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Biographical Information

Anne Mariel Peters is Assistant Professor of Government at Wesleyan University, Middletown,CT. Her recent dissertation, Special Relationships, Dollars, and Development , examines therelationship among U.S. aid, coalition politics, and institutions in Egypt, Jordan, South Korea,

and Taiwan. Her current research examines the use of donor-financed “parallel institutions” inthe post-war reconstruction of Iraq and Afghanistan.

Pete W. Moore is Associate Professor of Political Science at Case Western Reserve University,Cleveland, OH. He has conducted research and published on issues of comparative politicaleconomy and US trade policy in the Middle East. His current research as a 2008-2009 FulbrightFellow in the U.A.E examines how the civil war in Iraq is reshaping regional politicaleconomies.



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Beyond Boom and Bust: External Rents, Durable Authoritarianism, and Institutional

Adaptation in the Hashemite Kingdom of Jordan**

Abstract

Drawing on recent critiques and advances in theories of the rentier state, this paper usesan in-depth case study of the Hashemite Kingdom of Jordan to posit a new “supply anddemand” approach to the study of external rents and authoritarian durability. TheJordanian rentier state is not exclusively a product of external rents, particularly foreignaid, but also of the demands of a coalition encompassing groups with highly disparateeconomic policy preferences. The breadth of the Hashemite coalition requires that theregime dispense rent-fueled side-payments to coalition members through constructingdistributive institutions. Yet neither rent supply nor coalition demands are static. Assisted by geopolitically-motivated donors, the Hashemites have adapted institutions over time totap a diverse supply of rents that range from economic and military aid to protocol trade,allowing them to retain power through periods of late development, domestic political

crisis, and neoliberal conditionality.

Introduction

The social science literature on the role of external rents in the developing world has

evolved significantly over the last two decades. Central to this scholarship have been theories of

the rentier state, which broadly claim that external rents inherently skew a country’s politics,

society, and economy towards distribution rather than production, and authoritarianism over

democracy. Although rentier theory was initially restricted to a particular sub-group of Middle

Eastern cases, scholars working in both quantitative and qualitative methods have increasingly

appropriated the theory’s key elements to explain a number of different outcomes across a

diverse geography (Karl 1997; Ross 1999, 2001; Sachs and Warner 1999, 2001; Doner, Ritchie,

and Slater 2005; Acemoglu and Robinson 2006). Popular commentary and journalistic accounts

have followed with simplified claims that lack of democracy, civil war, and even terrorism can

be tied to the presence of economic rents or “the resource curse (Knack 2001; Eviatar 2003;

Judis 2003; Birdsall and Subramanian 2004; Brautigam and Knack 2004; Rajan and

Subramanian 2006).” Meanwhile, Middle East scholars have returned to criticize rentier theory



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on a number of methodological and empirical grounds (Heydemann 1992; Bellin 1994;

Waterbury 1994; Herb 1999, 2003, 2005; Okruhlik 1999; Waldner 1999; Smith 2007).

This paper draws on both the critiques and advances to push the debate in a new

direction. We return to the Middle East to explain how changes in external rent access and

historically constituted domestic demands on those rents have generated institutional adaptations

that gird one of the region’s most persistent authoritarian regimes, the Hashemite Kingdom of

Jordan. Ever since the Kingdom’s inception, the Hashemite rulers of Jordan have constructed a

series of distributive institutions—usually at the expense of economic development—in order to

maintain a highly disparate regime coalition that consists of a Syrian/pre-1967 Palestinian

merchant elite and Transjordanian tribes.i

The sheer breadth of policy preferences within the

Hashemite coalition has produced a heightened demand for side-payments, and new coalition

demands on the distribution of external rents have emerged throughout periods of late

development, abrupt demographic change, intense civil conflict, and neoliberal conditionality.

The monarchy, in concert with geopolitically-motivated donors, has met these demands by

modifying old distributional mechanisms and institutionalizing new venues to take advantage of

shifts in the international system’s provision of economic rents. It is this institutional bob and

weave that explains authoritarian durability in a small state of significant geostrategic value to

external patrons. That significance was first evidenced in British ambitions during the First

World War, and today it is expressed through the United States’ regional ambitions-- in which

Hashemite Jordan is a political linchpin.

Several contributions to rentier theory are achieved through a close look at this well-

researched case (Vatikiotis 1967; Aruri 1972; Amawi 1992; Brand 1995; Piro 1998; Fischbach

2000; Moaddel 2002; Tal 2002; Carroll 2003; Knowles 2005). First, the Jordanian case builds



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upon a growing revisionist literature positing that rentier states are not solely a product of large-

scale external rents (“supply”). Rentier states are also the result of micro-level decision-making

processes in the recipient, namely coalition strategies (“demand”), which can change as rulers

face challenges from late development, demographic change, civil conflict, and economic

reform.ii

Second, the use of Jordan extends the set of rentiers beyond oil and gas exporters to

include lower-middle income developing countries that have relied upon a variety of external

rents over time, such as development assistance, protocol trade, and security support. Limiting

the set of cases to pure oil rentiers misses the point that even moderate levels of aid or trade in

the hands of rulers can far exceed the resources available to potential domestic challengers. A

small literature on foreign aid and democratization has also emphasized this point (Bratton and

van de Walle 1997; Carapico 2002; Dunning 2004; Morrison 2007), yet it fails to recognize that

many aid-dependent states have relied on a variety of rents over time, as well as a diverse array

of institutions to distribute them. Authoritarian regimes adapt as different sources of external rent

decrease or increase, seeking out new sources of external rent and devising new ways to deliver

it to coalition members. Geopolitically-concerned donors may even use foreign aid to facilitate

institutional adaptation, a phenomena that necessitates a more nuanced conceptualization of aid

than has been used in the past.

Third, the Jordanian case suggests that the full range of institutional outcomes facilitated

by external rents does not fit easily into the simple “distribution versus extraction” dichotomy

commonly utilized by mainstream rentier theory and its aid-specific manifestations (see Remmer

2004). Although the core logic of circumscribed distribution to coalition members remains in

place, disjunctures between supply and demand force adaptation, which may manifest itself in



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form of new institutions, partial economic or political “liberalization,” and increased coercion of

non-coalition members. Perhaps most interestingly, aid-based rentiers may come to rely upon

foreign donors to supply important institutions that the recipient state itself is unable to provide.

These “parallel institutions” may provide public goods, such as infrastructure or economic

reform, or simply court new rents. These institutions are key to authoritarian durability because

they allow the regime to continue distributing side payments to its coalition.

A single case study cannot produce generalizations. However, careful process-tracing of

the Jordanian case may allow us to inductively modify existing theories on rentierism and

authoritarian durability, which face assaults on both empirical and theoretical levels (George and

Bennett 2005: 75, 80-81). Jordan explicitly contradicts the rentier proposition that a decline in

foreign aid should lead to political liberalization or democracy. Jordan is also an unexpected

candidate for authoritarian regime durability. The Hashemites have remained in power despite

modernization under monarchy, brief splits in the military, and the presence of a large non-native

population that has engaged in civil war. They have done so without the support of a ruling or

mass-based political party, those cases of which dominate the literature on durable

authoritarianism (Brownlee 2007).

The proposed causal mechanisms of our argument are built upon broader commitments

and assumptions informing scholarship on non-democratic coalitions in the developing world.

First, the maintenance of a stable ruling coalition is a basic, necessary component of

authoritarian regime durability; coercion alone is insufficient.iii Second, during state formation

political elites desire minimum winning coalitions over broader arrangements (Riker 1962;

Waldner 1999). The size of the coalition is shaped by the requirements of state-building, and the

breadth of policy preferences of coalition members is directly related to the magnitude of side-



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payments that the regime must dispense to keep the coalition together. In terms of the origins of

the rentier state, institutional side-payments made through constituency clientelism, rather than

individual patronage, are the most salient.iv

Third, building on the rational-choice work of Robert

Bates, as elites seek to maintain a coalition, they often devise institutions and policies that are

detrimental to long-term economic growth—in this case, the rentier state (Bates 1981; Geddes

1994).

