oil
countries. So what are the consequences of such
refinery that makes millions of dollars per month as
an economic structure?
net profit, with a few engineers, workers and
The main problem of this structure is that it
machines is considered as rent, because by
creates an external dependence. Fluctuating oil
employing these engineers, workers and machines,
prices, economic and political crises, or the
in the second most productive activity, say a COVID-19 pandemic, have a decisive impact on
factory, the monthly profit will be just a few the GDP of these countries. Similarly, reliance on
these resources discourages governments from
thousand dollars. The difference between the two
investing in economic development projects. As,
outputs could not be considered as a result of work
rentier activities provide foreign currency, so

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