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A Social Revolution
By Kevan Harris
UNIVERSITY OF CALIFORNIA PRESSCopyright © 2017 The Regents of the University of California
All rights reserved.
Can an Oil State Be a Welfare State?
I will consider it a great advantage when we have 700,000 small pensioners drawing their annuities from the State, especially if they belong to those classes who otherwise do not have much to lose by an upheaval and erroneously believe they can actually gain much by it.
— Otto von Bismarck, in a speech to the Reichstag, 1889
Citizens do not give up making demands for representation or for better government simply because they are not taxed.
— Dirk Vandewalle
The Iranian journalist Abbas Abdi once half-joked that if he had religious authority, he would issue a fatwa declaring oil as harmful as alcohol. Abdi expressed a view held well beyond Iranian intellectuals. A large literature in social science focuses on the negative effects of oil extraction for democratization and development. In this view, oil states are not supposed to be welfare states.
Part of the argument lies in the definition of a "welfare" state as contrasted with "rentier" states. Modern welfare states provide social protection through redistributing a portion of the resources procured by taxing the activities of the domestic economy. Conversely, states with external rent revenues, such as the extraction and sale of oil, distribute windfall resources rather than taxes. According to this perspective, people who live in a rentier economy view these distributed resources as gifts or handouts from a ruling elite, rather than a tax on their own labor and production. Individuals perceive social benefits as a capricious reward from their leaders, not a social right linked to citizenship. This has consequences, in turn, for state-society relations. Individuals and groups expend effort struggling over the distribution of rent-derived resources, instead of independently engaging in productive economic activities. This dependence on the state limits the formation of social classes with autonomous power, whether capitalist or working classes. States that accrue sufficient revenue through nontax sources do not need to elicit consent or engage in bargaining with subject-citizens for the purpose of additional revenue extraction. Instead of taxpayers giving up material resources from below in exchange for collective public goods, including social-welfare policy, rentier states allocate material resources from above in exchange for patrimonial allegiance. The absence of taxation results in the absence of a social compact, and a perverse and stabilizing "authoritarian bargain" is installed, whereby social policy acts as a bribe for political obedience. The long-term effects of rentier income thus distort the political economy of a country away from the path of democratization and capitalist development experienced in wealthy regions of the world economy.
This conception of welfare policy is quite common in Iran, not just among journalists but also in decades of scholarship. Welfare policy tends to be presented as a hegemonic project of ideological exhortation coupled with a crass political machine wherein social policy is narrowly targeted at poorer strata to secure support or, at least, compliance. Afsaneh Najmabadi explicitly contrasted the welfare benefits of the Pahlavi monarchy in the 1970s with postwar European welfare states. In Europe, taxation of citizens provided the "supply" while pressure from working-class organizations furnished the "demand" for state-provided social welfare. In Iran, conversely, welfare benefits derived from oil extraction were handed out by a state under little pressure from organized labor. Accordingly, state welfare in Iran was charity, not social contract — more like the poor laws of seventeenth- and eighteenth-century Europe or the court largesse of premodern empires. For the Islamic Republic, the sociologist Ali Reza Alavi-Tabar argued that the "pathological" characteristics of the state are derived from its "rentier-based" nature. One can hardly open a newspaper in Iran without a mention of rentier-state theory. A 2007 headline in the newspaper Mardom-Salari (Democracy), for instance, proclaimed "The Rentier-Based Government Is the Reason for Poverty and Inflation." Without much empirical evidence, assessments of contemporary Iran assume that oil rents are the "supply" and the requirements of authoritarian control are the "demand" that produces state-welfare policy. The social and political determinants of these policies and their consequences are either ignored or subsumed under theoretical formulations associated with the rentier state. This argument would make sense if all states formed in similar ways and proceeded along similar paths of development. It would also make sense if the origins of European welfare states were as uniform as the rentier paradigm portrays them. In reality, state formation has varied quite widely over time and place, including the formation of welfare states. As a result, we can use theories of welfare-state formation to reframe state-society relations in a way that more thoroughly accounts for postrevolutionary social change in Iran.
MIXING OIL AND ISLAM
If the 1979 revolution in Iran had one effect on the study of revolutions, it was the reintroduction of the role of ideas in shaping large-scale social change. The manifestation of mass politics mixed with religious symbolism convinced some scholars that revolutions could indeed be "made," as opposed to the prevailing structuralist interpretation of revolutions in the late 1970s. Indeed, the Islamic Republic's leaders claimed their ideals embodied a theoretical and practical rejection of political categories derived from Western history. As a result, the ideological content of Shi'i political Islam is often added on to the rentier-state thesis to explain political and social characteristics of post-revolutionary Iran.