We develop the case and our argument in four stages. First, we disentangle the existing

literature on rentier theory to make way for a new supply and demand approach that moves

beyond simple “boom and bust.” The second section lays out the formation of the Hashemite

political coalition and the Jordanian rentier state during the period of the British Mandate,

emphasizing that British aid was not a sufficient condition to produce these phenomena. The

third section discusses broader institutionalization of the rentier state from 1949 to 1989, a period

of late industrialization and political crisis. It draws special attention to the American provision

of parallel institutions that allowed Jordan to enter late development and deal with a refugee

crisis with minimal political cost. The fourth section describes how from 1989 onwards a

decrease in foreign aid and a re-orientation in donor strategies towards neoliberalism have forced

several institutional adaptations that have secured new rents and preserved the original

Hashemite political coalition. In these middle three sections we clearly label demand side

pressures, rent suppliers, and institutional responses. We conclude by summarizing the argument

and suggesting several possible cases to which it might be tested in future work.

I. Disentangling Rentier Theories

Rentier theory is a cluster of arguments that have evolved along two explanatory tracks:

(1) external rents compel governments to do a poor job of promoting economic growth; and (2)



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external rents contribute to the durability of political authoritarianism and/or lack of democracy.v

In this paper we take up the political side of the dependent variable, authoritarian endurance. We

explore how historical shifts in the type and magnitude of rents available to the Hashemite state

(supply), as well as the domestic political demands on those revenues (demand), drove the

creation and adaptation of distributive institutions in Jordan. Institutional adaptation to maintain

the ruling coalition is the foundation of regime endurance in this important case.

Although the concept of rent as an unearned income predates the rentier state literature,

economist Hussein Mahdavy is credited with re-introducing the concept in a 1970 piece on Iran.

Mahdavy’s work marked the first phase of the rentier literature, which proceeded to generate

several useful though preliminary inferences regarding the relationship between external rents,

Dutch Disease, income growth, and domestic extraction (Mahdavy 1970; Heller 1975; Delacroix

1980; Kimbrough 1980). However, during the 1980s and 1990s, a second phase evolved in

which scholars assigned particular causal properties to external rents in an attempt to achieve

explanatory adequacy. The trend began with an influential series of journal articles and an edited

volume produced by two economists, Hazem Beblawi and Giacomo Luciani (1987). Drawing on

little primary evidence, Beblawi and Luciani posited that oil exportation in the Persian Gulf was

tied to a lack of political mobilization and lack of democracy, arguing that a “rentier mentality”

permeated the region.

With the Beblawi and Luciani phase of rentier arguments, regime type or lack of

democracy became the principal outcome that scholars of oil exporting states sought to explain.

This approach conflated two distinct dependent variables, the origins and durability of regime

type, and by attaching causal properties to external rents (namely the rise of rentier-distributive

institutions that would sever representative ties with society) the approach also situated itself



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firmly at the macro-level of analysis. The implication was that large-scale external rents were

sufficient to explain both the origins and the durability of authoritarian regimes and the rentier

states that girded them. Scholars of foreign aid have increasingly incorporated this mainstream

theoretical framework into their work, assigning to aid inherent disincentives for extraction and

“moral hazards” that discourage political reform, particularly when the aid recipient is

strategically significant (Bratton and van de Walle 1997; Carapico 2002; Dunning 2004;

Remmer 2004; Morrison 2007).

The theoretical and conceptual flaws of this approach became evident in the 1980s, when

neither democratization nor authoritarian regime collapse followed from dwindling oil revenues

and foreign aid (Luciani 1988; Anderson 1992; Karl 1997).vi

Upon closer examination, scholars

also found that the “no taxation, no representation” mechanism in mainstream rentier theory,

whereby rulers exchange tax breaks and distributive expenditures for autonomy from society, did

not bear out. In countries like Saudi Arabia and Jordan, regimes were hardly autonomous from

the beneficiaries of rent, and groups wanting political representation were often given it

informally under the auspices of a rentier authoritarian regime (Chaudhry 1997; Okruhlik 1999;

Moore 2004). Finally, scholars became increasingly cognizant of countries that have access to

large quantities of external rent but which do not display rentier-type outcomes with regards to

regime type, institutions, or economy, thereby questioning the sufficiency of external rents to

produce these outcomes (Karl 1997; Smith 2007; Dunning 2008; Peters 2009). Indonesia, for

instance, actually intensified domestic taxation during oil booms; Taiwan used copious amounts

of U.S. aid for institutional upgrading and developing an export-led growth strategy; and Norway

is an oil-exporting democracy with high-quality institutions that underpin a dynamic economy



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(Boix 2003; Smith 2007; Peters 2009). Mainstream rentier theory provides no theoretical tools

by which we can understand these phenomena, and in many aspects has reached a dead end.

Mainstream rentier theory fails to produce satisfactory causal explanations linking

external rents as budget support to institutional outcomes or regime type because it does not

unpack the “black box” of causal mechanisms that might link various types of external rents to

these outcomes at the micro-level (Heydemann 1992; Waterbury 1994; Herb 1999). Micro-level

decision-making processes within rentier states condition both demand for the distribution of

external rents and the nature of distributive institutions themselves. Taking the politics of

coalition maintenance seriously--even in a non-democratic context--means abandoning crude

assumptions that rent distribution buys policy autonomy. Why are certain aspects of institution

building so difficult in some cases and really quite simple in others? Why wouldn’t elites

marshal external rents towards improving extraction and more general institutional upgrading?

Which groups seek rents and why, and what factors condition their success? What are the

institutional implications of these preferences? Answering these questions requires us to unpack

the distributional politics of external rents.

In the late 1980s and early 1990s, a third phase of rentier theory aimed to integrate some

of the mainstream approach’s abstract tenets with an emphasis on historical contingencies and

institutional legacies (Anderson 1986; Crystal 1989; Chaudhry 1994, 1997; Gause 1998;

Vandewalle 1998). One objective of these works was to acknowledge institutional similarities

among the rent-dependent states of the Middle East (namely weak administrative and

organizational capacities), while also explaining important political variation (strength of

political opposition and role of important social groups) within this same set of cases.vii

This

literature’s attempt to explain variation among rentiers via domestic-level variables was a step in



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the right direction, although it still falls prey to some of the same problems as mainstream rentier

accounts--namely in that it still tends to assign particular causal properties to external rents, and

ignores institutional nuances arising from fluctuations in rent supply and political demand.

Many of these problems have been acknowledged by a revisionist literature on the rentier

state that has very recently emerged within comparative political economy (Smith 2007;

Dunning 2008). Drawing on empirical discrepancies in most-similar cases, this literature

abandons the notion that external rents are structural variables with independent and uniform

effects. Rather, these scholars see external rents as an antecedent condition or intervening

variable that is mediated by domestic level variables traditionally underscored by the broader

comparative political economy (CPE) literature. The most masterful synthesis of rentier theory

and CPE thus far is executed in Smith’s Hard Times in the Lands of Plenty (2007). Smith

explains the durability of Indonesia’s authoritarian regime versus the collapse of the Pahlavi

regime in Iran in terms of the timing of oil booms and mass opposition relative to late

development. Smith makes an important contribution to the study of external rents and durable

authoritarianism, yet his account does not consider how demands might fluctuate, forcing

institutional adaptations over time.

Historical analysis of the Jordanian case builds from these recent advances to develop

three new avenues of investigation into rentier regime endurance.

First, we argue that scholars should follow Smith’s lead and pay greater attention to the

demand side, micro-level decision-making processes that may condition the effect of external

rents on institutions (i.e., institutional upgrading versus distribution). In our study of Jordan,

coalition size is of primary importance. The size of the regime coalition determines how rulers

institutionalize their rule, how they deal with domestic and international challenges, and to what





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and—in certain circumstances-- entire institutions. In a developmental sense, much of this aid

may be considered fungible (Feyzioglu et al 1998), but on the level of politics foreign aid often

maintains a circumscribed distributional logic (Brynen 2000).

Third and finally, the case of Jordan suggests that institutional outcomes of one type of

external rent in particular, foreign aid, are far more diverse than the “distribution versus

extraction” dichotomy that is the focus of the rentier literature to date (for an overview see

Remmer 2004). In Jordan, the U.S. has inserted a diverse array of parallel institutions into voids

within the Jordanian state. The Water, Resources, and Environment Office within the U.S.

