Monarchy, Rentierism and the Economic Crisis in Jordan

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SEATTLE — On June 4, the Prime Minister of Jordan resigned amid nationwide protests against proposed tax and price increases, including a 5 percent tax increase on workers and 20-40 percent on businesses. The proposed increases are the latest in a series of austerity measures since 2016, in response to receiving $723 million in a three-year line of credit from the International Monetary Fund (IMF). This is just the most recent flare-up of the country’s structural economic problems. But the resignation of the prime minister offers little hope in turning around the economic crisis in Jordan because the monopolization of economic development by the monarchy is largely responsible for the country’s long-term economic issues.

Jordan Used Rentierism to Its Economic Advantage

Beginning from independence in 1950, Jordan’s monarchy maintained power and popular support through the acquiescence of an “authoritarian bargain.” This refers to an implicit agreement between citizens and ruling elites whereby citizens renounce political influence in exchange for large amounts of public spending and support. This manifested in Jordan with the monarchy nearly exclusively developing a huge public sector of employment that provided steady income, healthcare benefits and access to consumer goods. The allure of this deal is evident in that by the mid-1980s, the public sector employed half the national workforce and was the cornerstone of the economy. While an amount of small private sector employment did exist, the state invested heavily in these industries and often constituted majority ownership.

The state supported this massive public industry primarily through semi-rentierism. A rentier state refers to a state generating the majority of capital through non-productive sources of income (such as extraction of natural resources like oil). While Jordan lacks such natural resources, it has a uniquely stable geopolitical position while surrounded by states that historically and contemporarily have faced much political instability, such as Syria, Iraq, Palestine and the Sinai Peninsula. Jordan cashed in on this by utilizing its stability in such ways as hosting refugees from Palestine, Iraq and Syria, remaining a stable ally for many international powers, possessing a strong army that helped stabilize the region, serving as an intermediary during neighboring conflicts and providing an external labor force to fill vacancies for companies and countries throughout the Gulf.

Economic Crisis in Jordan Precipitated by Dependency

But this structural cycle of dependency, with Jordan’s citizens economically reliant on the state for support and the state in turn relying on foreign income, served as the basis of the economic crisis in Jordan. The 1970s and early 1980s constituted the boom period for these rentier services. Only 11-12 percent of income came from domestic taxation, with foreign sources of income constituting 54 percent of Jordan’s budget in 1980 and remittances to relatives in Jordan from workers abroad forming the largest component of national income. However, the large influx of currency from abroad largely contributed to domestic inflation, and through the 1980s the cost of living increased by an astounding 300 percent.

As early as 1974, the government began massively subsidizing basic goods for public sector employees to prevent an unaffordability crisis, effectively addressing the symptoms of the issue rather than its base structural problems that would require dismantling its system of dependency. This completely unraveled when oil prices declined in the mid-1980s, which hurt Jordan’s petroleum-rich patron neighbors, causing a radical drop in aid from these states and labor remittances as jobs in the Gulf were cut. Essentially this placed Jordan in a position of no longer being to fund itself or its mass of citizens dependent on it.

Micro and Small Enterprises Address Poverty in Jordan

Since this crisis, Jordan’s economy has struggled to recover. With no other option in sight for economic relief, Jordan turned to the IMF for financial assistance in 1989. While aid received through the IMF kept the country afloat, part of the stipulations under the IMF’s structural adjustment plan cut state employment, privatized public sector investments and removed subsidies on goods. The ensuing mass unemployment and unaffordability of goods caused riots throughout the 1990s. Poverty, which had basically been eliminated by the mid-1980s, rose to 20 percent in 1991 and 30 percent by 2003.

There is some important contemporary progress in terms of ground up empowerment helping to alleviate the economic crisis in Jordan, such as through USAID’s Jordan Local Enterprise Support Project, a five-year project encouraging the long-term economic growth and development potential of underserved communities through supporting small micro-enterprise initiatives. But what is fundamentally demanded is change from the top, as Sean L. Yom, A Professor of Political Science at Temple University who Studies Middle Eastern Governments told the New York Times in regards to the latest protests: “The protesters also want a changing social contract…The Jordanian state is asking citizens to pay more and live more frugally, but in return offers little political concessions or more democracy.” Without large-scale political change and inclusion, Jordan’s citizens will continue to bear the brunt of the state’s economic problems.

– Emily Bender

Photo: Flickr

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