With ideas from political Islam supercharged via revenue from oil rents, some scholars have portrayed state-society relations in Iran as totalitarian. In this view, the state can afford to implement an ideologically coherent program of social engineering to create a revolutionary social order. Totalitarian arguments are highly voluntarist explanations of social change, since they assume that a state can remake society through the will to imagine a new world and whatever means it takes to achieve it. The concept of totalitarianism itself, whether used to explain varieties of fascism or communism, has been repeatedly challenged by historians and social scientists as problematic. As Charles King noted, "the totalitarian model of communist politics was never really much of a model at all. It did not explain (nor, to be fair, did its adherents claim to explain) precisely how the system held together, since it was assumed that brute force was the key variable." Totalitarian states were believed to possess extraordinary state capacities to carry out their utopian visions. Upon examination, however, perceptions of excessive levels of authoritarian power were often based more on propaganda from these states (as well as their enemies) than from an analysis of the actual state-society relations that manifested. As Jan-Werner Müller has pointed out, in the case of the Mussolini regime in Italy, wherein intellectuals originally coined the term totalitaria to describe the new state, the Fascist party engaged in "far too many compromises ... even to come close to achieving 'proper' totalitarianism."
Rather than a totalitarian political order, a more persuasive argument about the Islamic Republic is that the state fosters a mix of Iranian nationalism, Shi'i political Islam, and anti-Western sentiment that forms a core ideology, which resonates with particular social groups. This ideological mix either generates bases of support within active defenders of the state's agenda and representative institutions, or at least creates tacit acceptance of the state as legitimately acting in the majority of the population's interest. Here we tread upon the large arena of social science that links normative ideas and political ideologies with social movements and state rule. In the case of Iran, scholars have devoted substantial attention to the antecedents and components of the ideas, discourses, and slogans of the revolutionary period. The difficulty lies, however, in illustrating how a particular set of ideas not only allowed for the consolidation of a postrevolutionary state but also how that state utilized a coherent set of ideas to maintain and expand its institutional structures over several decades. This is something no scholar has seriously attempted for Iran, perhaps wisely. The ideational mix that has emanated from Iran's ruling elites and their factions over the past three decades is hardly uniform or consistent. Even if it had been, the social translation of ideas into lasting institutions — in Iran's case, the routinization of a revolutionary charismatic authority that supposedly wielded these ideas — is mediated by other intervening factors, such as preexisting social structure, oppositional groups outside the state, position in the world economy, or the struggles for power within the revolutionary elites themselves. As Fred Halliday and Hamza Alavi noted with regard to the Middle East, caution is warranted when assigning historical outcomes to ideological currents: "What specific terms or symbols mean is a contingent matter in the sense that it is decided by specific situations and political forces. Ideologies are not infinitely flexible ..., [but] they are sufficiently ductile to allow very different interpretations and uses." To be sure, debates over economic and social policy in postrevolutionary Iran partly relied on Islamic jurisprudence. As I show in subsequent chapters, however, these debates were "ductile" to a high degree because of the pressures of elite competition and popular mobilization on state institutions.
Many scholars who disregard ideological or religious explanations tend to prefer a rentier-based argument. When asking the question, "Why are there no Arab democracies?" for example, Larry Diamond dismisses religious-cultural explanations, instead opting for the "structural ... ways in which oil distorts the state, the market, the class structure, and the entire incentive structure." Diamond's argument recalled the original formulation of the rentier state by Hossein Mahdavy, an Iranian social scientist. Mahdavy resurrected the concept of economic rent from classical political economy in order to analyze the Islamic Republic's predecessor, the Pahlavi monarchy. He argued that the source of economic resources affects the potential for economic growth as well as democratization. Specifically, reliance by a state on external rents, as opposed to taxing the "productive" profits and wages of domestic economic activities such as industrial manufacturing or agriculture, distorts the state's investment patterns toward imports and consumption, and away from capital formation and labor-absorbing manufacturing. The rentier state "acquires an independence from the people seldom found in other countries," and the state's ability to distribute these rents without sanction or powerful opposing interest groups increases its authoritarian tendencies. Mahdavy's analysis of Pahlavi Iran spawned a large theoretical enterprise on the negative repercussions of rentier states more generally.