Agency for International Development (USAID) plans, builds, and maintains most of the

country’s expensive hydraulic infrastructure. The United Nations Refugee and Works Agency

for Palestine Refugees in the Near East (UNRWA) provides infrastructure and decentralized

regional governance to Palestinian refugees. The Aqaba Special Economic Zone is a regional

authority that uses streamlined governance to court new, private sector rents for economically

displaced coalition members. In the long-run, these institutions provide disincentives for

institutional reform and allow distributive institutions to remain in place, thus supporting

authoritarian durability. However, their organizational format, operational area, and outputs are

highly complex, rendering them difficult to superimpose upon the rentier literature’s near-

exclusive focus on aggregate levels of taxing and spending. Parallel institutions are neither a new

nor a scarce phenomenon, having been employed by the British in former colonies and, more

recently, by the U.S. in the reconstruction of Iraq. Yet apart from Krasner’s (2004) work on

“shared sovereignty,” the significance of parallel institutions in the larger aid literature has yet to

be recognized, and within the scholarship on political development they have passed entirely

under the radar.



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These three points may broadly guide future approaches to the study of external rents and

regimes, yet Jordan’s geopolitical centrality is an important antecedent condition that may render

it directly comparable only to countries that have enjoyed prolonged, geopolitically-motivated

external patronage. Brand (1995: 41-42) notes,

Whether as the key land link in British imperial designs in the early period, or as a pro-Western buffer between the Arab states and Israel…Jordan’s geographic location in the EasternMediterranean and as a country bordering Israel, Saudi Arabia, Iraq and (nearly) Egypt has givenit an importance of which most small and natural resource underendowed states could only dream.As a result, it has managed over the years to extract financial support of various kinds fromconcerned states, and this form of support has set patterns of economic development anddecisionmaking that have continued to the present…

Jordan has a history of basing foreign policy on rent maximization (Brand 1995).viii

The United

States is the most recent and consistent patron to trade rents for favorable Hashemite policies

towards Israel, Iraq, and terrorism, although the Gulf states and Great Britain have also assumed

similar arrangements.

External patrons can be acutely aware of the political environment in key allies and will

configure foreign aid volume and composition primarily for the purpose of maintaining regimes

that serve their geopolitical interests, avoiding potentially destabilizing economic and political

conditionality (Dunning 2004; Bearce and Tirone 2007). These allies are the only countries for

which donors will make a substantial effort to court new rents, facilitate institutional adaptation,

and overall commit financial and technical resources in the long-term for the purpose of

maintaining a particular regime via meeting the demands of coalition members. Assisted by

geopolitically-motivated donors, the Hashemites have conquered a myriad number of challenges

by tapping new sources of external rent and adjusting domestic institutions to funnel these rents

to the same coalition. This strategy of coalition maintenance has ensured that no significant

challenge has ever emerged to Hashemite rule, and Jordan boasts one of the most stable

authoritarian regimes in the region.



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II. Coalition-Building Under the British Mandate, 1921-1949

Ever since the period of the British Mandate, Jordan’s Hashemite rulers have grounded

their rule in a highly disparate political coalition consisting of a Syrian/ pre-1967 Palestinian

merchant-industrial elite and Transjordanian tribes. In order to retain the support of both groups,

the Hashemites tapped external rents, particularly foreign aid, to fuel massive class-based

institutional side-payments, such as public employment and other forms of state largesse for

tribes, as well as tax breaks and market protectionism for merchant-industrialists. The British

subsidy supported these practices to a great extent, and most British attempts at institutional

reform failed due to Hashemite rejection and the primacy of geopolitical imperative.

Demand Side Pressures

The demand side of the Jordanian rentier state—that is, a distributive strategy based upon

maintaining a disparate political coalition—is largely a product of British colonial efforts to

grapple with Ottoman institutional legacies. In 1921, the British installed Abdullah I as Amir of

Transjordan, an area that had previously been an Ottoman hinterland. Abdullah was left with a

territory exhibiting unstable borders on three sides, masticated fragments of Ottoman land tenure

and taxation structures, and a populace largely composed of Bedouin raiders and peasant

smallholders. He was thus faced with the dual tasks of constructing a viable state and

consolidating domestic support for continued Hashemite rule within an environment of British

dominance.

Abdullah and his family, the Hashemites, needed to extend state control but had few

means to do so. Property rights and taxation were restricted to patches in the northwest province

of Ajloun, and the Ottoman policy of paying tribute to Bedouins in the periphery not to attack

Muslim pilgrims had resulted in the creation of exceedingly well-armed and powerful tribes that



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put up significant resistance to early British-Jordanian attempts at border definition and

extension of state authority (Vatikiotis 1967: 35-36; Aruri 1972: 15; Abu Nowar 1989: 26, 29;

Fischbach 2000: 10-19, 25-26, 49). As a solution, Abdullah began to court the tribes and a small

merchant class, which extended territorial control and provided internal revenue, respectively.

In exchange for their allegiance, co-opted tribes demanded payoffs in the form of tax

exemptions, cash, weapons, and employment in Transjordan’s new military. Yet as more and

more tribes submitted to state authority, demands for public employment, tax breaks, and payoffs

became so great that they overwhelmed the state budget (Aruri 1972: 28-30; Fischbach 2000:

66). From 1921 to 1927 domestic revenue was so minimal that Abdullah had to rely on the

British subsidy and a portion of British customs revenue levied at Palestinian-Transjordanian

borders. Abdullah then turned to the Transjordanian merchant community to cover budget

shortfalls—thereby enlarging the coalition.ix In exchange for extending “loans” to the state, these

merchants received tax breaks and preferential trading arrangements (Amawi 1992: 412).

Within the first ten years of the Mandate, Abdullah constructed the Hashemite coalition

on the support of two highly disparate groups, a settled merchant elite and a combination of

settled and nomadic Transjordanian tribes. The magnitude of the Hashemite coalition’s demand

for rents is particularly elevated because the policy preferences of each group impose high

economic costs upon the other. While tribes prefer social security through state employment and

subsidies, these policies impose higher factor costs, an inefficient bureaucracy, and increased

taxation on luxury imports upon the economic elite. The latter seeks to maximize profit through

preferential trading arrangements, which reduce competition in the domestic market and drive up

prices for consumers, penalizing tribes that sustain themselves on relatively meager government

incomes. To compensate each group for costs imposed by the other, expanded side payments are



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necessary to maintain their support. The merchant-tribal coalition is therefore quite expensive to

maintain, and introduces a large structural deficit into the state budget, but neither coalition

member is dispensable.

Rent Supplier: Great Britain

The British were initially ambivalent to the fate of Transjordan after the First World War,

yet they eventually looked east for the purpose of maintaining security in nearby Syria and

Palestine, as well as securing an overland route between the Eastern Mediterranean and the

Persian Gulf. Transjordan’s strategic value to the British had clear manifestations in that British-

administered aid and eventual preferential trade arrangements funded Hashemite coalition

maintenance (and corresponding negative institutional externalities) with certain British

knowledge.

When Abdullah assumed power, he accepted an annual British subsidy of ₤5000 for six

months (later elevated to ₤180,000 per year) to raise a security force and a central administration.

The initial subsidy provided over one-half of Transjordan’s budget and was meant to finance the

co-optation of tribes through bribes and military employment, as well as land reform and the

construction of extractive institutions (Aruri 1972: 20-21; Carroll 2003: 33). The latter two

objectives, which emphasized the importance of state building for long-term stability, ultimately

were subordinated to other measures required to maintain Abdullah’s rule. Over a period of

twenty years the British tried (and failed) many times to establish effective land and income

taxes, which were rejected by coalition members and unimplemented by the state (Fischbach

2000; Carroll 2003; Moore 2004). In the end, Great Britain’s distributional activities would leave

a much more durable institutional imprint than would its explicit efforts at state building.



