Changing patterns of rent: state, private sector and donors in Jordan, 1989-2000

Abstract

Two major changes since 1989 have affected the political economy of Jordan, namely: 1) The transformation from an economy primarily based on official economic assistance (an induced rentier state economy) to one primarily based on remittance income (a private sector rentier economy); and 2) The increased level of involvement of the donor community (led by the IMF and the World Bank) which has as its stated aim the desire to increase the involvement of the private sector in the economy at the expense of the state. The thesis sets out to answer the question: what does rentier theory tell us about the effects of these changes on the nature of the state and the private sector and the relationship between the two in Jordan? The study contends that an induced rentier state economy creates a different political economy (induced state rentierism) from a private sector rentier economy (private sector rentierism), both of which are different from a 'normal' market economy. Evidence for these differences can be found in the natures of the economy, the state, the private sector and the relationship between the latter two. The research question is answered with the help of four innovative models: 1) A measure of the level of the induced rentier state economy; 2) A measure of the level of the private sector rentier economy; 3) A five-continua state-market model; and 4) The characteristics of induced state rentierism. The concepts of private sector rentier economy and private sector rentierism are also introduced. The high levels of official economic assistance had by 1989 created a political economy which exhibited the characteristics of induced state rentierism: the existence of a rentier elite; state ownership and/or control of productive assets; state involvement in the market; the use of the economy by the state for political purposes; and the co- optation of the private sector institutions by the state. The state and the rentier elite's raison d’être had become one of maintaining control of and access to the flows of rent. Despite the two aforementioned transformations, the study concludes that: 1) Both the state and the rentier elite have been able to continue to rent-seek—albeit in a reduced and different format; 2) The economy has moved slightly towards the market- end of the state-market continuum, as the role of state has altered from one of direct control to one using indirect methods, such as regulation; and 3) The features of induced state rentierism have been reduced slightly, while the features of both private sector rentierism and the market economy have been strengthened slightly.