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Dictionary Definition

rentier n : someone whose income is from property rents or bond interest and other investments

User Contributed Dictionary

English

Etymology

From French.

Noun

rentier

An individual who does not work for a living, but instead receives an income, usually interest or rent, from their assets and investments.

Translations

Estonian: rantjee

Extensive Definition

A rentier (prounounced /rɛn'tje/) is an individual who depends on income derived from rents, which in turn are defined as “a reward for ownership of all natural resources” or the “income derived from the gift of nature.” A rentier state is a term in political science and international relations theory used to classify those states which derive all or a substantial portion of their national revenues from the rent of indigenous resources to external clients. The term is most frequently applied to states rich in highly valued natural resources such as petroleum, however it could also be applied to those nations which trade on their strategic resources (such as permitting the development of an important military base in their territory). Dependent as they are on this source of income, rentier states may generate rents externally by manipulating the global political and economic environment. Such manipulation may include monopolies, trading restrictions, and the solicitation of subsidies or aid in exchange for political influence.

Hazem Beblawi suggested four characteristics that would determine whether or not a state could be identified as “rentier”:

1. if rent situations predominate

2. if the economy relies on a substantial external rent – and therefore does not require a strong domestic productive sector

3. if only a small proportion of the working population is actually involved in the generation of the rent

4. and perhaps most importantly, that the state’s government is the principle recipient of the external rent.

The emergence of the new oil states and their increasing importance in world trade in the 1970s brought a renewed interest in thinking on rentier economies in the aforementioned disciplines of political science and international relations. Examples of rentier states include oil producing countries in the Middle East region including Saudi Arabia, United Arab Emirates, Iraq, Iran, Kuwait and Qatar as well as states such as Venezuela and Libya in Latin America and North Africa, all of whom are members of OPEC. Rentier state theory has been one of several advanced to explain the predominance of authoritarian regimes in the Middle East and the apparent lack of success of democracy in the region. While many states export resources or license their development by foreign parties, rentier states are characterized by the relative absence of revenue from domestic taxation, as their naturally occurring wealth precludes the need to extract income from their citizenry. According to Douglas Yates (cited here), the economic behavior of a rentier state embodies a break in the work-reward causation ... [r]ewards of income and wealth for the rentier do not come as the result of work but rather are the result of chance or situation. Hazem Beblawi has argued that this could create a “rentier mentality,” while political scientist Fareed Zakaria has posited that such states fail to develop politically because, in the absence of taxes, citizens have less incentive to place pressure on the government to become responsive to their needs. Instead, the government essentially 'bribes' the citizenry with extensive social welfare programs, becoming an allocation or distributive state. The budget, in effect, is little more that an expenditure programme. Moreover, because control of the rent-producing resources is concentrated in the hands of the authorities, it may be used to alternately coerce or coopt their populace, while the distinction between public service and private interest becomes increasingly blurred. There is, in the words of Noah Feldman in his book After Jihad, no fiscal connection between the government and the people. The government has only to keep its people in line so that they do not overthrow it and start collecting the oil rents themselves. (Feldman 139)

Consequently in these resource-rich rentier states there is a challenge to developing civil society and democratization. Hence, theorists such as Beblawi conclude that the nature of rentier states provides a particular explanation for the presence of authoritarian regimes in such resource rich states.

Beblawi identifies several other characteristics particularly associated with “rentier” oil states. For example, where the government is the largest and ultimate employer, the bureaucracy is frequently bloated and inefficient – and indeed comes to resemble a “rentier class” in society. Moreover, local laws often make it impossible for foreign companies to operate independently. This leads to a situation where citizenship becomes a financial asset. In order to do business, foreign enterprises engage a local “sponsor” (al-kafil) who allows the company to trade in his name in return for a proportion of the proceeds – another type of rent. In addition, the oil “rent” leads to “secondary” rents, usually stock market or real estate speculation.

The crucial nature of oil has led to a situation where non-oil states have started to behave like rentier states. This can be seen for the region as a whole – so some states have been able to exploit “location rent” due to their strategic location, for example for military bases. More significantly, inter-state relations in the region have been affected as oil states try to ensure stability and tranquillity for their rent by buying allegiance from neighbouring states – in effect, sharing the oil rent. Beblawi highlights the case of Egypt whose receipt of financial aid from oil rich neighbours declined significantly after Camp David, and money going instead to Iraq, Syria and the PLO who were considered more “assertive”.

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