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The British created and led the Transjordanian military as a Bedouin employment

vehicle, and during the Second World War the British started funneling trade-based rents to the

Transjordanian merchants through the Middle East Supply Centre (MESC).x

The MESC

designated Aqaba as the primary import point for goods going to Transjordan and Palestine,

positioning Transjordan’s merchant elite to re-export goods to large markets in Jerusalem,

Nablus, Hebron, and Bethlehem, where prices were significantly higher. The Transjordanian

merchants used their contacts with Abdullah and the MESC director to obtain semi-

monopolistic import and re-export rights. From 1940 to 1941, re-exports from Transjordan

increased five-fold. The MESC was aware of excess importation into Jordan and did not do

anything about it, noting that “certain smuggling is economically justified” and “certain

governments are inclined to agree (Amawi 1992: 457).xi

”

Institutional Responses

British-mediated Ottoman antecedents shaped the size of Abdullah’s coalition and its

corresponding demand for rents, while Jordan’s geopolitical position ensured a ready supply of

foreign aid and preferential trade from the British. By the end of the Second World War Jordan

had many features of a traditional rentier state, including weak institutions of taxation,

distributive state institutions, a patronage-based bureaucracy, economic protectionism, and

collusive ties between the state and private sector. Yet the fruits of state distribution were by no

means divided indiscriminately. Distributive institutions had clearly circumscribed beneficiaries

within the Hashemite coalition, not without.

Tribal demands were institutionalized into military employment and corresponding

welfare and tax benefits after 1930, when British general John Bagot Glubb incorporated

Bedouins in to his exclusive Desert Patrol Force. Enlisted men were offered educational



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opportunities for themselves and their families, housing, medical care, and welfare services. Sons

of Bedouin soldiers were enrolled in army schools at age ten and enlisted thereafter (Aruri 1972:

4; Moaddel 2002: 30-31). These military bodies put down uprisings by disloyal tribes and

secured Jordan’s southern borders from Wahhabi raids (Glubb 1983: 100-106, 118). In addition

to staffing the military, tribes began to gradually replace expatriate Palestinians and Syrians in

the civil service and the cabinet.

In exchange for advancing loans to Abdullah, the Transjordanian merchant community

was allowed to buck the institutionalization of income taxes and secure trade protection. British

pressure to impose an income tax was thwarted early on by merchant-Hashemite collusion, and

the inception of the MESC in 1941 marked the beginning of institutionalized collusion between

the Hashemites and the merchants in the area of trade. The merchant elite would eventually

broaden their coalition demands to industrial assistance in 1950s and to help in securing private

sector rents in the early 2000s, but this logic of exclusivity between the Hashemites and this

small Transjordanian elite remained constant.

The Jordanian rentier state did not naturally follow from large-scale British rent supply.

Rather, its origins lay in political maneuvers executed by Abdullah to secure his rule and extend

the central authority of the state under a disadvantageous institutional legacy and very

advantageous quantities of British assistance. The Hashemite coalition of merchants and tribes

became increasingly important in the next decade as throngs of Palestinian newcomers tripled

the population of Jordan, bringing with them education, capital, leftist movements, and the

politically-charged pathos of the Israeli-Palestinian conflict.

III. Political Crisis and Late Industrialization, 1949-1989



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Although Glubb would remain in his position until 1956, Transjordan became a formally

independent state in 1946 and was renamed the Hashemite Kingdom of Jordan in June 1949.

Following the Arab-Israeli War, the April 1949 armistice agreements left Jordan in control of the

West Bank. The country’s population tripled in size, increasing to 1.3 million people, 400,000 of

whom were Transjordanians, 400,000 of whom were Palestinian refugees, and 500,000 of whom

were West Bank Palestinians (Tal 2002: 4; Moaddel 2002: 33). After ascending to the throne in

August 1952, the young King Hussein exploited Jordan’s renewed geopolitical importance, using

much-enlarged American aid to maintain state largesse to coalition members and to ease

Transjordanian merchants into a highly protected, state-led industrialization strategy while co-

opting and repressing the Palestinian population.

Demand Side Pressures

Hussein maintained the same conservative base as his grandfather, Abdullah, providing

employment and welfare to tribes and protectionism to merchants. Yet the onset of late

development, the influx of Palestinian refugees, and the rise of an opposition movement posed

new challenges. Late development would require physical infrastructure in transport, water and

communications. Palestinian refugees also required infrastructure for their camps, governance,

and employment. The Hashemite state had neither the requisite financial nor technical resources

to provide for refugees or plan, build, and maintain infrastructure--nor could it without disrupting

existing side-payments, i.e. by increasing taxes and introducing meritocratic state employment

schemes. Hussein would need to rely on the existing coalition in the face of a rising opposition,

and could hardly cut into these benefits. Hussein therefore had to formulate new institutions to

overcome these challenges and leave his conservative coalition intact.



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The late 1940s and early 1950s saw a series of conflicts among Transjordanian

nationalists, Palestinians, and pan-Arab factions. Many Palestinians were reluctant to be

governed by the Hashemites (Abdullah I was assassinated by a Palestinian nationalist in 1951),

and the threat of Egyptian pan-Arab socialism often found a voice in Jordan’s Palestinian

population (Aruri 1972: 34; Cohen 1982; Singh 2002).xii

The mid-1950s saw elite-mobilized

mass riots and several thwarted coup attempts as a leftist army faction tried to grab power, and

after the brutal murder of King Hussein’s uncle and cousins in Iraq in 1958, British Ambassador

Charles Johnston commented, “Not a single foreign observer in Amman outside the British

Embassy believed that, even with British and American help, the Jordanian monarchy had a

chance of surviving (in Lunt 1989: 53).” During this period of refugee influx, opposition, and

late development, Hussein relied on the support of tribal leaders in the military and the

government against Palestinians and pan-Arab radicals, and in return he continued to expand the

military and civil service as a source of employment.

These domestic developments had also spurred new demands from Hussein’s coalition.

Transjordanians –merchants and tribes alike--feared that the Hashemites would grant

Palestinians political and economic privileges at their expense (Tal 2002: 9). Palestinian labor

threatened to drive down wages while Palestinian capital was for more competitive that that in

Transjordan. Many Transjordanian merchants had reaped significant profits secured under the

MESC regime and had started to invest them in small private industrial ventures; they wanted to

be at the helm of industry in Jordan, not the Palestinians. To ensure their continued support, as

well as to preclude the rise of a rival power center in the West Bank, the regime designated the

Transjordanian merchants to become Jordan’s new public-sector industrial elite. Paired with

several Transjordanian technocrats working at the Ministry of the Economy, the merchant elite



22

engaged in joint ventures (JVs) with the state to establish four of Jordan’s Big Five industries

during the 1950s (Piro 1998: 37). By 1959, the East Bank hosted 36.4 percent of Jordan’s

industries where little industrial development had been present a decade earlier (Carroll 2003:

31; Moore 2004: 68).

Rent Suppliers: The United States and Gulf Petromonarchies

Economist-dominated rentier theories tend to view boom years as politically stagnant, yet

foreign aid was in fact supplied because Jordanian politics and demands were overly lively.

Hussein capitalized on Jordan’s strategic position and domestic unrest to garner more foreign

aid, this time from the United States. In the early 1950s, Hussein’s alliance with Britain became

a political liability under rival Gamal Abdel Nasser’s banner of anti-colonialism, and the British

were increasingly pushing Hussein to undertake politically painful institutional reforms rather

than allowing British parallel institutions to function alongside the developmentally impotent

patronage state (Kingston 1994). Hussein responded by appealing to the U.S., which repeatedly

rebuffed his requests until April 1957, when Hussein dismissed a leftist prime minister, declared

martial law, and convinced the U.S. that his regime faced a pan-Arab communist threat.xiii

Within days, an agreement was signed to grant Jordan $10 million in economic assistance under

the guise of the Eisenhower Doctrine, which was immediately followed by another $10 million

for the army and $10 million in budget support. In May, the White House instructed the Embassy

to issue the grant substantially without conditions, claiming, “political factors were overriding

(The White House 1957).” Between 1957 and 1967, the U.S. provided Jordan with roughly $55

million in economic and military aid annually (USAID 2008). American bilateral assistance was

focused on budget support, infrastructure, and technical assistance for the East Bank, while

UNRWA’s “blue state” would ensure basic living standards for Palestinians.





