Rent, rentierism, and the challenge of economic reforms

The concept of economic rent refers to an income drawn from the “free gift of nature” -of owning natural resources- and which differentiates from wages and profits in that it “embodies a break in the work-reward causation” with potentially far reaching implications for an economic system. This study deals with the massive inflow of economic rent and its role in economic development and reform, focussing on the Arab countries of the Middle East and, more specifically, on the case of Jordan. It is puzzling that the Middle East, in spite of its economic potential and its extraordinary amount of resources, reveals an economic performance which is far below expectations. More specifically, the whole region receives and is heavily dependent on the inflow of conspicuous external capitals that accrue in the form of economic rent from the export of natural resources (primarily oil), from migrant workers’ remittances and also from international aid. Whenever rent becomes an essential source of income for a country, its inflow will affect the behaviour of the state and of its economic subjects, who will both strive towards maximizing their ‘piece of the pie’ instead of engaging in more productive activities; thereby wasting resources without creating any added value for the society. The consequences of similar patterns of behaviour are far reaching: they skew the rules of economic competition along with the political system and induce a specific ‘rentier mentality’ which deeply affects the economic, political and social life of a country. Based on this view, the main research hypothesis is that the availability of rent in the Middle East has hampered economic development and the establishment of a sustainable, productive economic order. This hypothesis will be theoretically analysed and empirically tested with the case of Jordan.