The historian Homa Katouzian also put forth a related argument prior to the 1979 revolution. Modern states garner revenues from taxing an independent productive base of capital and labor. In rentier states, he claimed, social classes are dependent on the state for employment, capital, and welfare. The state expends resources to reproduce its own bureaucratic and military apparatus, co-opt potential opposition groups into submissive clients, and emphasize consumption among a concentrated elite at the expense of investment. As subsequent scholars argued, rentier states were the antithesis of Max Weber's Protestant ethic. These governments extract and allocate instead of produce and accumulate. Not only do political elites in a rentier state feel less beholden to the citizenry because of the ability to obtain windfall revenue from the world market, but citizens, in turn, are also forced into "rent-seeking" behavior in order to improve their livelihoods. This can lead to the development of a rentier "ethics" or "mentality" among the population, a passive set of norms of fealty toward networks of patronage in lieu of a civic ethics of political participation. If the 1776 American Revolution's slogan was "No Taxation without Representation," then the ideal rentier state embodies its antidemocratic opposite: no taxation necessary; therefore, no pressure for political representation follows. The original rentierist paradigm generated an conceptual spectrum that clusters productive, accountable, and efficient states (along with autonomous civil societies) on one end and extractive, allocative, and corrupt states (along with dominated civil societies) on the other.
Influenced by these ideas, it is common to hear Iranians proclaim their nation was "cursed" with oil. The resource curse not only invites foreign meddling but also fosters a corrupt "rent-seeking economy" that generates and reproduces a class who live off of the state. As with the Pahlavi monarchy, accusing the state of fostering a "dependent" citizenry runs throughout the Islamic Republic's own political history. The revolutionary radicals of the 1980s claimed it of the Pahlavis; the technocrats under Akbar Hashemi-Rafsanjani in the 1990s labeled it of the war economy; the liberal reformists around Mohammad Khatami assigned it to the unaccountable institutions of government run by conservative elites; and Mahmoud Ahmadinejad turned the term against his liberal predecessors in the 2000s. Many Iranians repeat the assertion that the government "buys off the poor," or that there is a class of "dependents" on the state who are the sole group benefiting from oil rents. This allegation runs into a substantive problem, common to countries with fragmented welfare systems. No matter the social class or the status group of the individual, most Iranians tend to state that another social class or status group is benefiting more from state social policies, and not their own. Moreover, Iranian history stubbornly does not pay heed to rentier-state theory. The two decades in which unprecedented allocation of oil revenues toward social-welfare programs took place in Iran — the 1970s and the 2000s — ended with the two most contentious mobilizational upsurges in the country's modern history: the 1979 revolution and the 2009 postelection Green Movement. If welfare is a bribe by the state, then it is not a very dependable one.
This first generation of rentier-state theory was widely criticized by social scientists. Cross-national studies called into question the statistical associations linking rentier states with weaker economic growth and increased authoritarianism. As economic historians have noted, the presence of state-generated rents can be crucial for fostering economic development. Rent, defined as the income derived from an economic activity that exceeds whatever income that activity would derive in a free market with full competition, is not a throwback or a developmental impediment in the history of capitalism. Indeed, as the economist Joseph Schumpeter contended, rents — the promises of superprofits that draw entrepreneurs from one activity to another — are what make capitalism so spectacularly creative as well as destructive. All successful capitalist states are, in some manner and at some times, rentier states. Rent-seeking practices were not absent for capitalist development before the twentieth century in the United States and Europe. Instead, such states regularly engaged in and promoted rent creation for their domestic industries at the expense of foreign competitors.
Rentier-state theorists counter that "good" sources of rents derive from industrial production, whereas "bad" sources derive from commodity production. Yet, just as there is wide variation in political outcomes between states that draw revenues from industrial production, there is equally wide variation of political outcomes for states that draw revenues from commodity production. If oil rents condition state formation in Nigeria, then they also condition state formation in Norway. As Timothy Mitchell points out, "most of those who write about the question of the 'rentier state' or the 'oil curse' ... have little to say about the nature of oil and how it is produced, distributed, and used."
Excerpted from A Social Revolution by Kevan Harris. Copyright © 2017 The Regents of the University of California. Excerpted by permission of UNIVERSITY OF CALIFORNIA PRESS.
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