24

economic aid fell to $18 million, $10.2 million of which were ESF funds (USAID 2008). This

reduction in assistance was based on economic grounds, namely that Jordan was beginning to

benefit from subsidies from wealthy Arab countries after the Khartoum Agreement. Yet after the

Hashemite military violently expelled armed units of the Palestine Liberation Organization

(PLO) in September 1970, both economic and military aid spiked in a show of support for

Hussein, increasing from $200,000 to $58.4 million between 1970 and 1971.

[INSERT FIGURE 2 HERE]

The period from 1973 to 1980 is generally described as Jordan’s “rentier era.” From 1970

to 1980, foreign aid was equivalent to about 30 percent of Jordan’s GDP on average, and as

much as 86 percent of government revenue in 1979 (World Bank 2007). This new wave of

petromonarchy assistance was budget support in the purest sense of the word, enabling the state

to expand state economic intervention through employment, state-owned enterprises, and

subsidies (Carroll 2003: 35; Bint Al-Talal 2004: 59; Moore 2004: 104).


Foreign assistance under U.S. leadership had significantly evolved since the period of the

British subsidy, and new innovations in bi- and multilateral aid were channeled to suit coalition

demands. U.S. aid continued to fuel distributive institutions established during the British

Mandate, particularly tribal employment and welfare, but satisfying coalition requirements

amidst the Palestinian influx and the onset of late development required larger quantities and

more diverse formulations of foreign assistance.1 American aid met coalition demands in two

new ways.

1 From 1955 to 1966, the average domestic revenue as a percentage of budget expenditure was 45 percent, downsignificantly from the 73 percent average of the 1924-1934 period (Aruri 1972: 61).





26

standard of living. While the number of small farmers did increase, they were mostly Palestinian

sharecroppers working large tracts of land that had been bequeathed to tribal favorites. The

project thus served to reward tribes and keep Palestinians out of urban areas where collective

action was easier (Hezleton 1974: 37-38; Sutcliffe 1974: 58; Bint Talal 2004: 51; Moore 2004:

70). Public Law (PL) 480 food aid, which totaled $166 million between 1952 and 1976, was also

another source of payoffs for tribes in that PL 480 grains were often sold to finance homes and

luxury goods for tribal favorites (Ryan and Stork 1972: 9; USAID 2007).

Even multilateral aid intended for Palestinians tended to find its way into Transjordanian

pockets. A primary administrative goal of UNRWA was ensuring that its benefits were restricted

to Palestinian refugees, yet the Hashemites used UNRWA to develop the East Bank rather than

the West. UNRWA plans for West Bank infrastructure were continually stalled, while those in

the East Bank flourished. Additionally, many Transjordanians illicitly received UNRWA food

aid because the Jordanian government refused to maintain accurate registration records. The U.S.

was aware of the problem and refused to leverage bilateral aid for the East Bank as a remedy (El-

Farhan 1979: 51-52; Dann 1989: 14).

The military benefited enormously from military aid and budget support. Between 1955

and 1960, military spending increased by 74 percent, chiefly by way of expanding forces rather

than upgrading them, and between 1961 and 1975, military employment tripled (Tal 2002: 75;

Moore 2004: 8). By 1965, Jordan had the highest force levels in the Arab world, with 2.3 percent

of the population enlisted in the military (Tal 2002: 17). The military served as a patronage

vehicle, as well as a means by which Palestinians could be monitored and repressed. Refugee

camps were carefully monitored, and West Bank leftists and voters at large were subject to

routine intimidation by Jordanian security forces (Cohen 1982: 27-40).



27

Despite a massive infusion of Gulf aid in the 1970s and 1980s, most distributive

institutions did not change significantly in scope but expanded in size: the “rentier state” was

established before the country’s so-called “rentier era,” and side payments continued to reflect

the preferences of the same ruling coalition that had been in place since the Mandate period.xvi

The one significant institutional change to come about in the 1970s was the decision to start

subsidizing consumers through the provision of public goods such as subsidies and an

overvalued dinar (Satloff 1986: 9). However, this seems to be less a product of increased foreign

aid than a preemptory move to placate urban Palestinian consumers.

Large-scale subsidies were only institutionalized after the 1970-1971 civil war between

the PLO and the Jordanian government. Although the PLO’s armed units and leadership were

expelled to Lebanon and the vast majority of Palestinians did not participate in combat, the

conflict drew attention to a growing urban Palestinian population. The monarchy could no longer

rely on its pre-1970 coalition strategies to maintain stability, but given that the social conflict

reflected ascriptive divisions, integrating the Palestinian population alongside Transjordanians in

the security/ civil service establishment was not an option. The regime also ensured that

Transjordanian merchants benefited disproportionately from the subsidies, using the new

Ministry of Supply (1974) to award import rights for subsidized goods. The Ministry distributed

import quotas to merchants based on enterprise size, creating instant monopolies for medium-

sized merchants close to the state bureaucracy and putting many smaller Palestinian merchants

out of business.

Palestinian Jordanians also benefited from the oil boom in a more indirect manner; they

constituted between 90 and 95 percent of the 350,000 doctors, teachers, and engineers working

in the Gulf. The regime had a clear stake in encouraging these individuals to work abroad, most



28

notably because their remittances (which amounted to 30 percent of GDP in 1981) eased the

economic hardship of Palestinian families remaining in Jordan without intruding upon state

resources. Yet the influx of remittances into Jordan also resulted in demand-driven inflation, and

as the national cost of living rose by 168 percent between 1973 and 1981, the regime used a

budget enlarged by Gulf aid to safeguard its tribal base employed in the civil and military service

(Satloff 1986: 9-19).xvii

Distributive institutions persisted even in the face of declining levels of foreign aid. In

1979, foreign assistance began to fall, and the government responded with massive borrowing to

maintain distributive institutions engaged in serving the coalition. By 1988, loans constituted 10

percent of government revenue (Carroll 2003: 45; Harrigan, El-Said, and Wang 2006: 266;

Alissa 2007: 2). Some degree of economic reorientation occurred between 1983 and 1989.

However, these reforms were not geared towards macroeconomic stabilization, restructuring, or

increasing domestic productivity in any way. Rural welfare services were further expanded to

reach tribal areas, and a National Aid Fund was established to provide cash on the spot to needy

families (Harrigan, El-Said, and Wang 2006: 266).xviii As early as 1983, the Ministry of Industry

and Trade began to streamline the licensing process to protect elite profits (Carroll 2003: 46).

Export credits and the banning of selected imports pleased some industrialists, and the regime

also began to pursue preferential trading agreements with Iraq, essentially carving out a

monopoly for favored merchants and industrialists in the Iraqi market (Parker and Moore 2007).

The start of the Iran-Iraq War in 1980s expanded this cooperation as the port of Aqaba became

Iraq’s de facto import node. By 1985, Iraq was absorbing one-third of all Jordanian exports.

Eventually an oil-for-trade protocol agreement was reached whereby Jordan received half of its



29

oil for free, while the other half was discounted and paid for by Jordanian exports to Iraq

(Kanaan and Kardoosh 2004:12-13).xix

In 1989 the economy collapsed. That year Jordan experienced 14 percent negative growth

in GDP, ran down Central Bank Reserves to a record low of $68 million, and had accumulated

$9.5 billion in public debt, rendering the government unable to service its foreign debt

obligations (Harrigan, El-Said, and Wang 2006: 266-267). On March 9, 1989, the government

extended a formal invitation to the IMF, requesting $275 million in standby credits. IMF officials

arrived with conditionality in hand: sharp reductions in government spending, fiscal reforms to

increase domestic revenue, and a tighter credit policy. The arrival of the IMF marked the end of

an era, severing Jordan’s access to unconditional foreign aid and borrowing and forcing the

regime to seek new mechanisms of coalition maintenance and institutional adaptation.

IV. Neoliberalism, New Rents, and Survival, 1989-present

Following the economic crisis of 1989, both the Hashemites and their foreign patrons

found themselves in a major dilemma. The reforms required by international financial

institutions (IFIs) would require the country’s slow, unqualified, and ill-performing institutions

to be transformed into efficient, apolitical regulators that could ride the tide of international

markets and generate sustainable economic growth. Reforming these institutions would pose

considerable economic and political risks. It would be very difficult to reduce military spending,

for instance. Tribes form the backbone of the military and security apparatus, which both

suppress domestic opposition groups and serve those geopolitical priorities for which Jordan is

awarded substantial financial benefits. Worse, the Hashemites had spent over forty years

alienating and weakening the majority-Palestinian private sector, thus denying themselves a pro-

reform political ally and a viable economic replacement to the Transjordanian merchant-



30

industrialists. The Hashemites thus continued to rely on the support of tribes and Transjordanian

economic elite, both of which opposed economic and political reform. The U.S. has devoted

substantial resources towards economic reform in Jordan, but it has done so while providing

budget support that allows the Hashemites to maintain their tribal base, as well as by

constructing new institutions that secure trade-based rents for the displaced Transjordanian

economic elite.

