Christopher Davidson - After the Sheikhs - The Coming Collapse of the Gulf Monarchies

First discussed by Karl Marx in the 1860s, in the context of a decadent class which benefits from profit-income derived from renting out property and thus does not actually produce anything itself, [16] 16. Pollin, Robert, ‘Resurrection of the Rentier’, New Left Review , Vol. 46, July — August 2007, pp. 140–153. ‘rentier capitalism’ or ‘rentierism’ was then expanded in the twentieth century to include discussion of entire ‘rentier states’. These were originally understood to be those developed nations that could supply loans to less developed nations and thus charge interest, [17] 17. Ross, Michael, ‘Does Oil Hinder Democracy’, World Politics , Vol. 53, No. 3, 2001, p. 329. before Hussein Mahdavy’s 1970 article ‘The Patterns and Problems of Economic Development in Rentier States’ revised the definition to specify those states that received significant rent from ‘foreign individuals or concerns’. Moreover, with Shah Muhammad Reza Pahlavi’s oil-rich Iran as his case study, he made the explicit connection between hydrocarbon rents accruing to a government, and the formation of a new, rentier elite class. [18] 18. Mahdavy, Hussein, ‘The Patterns and Problems of Economic Development in Rentier States: The Case of Iran’ in Cook, M. A. (ed.), Studies in Economic History of the Middle East (London: Oxford University Press, 1970), p. 428.

In 1987 Hazem Beblawi’s article ‘The Rentier State in the Arab World’ brought the debate even closer to the Gulf monarchies. Having also drawn on Marx’s views on class formation, Beblawi claimed that a rentier state was a one ‘in which only a few are engaged in the generation of the wealth, with the majority being only involved in the distribution or utilisation of it’. [19] 19. Beblawi, Hazem, ‘The Rentier State in the Arab World’ in Beblawi, Hazem, and Luciani, Giacomo (eds.), The Rentier State (New York: Croom Helm, 1987), p. 51. With their relatively small indigenous populations — which have themselves sometimes been used as a simplistic explanation for the durability of traditional political systems [20] 20. Lucas, Russell E., ‘Monarchical Authoritarianism: Survival and Political Liberalization in a Middle Eastern Regime Type’, International Journal of Middle East Studies , Vol. 36, No. 4, 2004. As Lucas explains, small population size was previously used as a possible explanation for explaining demise of other monarchies. —and, by this stage, governments with ever-increasing rent from hydrocarbon exports, the Gulf monarchies appeared to have become the quintessential examples of Beblawi’s rentier states. Able to distribute rent to their citizens in the form of various economic benefits — whether direct transfers of wealth, services, or public sector jobs — and with vast numbers of expatriate workers being imported to the region to fulfil most labour requirements, the majority of the region’s indigenous population was increasingly being distanced from the forces of production and thus sidelined into becoming a rentier class dependent on government subsidies, rather than a distinct proletariat or middle class. In this way political acquiescence was assumed to have been bought, as it seemed that most Gulf nationals would be satisfied as long as they benefited from a mode of production caught somewhere between feudalism and capitalism, in which traditional familial or tribal ties to a ruling family guaranteed access to wealth and economic opportunities. More recent Gulf-specific studies have added much weight to this analysis, with Steffen Hertog’s 2010 study on Saudi Arabia’s political and economic history, Princes, Brokers, and Bureaucrats , providing much evidence to show how oil income has often allowed the state to act independently of demands in society. [21] 21. Hertog, Steffen, Princes, Brokers, and Bureaucrats: Oil and State in Saudi Arabia (Ithaca: Cornell University Press, 2010).

A few problems remain, however, with proving the direct connection between rentierism and the survival of traditional political systems. As Michael Ross noted in his 2001 article ‘Does Oil Hinder Democracy?’, the Middle East was a particularly difficult region on which to test the theory, given that most Arab governments at that time could be considered authoritarian, regardless of their natural resources or rent-based structures. [22] 22. Ross, p. 331. Nevertheless, Ross demonstrated that a ‘taxation effect’ did exist in the hydrocarbon-rich states, most notably the Gulf monarchies, whereby governments derived such large revenues from oil and gas sales that they became unlikely to tax their population heavily, if at all; in turn the public would be less likely to demand representation or accountability from their rulers. [23] 23. Ibid., p. 332. Similarly, Ross illustrated a ‘spending effect’ in rentier states, whereby wealthy governments could pay for extensive patronage projects to enhance the reputation of rulers, and — through the generous funding of quasi-civil society bodies — could engender a ‘group formation effect’, weakening the appeal of poorly funded, unlicensed and genuine civil society bodies. [24] 24. Ibid., p. 333. Indeed, in young states such as the Gulf monarchies, where a tradition of civil society organisation was noticeable by its absence, it was noted that governments relied primarily on largesse rather than repression to block the formation of powerful social capital.

With hydrocarbon reserves declining in several Gulf monarchies, especially since the 1990s, and with the ability of governments to keep spending or expanding the public sector being challenged, another problem loomed for the rentierism assumption. Nonetheless, the ‘new rentierism’ described in my 2005 book The United Arab Emirates: A Study in Survival , tried to offer an explanation. Dubai — the second largest of the UAE’s constituent emirates — had run out of sizeable oil rents some time before, and was thus rapidly diversifying its economic base into tourism, export-processing zones, and real estate opportunities for foreign investors. All three activities were kick-started by the government, which fostered a more liberal investment environment and then distributed hitherto worthless tracts of desert land to powerful indigenous families. In turn these families were able to develop or rent out their land to expatriates, thus reaping rewards from a feudal-capitalist system while still maintaining a certain separation from the wealth creation process. [25] 25. For a full discussion see Davidson, Christopher M., The United Arab Emirates: A Study in Survival (Boulder: Lynne Rienner, 2005), chapter 4. Similarly in Bahrain and Oman, which were also low on hydrocarbon reserves, recent analyses have demonstrated that new, land-related activities managed to shift at least some of their national populations from oil-financed rentier expectations to this post-oil, private sector rentierism. Other research has also revealed how all six Gulf monarchies — even those with very sizeable hydrocarbon reserves — have kept reinvigorating an old sponsorship practice, the kafala system. [26] 26. With reference to the Bahrain system see Kinninmont, Jane, ‘Bahrain’ in Davidson, Christopher M. (ed.), Power and Politics in the Persian Gulf Monarchies (London: Hurst, 2011). With reference to the Omani system see Valeri, Marc, ‘Oman’ in Davidson (2011). With most businesses being required by law to have a local partner, this has effectively allowed Gulf nationals to market themselves as sponsors to industrious foreign entrepreneurs. [27] 27. With reference to the UAE system see Davidson (2005), chapter 4. Thus even the most minor of Gulf national families have often had the opportunity to transform themselves into ‘mini rentiers’ courtesy of their nationality and regardless of their closeness to ruling families or access to land. Writing in 2011, Matthew Gray’s article ‘A Theory of Late Rentierism in the Arab States of the Gulf’ pushed some of these ideas a little further forward, arguing that ‘late rentier’ states have had to become much more entrepreneurial and responsive to markets, even if they remain undemocratic, and have had to open up to globalisation while at the same time keeping strong protectionist elements. [28] 28. See Gray, Matthew, ‘A Theory of Late Rentierism in the Arab States of the Gulf’, Georgetown University Center for International and Regional Studies Occasional Papers , No. 7, 2011, pp. 23–36.