Rent Supplier: The United States and Gulf Petromonarchies

After concluding a peace treaty with Israel in 1994, the U.S. once again became Jordan’s

major donor, though economic and military aid only accelerated after the ascension of King

Abdullah II in 1999. In the mid-1990s, bilateral aid was less important than U.S. leadership in

IFIs such as the Paris Club (which forgave $830 million and extended payments on $2.2 billion

of Jordan’s foreign debt through 1997); the IMF (which has continually allowed Jordan to

sidestep conditionality); and the World Bank (which has provided several hundred million

dollars in loans to implement IMF structural adjustment programs). Jordan’s designation as a

Major Non-NATO Ally in 1996, complemented by $560 million in arms assistance between

1994 and 1999, demonstrated American intentions to help preserve the Hashemite regime well

into the future (Yom and Al Momani 2008: 49).xx

By capitalizing on Jordan’s geostrategic

relevance after 1989, the Hashemites have continued to attract external rents to fund coalition

maintenance. The U.S. is a willing supplier, with one American official commenting, “The

course of moderation brings rewards (Anonymous 2007).xxi”

[INSERT FIGURE 4 HERE]

U.S. bilateral economic aid to Jordan has increased substantially since 1999, mostly

under the Cash Transfer Program. Cash transfers are meant to provide balance of payments



31

assistance and can be considered fungible. The cash transfers are accompanied by “conditional

precedents (CPs),” benchmarks that the Jordanian government must implement before funds are

disbursed. Aside from instances when they are used to enhance the autonomy of parallel

institutions from the broader bureaucracy, CPs are typically not ambitious in scope, and include

the production of feasibility studies and small reforms related to obstacles confronting USAID

projects. USAID has never withheld a cash transfer on the basis of unfulfilled conditionality.

Development aid from Gulf petromonarchies has ebbed, although Hashemite-mediated

private investment capital from these countries has been on the rise following the 9/11 attacks

and the 2006 conflict between Israel and Hizbullah. Most Gulf investors place their money in

tourism and real estate, such as Saudi Oger’s holdings in the $1 billion Saraya Aqaba

megaproject and the $1.5 billion Abdali urban redevelopment scheme for Amman. Some,

however, such as Jordan Dubai Capital, have ventured into purchasing former state-private sector

JVs. Nearly all of these investments deliver particularistic benefits to coalition members, whether

it is continued employment for workers previously employed in JVs or providing additional

capital to Transjordanian business families in new ventures.


In order to preserve its coalition under neoliberalism, the Hashemite regime has retained

old institutional mechanisms where possible. Institutions providing public employment and

welfare to tribes have not fundamentally changed since the Kingdom’s inception, while apart

from a stubbornly regressive income tax structure, institutions delivering side payments to the

Transjordanian economic elite have actually been modified a great deal. The Hashemites, often

assisted by the U.S., have sought out new modes of public-private partnerships that are permitted



32

under Jordan’s international obligations, as well as secured a number of bilateral trading

arrangements that deliver a steady stream of rents.

The majority of tribal side-payments, such as public employment and the selective

provision of welfare benefits, have persisted because the regime has been able to foot the bill

through foreign aid as budget support and unregulated privatization proceeds. After 1989, the

government continued to provide a series of wage increases to public sector employees--in direct

violation of Jordan’s agreement with the IMF. By the mid-1990s, public sector hiring had

increased by 10 percent while spending on wages and salaries had grown by 70 percent

(Pripstein Posusney 2003: 10-11). Between 1989 and 2001, expenditures on wages and salaries

consistently accounted for around 45 percent of the budget, and from 2001 to 2005, employee

compensation grew by 6 percent. Military expenditures lingered between 26 and 28 percent of

total expenditures, even though external threats to Jordan have ebbed (Mansur 2006), and the

government continues to provide additional welfare benefits to civil servants and military

personnel (for an excellent overview see Baylouny 2008).

Regime elites have also ensured that privatization will not threaten former public sector

jobs. The 1999 privatization law stipulated that the government should retain the “golden share”

by which it can still veto decisions made on the board of directors of any privatized company and

in the selling of shares the government often stipulates that no employees can be dismissed

within a defined period (El-Said 2002: 270). This tactic is facilitated by the use of members of

loyal Transjordanian commercial families as middlemen between the Jordanian government and

typically a buyer from the Gulf.xxii In other cases, the “private” holder of shares is often a

government entity, such as the Social Security Corporation’s Investment Unit or the Aqaba

Development Corporation, neither of which is autonomous from political pressure to generate



33

employment and both of which are headed by regime loyalists serving under executive

appointment.

Continued public employment and direct compensation of public employees have

selectively sheltered tribes from broader costs imposed by a value-added tax (VAT) and the

removal of food subsidies, as well as the rising inflation that has come about after a second oil

that lasted between 2001 and 2008. These developments imposed costs on all consumers, but

Transjordanians were sheltered from the storm through other compensatory measures.

Palestinians that do not enjoy a close relationship with the state do not have this safety net.

The neoliberal agenda has resulted in major institutional changes relevant to the

economic elite, particularly in the areas of direct subsidies, trade protectionism, and state

ownership in joint ventures. Many of these changes occurred in the wake of Jordan’s accession

to the World Trade Organization (WTO) in 2000, a process that was essentially bankrolled by

USAID’s Achievement of Market Friendly Initiatives and Results Program (AMIR).xxiii

These

reforms, while viewed as necessary by the U.S. and the Hashemite leadership, hit at the very core

of institutional side-payments to the merchant-industrial elite by reducing protectionism and

eliminating monopolistic import rights. Most legislative requirements for the WTO and a

subsequent Free Trade Agreement with the U.S. were pushed through as executive decrees while

parliament was dismissed between 2001 and 2003.

The regime, heavily assisted by the U.S., has ameliorated these costs by three different

institutional mechanisms. First, the Jordanian government has complemented its multilateral

commitments under the WTO with a web of regional and bilateral trading agreements. The most

prominent of these has been a Qualifying Industrial Zones (QIZs) agreement with the U.S. and

Israel, by which Jordanian-Israeli goods that meet certain-value added requirements can be



34

shipped to the U.S. duty-free. While most investors in QIZs are “footloose” Asian apparel firms,

the individuals who control the zones are close to the regime and receive rent from industries

located there (Moore and Schrank 2003; Kardoosh and Burgis 2006).xxiv

The U.S. invasion and

occupation of Iraq has also helped re-establish old trade links for key constituents in the Iraqi

market, as well as opening new sources of rent. Overland trade routes and re-export

opportunities, once reduced by U.N. sanctions, have re-opened with virtually no limits.

Second, the regime has provided virtually guaranteed profits for select merchant-

industrialists through the political backing of real estate mega-projects in Amman, the Dead Sea,

and the Aqaba Special Economic Zone (ASEZ). ASEZ, for example, offers investors significant

tax breaks on improved land and income, world-class infrastructure, and a streamlined,

semiautonomous bureaucracy in the form of the Aqaba Special Economic Zone Authority

(ASEZA). ASEZA is widely acknowledged to be “USAID’s baby,” and can be considered a

parallel institution that employs best practices to attract private capital from the Gulf. However,

the Jordanian businesses that may partner with this capital appear to be restricted to coalition

members by the regime, which has aggressively courted most of the Gulf investors in ASEZ.

Many of the Jordanian investors in ASEZ are descendants of the “quota coterie” of

Transjordanian merchants that formed the core of Abdullah I’s coalition (Peters 2009).

Third, the government continues to procure goods and services from regime favorites. In

2002, the public consumption expenditure amounted for more than 20 percent of aggregate

disposable income (Kanaan 2005: 100). The procurement process is not based on fair

competition for contracts and, as such, Jordan has not yet signed onto the WTO’s Government

Procurement Agreement (GPA), as it would allow foreign firms to compete with Jordanian firms

for government procurement on a competitive basis.



35

More Aid, Less Democracy?

We have argued that the durability of Jordan’s Hashemite regime in the neoliberal era is a

product of both continued foreign aid and new sources of external rent to meet coalition

requirements. Yet a word should also be said about Jordan’s alleged “political opening” that

began in late 1984, accelerated in 1989, and slowed in 1994—coincident with the decline and

rise in foreign aid receipts. Following the IMF-mandated removal of subsidies on bread in 1989,

widespread rioting occurred in the southern tribal bastion of Ma’an. Shortly afterwards, King

Hussein declared that parliamentary elections would be held, commissioned a National Charter

to lay out the rules of the game for liberalization, and in 1992 lifted martial law and legalized

political parties. The 1994 peace treaty with Israel, which mobilized widespread opposition

among the Islamists and professional associations, is generally accepted as the death knell of any

political liberalization in the Hashemite Kingdom (Brand 1999; Schwedler 2002). Political

retrenchment has continued under Abdullah II, who dismissed parliament –and racked up about

$2.27 billion in U.S. aid-- between 2001 and 2003 (Choucair 2006: 9). These phenomena would

seem to support mainstream rentier accounts of Jordan that posit liberalization as inversely

related to foreign aid. The contention is that once Jordan re-secured U.S. aid in 1994, and again

in 2001, liberalization was abandoned (Luciani 1994: 220; Yom and Al-Momani 2008).

A closer look reveals that this is not the case. First of all, there is no reason to believe that

the Hashemite experiment in controlled “liberalization” would have led to democratization if

external rents had not become available. Furthermore, Jordan’s political “opening” was not only

short-lived but also a deliberate move to consolidate Hashemite authority. Although moderate

Islamists and secular groups were allowed to participate in Parliament, power ultimately

remained vested in the King and a few close advisors (Robinson 1998; Lust-Okar 2005).



36

Parliamentary districts were severely malapportioned to overrepresent Bedouins and ethnic

minorities at the expense of urban areas and in 1993, the electoral law was amended to a “one

person, one vote” scheme that was intended to privilege tribal candidates in light of the 1989

success of the Islamists.

Additionally, Jordan’s access to rents has also not bought political quiescence from all

parts of society, as it does in mainstream rentier accounts-- quite simply because all of society

does not stand to benefit from aid windfalls. Rather than reinforcing state autonomy by satiating

society’s hunger for rents, the 1994 peace treaty with Israel inflamed the opposition, and by 1995

Islamists and leftists had formed an Anti-Normalization Committee (Lust-Okar 2005; 108). This

is because Hussein concluded the peace treaty to serve coalition interests: the peace dividend

would be funneled towards coalition members, and the conclusion of a peace treaty with Israel

would support the tribal position that “Jordan is not Palestine.” As such, Brand (1999) suggests

that the corresponding political crackdown was not due to predictions of a lucrative peace

dividend, but the need to reduce opposition to the 1994 peace treaty with Israel among

Jordanians of Palestinian origin.

The American democracy promotion agenda that was formulated under the Clinton

administration and escalated during that of Bush the younger has yet to effect substantive

political change in the Middle East, including Jordan. In the Hashemite Kingdon, stability is

valued over political inclusion, and not only would American conditionality be without

credibility, there is no public evidence that the U.S. has ever tried to condition aid on substantive

political reform. From 2004 to 2007, USAID’s democracy and governance (D/G) assistance to

Jordan accounted for only 4 percent of total U.S. development assistance. Most D/G projects are

limited to technical assistance for formal institutions, such as the legislature and judiciary, and



37

D/G-related CPs for cash transfers do not address greater structural obstacles to democracy: a

parliamentary seat in the tribal bastion of Tafileh that represents only eleven thousand people,

while one in Palestinian-dense Amman represents forty-five thousand; widespread accounts of

election tampering and high-level coercion of candidates; municipal governments with no

revenues independent of the central government; and a parliament that is formally incapable of

generating legislation.

V. Conclusion

To date, the collective body of theories known as rentier state theory have neither

accounted for empirical contradictions nor developed conceptually precise causal mechanisms.

After providing a survey of rentier theory’s contributions and detractions, this paper has

suggested that future accounts of external rents, the rentier state, and authoritarian durability take

into consideration coalition demands on different types of rent, the source of rent and conditions

under which it is obtained, the institutional means by which regimes supply rent, and how these

arrangements vary across time. We have attempted to follow this logic through a close analysis

of the Hashemite Kingdom of Jordan with the intention that this case study might serve as a

model for future inquiries into the nature of rentierism across a variety of geographic regions and

political systems.

The supply and demand framework is a dynamic approach that is intended to remove the

static provision of rents by the international system as the sole explanatory variable for

rentierism, and to draw attention to the institutional adaptations forced by changes in supply and

demand over time. The Jordanian case produces several specific ideas regarding the origins of

rentier states and the relationship between rentierism and authoritarian durability that might

extrapolated from the Jordanian case and extended to future work on other cases in a variety of



38

geographic regions. Potentially useful cases could include Egypt, South Korea, Taiwan,

Afghanistan, Iraq, Thailand, and Laos. All are or were close allies of the U.S. and received large

amounts of aid. In East Asia, this aid eventually came to an end, introducing greater variation on

the supply side. Egypt is a similar case to Jordan. Variation on the demand side is introduced by

South Korea and Taiwan, which were governed by narrow coalitions. Iraq and Afghanistan are

cases of current importance in which the American use of parallel institutions during occupation

has been extensive.

First, assuming the availability of external rents, the presence or absence of a rentier state

is based upon the size of the regime coalition. Disparate regime coalitions, particularly alliances

between business and subaltern classes such as urban labor, peasants, and or tribes, compel

ruling elites to adopt expensive distributive strategies to finance side-payments to coalition

members. Post-1974 Egypt is an example of a highly disparate business-labor-military coalition

that has relied extensively on the support of foreign donors, specifically the United States, to

fulfill coalition demands and remain in power. Cash transfers serve to support the budget and its

priorities toward popular largesse such as state employment and subsidies, while technical

assistance for trade and investment and support to business associations serve the interests of a

narrow bourgeoisie called the “infitah class (Peters 2009).”

However, regimes based on narrow coalitions, such as a state-business alliance, must

answer only to a narrow constituency, thus reducing the demand for side-payments. These

regimes may be better able to construct developmental institutions while also retaining power,

and rentier states are unlikely to form even in the case of access to significant external rents. Two

examples of this are the Kuomintang’s (KMT) Taiwan from 1945 to the late 1960s and Park-era

South Korea. In the postwar era, South Korea and Taiwan received elevated and prolonged U.S.







41

are not a sufficient condition to explain the nature of state institutions and regime type. By

integrating the rich literature of CPE with the recognition from the rentier state literature that

external rents are important, scholars should aim to generate context-specific causal claims

regarding the relationship among external rents, domestic politics, and regime outcomes over

time.



42

Figures

Figure 1

Foreign Aid as Proportion of Budget Expenditures, 1964-2005

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

1 9 6 4

1 9 6 6

1 9 6 8

1 9 7 0

1 9 7 2

1 9 7 4

1 9 7 6

1 9 7 8

1 9 8 0

1 9 8 2

1 9 8 4

1 9 8 6

1 9 8 8

1 9 9 0

1 9 9 2

1 9 9 4

1 9 9 6

1 9 9 8

2 0 0 0

2 0 0 2

2 0 0 4

Year

Source: Central Bank of Jordan Yearly Statistical Series, 2006.

Figure 2

Source: Organization for Economic Cooperation and Development, 2007

Total

US

Bilateral Arab



43

Figure 3

Expenditures and External Aid, 1964-2005

0.0

500.0

1000.0

1500.0

2000.0

2500.0

3000.0

3500.0

1 9 6 4

1 9 6 6

1 9 6 8

1 9 7 0

1 9 7 2

1 9 7 4

1 9 7 6

1 9 7 8

1 9 8 0

1 9 8 2

1 9 8 4

1 9 8 6

1 9 8 8

1 9 9 0

1 9 9 2

1 9 9 4

1 9 9 6

1 9 9 8

2 0 0 0

2 0 0 2

2 0 0 4

Year

Capital Expenditures

Current Expenditures

External Aid

Source: Central Bank of Jordan Yearly Statistical Series, 2007.

Figure 4

Source: USAID, 2007.

1 9 9

7

1 9 9 9

2 0 0 1

2 0 0 3

2 0 0 5

0

100

200

300

400

500

600

700

$US Millions

Year

U.S. ODA to Jordan By Sector, 1997-2006

Water

Health

Education

Governance

Economic Oppties

Cash Transfer

Supplemental



44

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Endnotes

** The authors would like to thank David Waldner, Richard F. Doner, Andre Bank, Sean Yom, and Stefanie Nanesfor comments on earlier drafts of this paper and two anonymous reviewers. Dr. Peters would like to thank theAmerican Center of Oriental Research, the Binational Fulbright Commission in Egypt, and the Miller Center for Public Affairs for financial support during the course of the project, as well as USAID Jordan, Barbara Porter, andMarwan Kardoosh for their assistance in securing primary sources in Amman.i Transjordan refers to the land east of the Jordan River (what is today modern Jordan) and is also called East Bank.Cisjordan, also called the West Bank, refers to the land that today, in combination with the Gaza Strip, constitutesthe Palestinian Territories.

ii The authors would like to acknowledge Richard F. Doner for pointing out the underdeveloped demand aspects of rentier states.iii A coalition refers to the arrangements by which ruling elites maintain the support of two or more social groups inexchange for their collective political support.iv Our conception of the relationship among coalitions, side-payments, and institutions owes much to the work of Waldner (1999). Yet while Waldner claims that it was elite conflict that broadened Turkish and Syrian regimecoalitions to the extent that large side-payments had to be made to subaltern classes, we find that in the Jordaniancase, the requirements of state-building required the Hashemites to ally themselves with two highly disparatecoalition members, necessitating large side-payments.



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v As Michael Ross (2001: 330) notes, these two dependent variables are often conflated.vi While opposition mobilization, popular protests, and limited liberalization did take place in a number of countries(including Jordan) as rent-fuelled patronage decreased in the 1980s and early 1990s, democratization hardlyfollowed. Furthermore, though it may still be argued that rents in the form of superpower security assistance anddebt financing helped sustain regime security institutions despite fiscal austerity there is no reason to believe that the

downfall of an authoritarian regime would mean democracy (Skocpol 1982; Bellin 1994; Gause 1998).vii For example, though Kuwait, Libya, and Saudi Arabia are all considered oil rentiers, levels of political participation and the composition and the strength of the political opposition vary significantly. Chaudhry’s detailedcomparison of Yemen and Saudi Arabia introduced the still-underdeveloped argument that the type of rentsavailable to a state (remittances and foreign aid versus oil) influences state building strategies.viii

The subject of rent maximization and foreign policy is is a fruitful research agenda that Brand (1995) has already

carefully undertaken for Jordan, as well as Barnett (1993) for Egypt. We do not address foreign policy outcomes inthis short paper, but acknowledge the importance of this exchange for Jordan.ix These merchants, originally of Palestinian and Damascene origins, had acquired significant tracts of land throughusury and established local commercial banks by the end of the Ottoman period (Moaddel 2002: 68; Moore 2004:60). In 1923, the merchants established the Amman Chamber of Commerce (ACC) (El-Said 2002: 257; Moore2004: 61).x The British established the MESC in 1941 as a means of reducing wartime shortages across the region.xi

Of the thirty-nine merchants who dominated this so-called “quota coterie,” twenty-four either sat on the ACC board or were related to board members (Moore 2004: 65).xii It is worth noting that while the mass base of pan-Arab and communist groups were Palestinian, the mobilizers of these groups were often educated Transjordanians from the settled areas or early Syrian/Palestinian immigrants.(Anderson 1997: 23, 86).xiii The Prime Minister was Suleiman Al-Nabulsi, the Transjordanian leftist who had mobilized Palestinians,communists, and Baathists, as well as abrogating the Anglo-Jordanian Treaty without consulting with King Hussein,attempting to ally Jordan with Egypt and Syria, and dismissing Hashemite officials.xiv For a complete list of U.S. infrastructure projects see Peters 2009.xv The American attitude toward parallel institutions differed substantially from that of the British. U.S. aid officialsconsistently allied themselves with the “King’s Men,” old-guard tribal leaders who opposed institutionalrationalization, greater taxation of the population, and the retirement of redundant and corrupt civil service officers.Aid officials ignored appeals from reformers such as three-time prime minister Wasfi Al Tell, who sought tominimize state patronage and exemplified an Transjordanian technocratic elite that aspired to develop Jordan’s

industrial base. As a result, the Point Four/ USAID bureaucracy grew in parallel to the Jordanian rentier state, performing essential state functions but never making an attempt to engage Jordanian institutions in meaningfulreform (Kingston 1994, 2001).xvi This observation runs contrary to traditional rentier interpretations of Jordan, which see the rise of the rentier statein the 1970s and its demise (corresponding with aid reductions) in 1989 (Knowles 2005).xvii Army salaries were raised several times between 1978 and 1981, with two raises in 1980 alone. Specialsupermarkets were set up for government employees, offering up to a 50 percent discount on consumer goods. In1980, a decree was issued that gave the children of public servants preference in university admissions (Satloff 1986: 9-19).xviii Overall, the Hashemites seem to have favored the tribal coalition partner over the economic elite as Jordanspiraled towards economic crisis. Business had generally opposed greater interference of the government in theeconomy (particularly when the Ministry of Supply was established), but it became even more opposed in the mid-1980s. Yet from 1973 to 1988, government officials had less than twenty formal meetings with the industrialists’

associational representative, the Amman Chamber of Industry, and the government of Zaid Al-Rifai (1985-1989), a businessman coming from a pre-1948 Palestinian family, left promises of reforms and deregulation unfulfilled(Brand 1995: 57-58).xix The Jordanian government deposited dollar payments for the oil at the Jordan Central Bank, and Jordanianindustries exporting to Iraq then withdrew this money in payment. Some industries, such as those in pharmaceuticals, household appliances, and assembly, were solely dependent on the Iraqi market, though trade withIraq did not only benefit industrialists (Al Turk 2007).xx The U.S. has designated only five other states with this title: South Korea, Israel, Egypt, Australia, and Japan(Yom and Al-Momani 2008: 40)



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xxi Apart from King Hussein’s decision to side with Iraq during the First Gulf War (for which Jordan’s military and budgetary aid was reduced), the U.S. has purchased some stellar geopolitical services with its economic and militaryaid, which peaked at $1.15 billion and $681.5 million, respectively, in 2003. Before the Iraq invasion, Jordansupported coalition flyovers of Iraq. After September 11, Jordan provided both overt and covert political andsecurity support to the U.S., including the support of “extraordinary rendition” of terrorist suspects through the

General Intelligence Directorate (GID). After the invasion of Iraq, Abdullah allowed the stationing of U.S. andBritish Special Forces in the Eastern Desert and consented to non-offensive coalition flyovers to support the war effort during in the lead-up to the war. During the war, Jordan permitted the training of Iraqi police in the EasternDesert, the use of the Aqaba port and the Karameh borders for passage of goods, and the placement of peacekeepingforces in Iraq.xxii One such example is the Rifai family. As the CEO of Jordan Dubai Capital, Samir Rifai has overseen (with twoforeign partners) the purchase of 51% of the Central Electricity Generating Company (CEGCO).xxiii Jordan’s committed average tariff rate is 21.6 percent, and customs tariffs must be reduced to 20 percent by2010. Jordan committed to removing 139 measures in services, excluding market access, and 79 measures grantingnational treatment. Procedures by which import licenses were granted were first changed in 1997, and in 2003import licenses were no longer necessary except for limited categories of goods relating to public safety,environment, natural resources, national security, public order, and morality (FEMISE Coordinators 2005: 66, 75).xxiv Opening an export zone and qualifying for duty-free export to the U.S. requires ministerial approval in Amman,as well as Tel Aviv and Washington, making connections with the Royal Court a necessity.

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