The Impact of Rentier States on Corruption: A Venezuela Case Study

This essay investigates the correlation between rentier states and corruption, utilizing Venezuela as a comprehensive case study. The research begins by defining rentier states and rentierism, highlighting their reliance on revenues derived from natural resources, particularly oil. It explores the theoretical frameworks of international relations, including the rentier-state approach and the petro-state approach, to analyze the economic and political dynamics within Venezuela. The essay examines how Venezuela's dependence on oil has shaped its government structure, influencing the distribution of power, state capacity, and the potential for corruption. The methodology section details the qualitative comparative policy analysis method employed, emphasizing the use of primary and secondary data, as well as interviews with Venezuelan policymakers. The essay concludes by summarizing the significant impact of oil on Venezuela's socio-economic and political development, highlighting the challenges faced by the country in managing its resources and promoting good governance within the context of both rentier and petro-state theories.

Running head: CAN RENTIER STATES ENHANCE CORRUPTION?
Can Rentier States Enhance Corruption?
Name of the Student
Name of the University
Author Note

1CAN RENTIER STATES ENHANCE CORRUPTION?
Abstract:
The research intends to provide a deep understanding on the matter regarding the role of rentier
states in enhancing corruption. It is evident that a common form of politics known as rentierism
is prevalent to all rentier states. The model of rentier states is generally dependent on two
variants- the first variant deals with the fact that the rich late developers of mineral resource are
prone to violence while he second variant deals with the fact that the minerals which are highly
effective and are dominating the economy for a long time have been generating corruption in
higher levels. This research paper was commissioned to examine the second variant of the rentier
state model on methodological ground by presenting a case study on Venezuela. The research
paper investigates the fact that how the theories of international relations can be applied to the
given case study.

2CAN RENTIER STATES ENHANCE CORRUPTION?
Table of Contents
Introduction:..................................................................................................................................3
Theory Framework:......................................................................................................................3
Analysis:..........................................................................................................................................4
Methodology:..................................................................................................................................5
Conclusion:.....................................................................................................................................6

3CAN RENTIER STATES ENHANCE CORRUPTION?
Introduction:
The theory on rentier state was first formulated in 1970 by Hossein Mahdavy. According
to the views of the theorists of the rentier states based on the classification and understandings of
a renter economy, rentier state can be viewed as a unit of analysis (Kent 2014). The World Bank
based on the classification of mineral economy considered Venezuela a rentier state (Waldner
and Smith 2013). In this regard it is noteworthy to mention that according to international
relations theory, rentier state can be defined as the state which acquires all or considerable
portion of its national revenue from the rent of domestic resources to external clients. In this
research proposal attempts has been made in order to provide an understanding on the
enhancement of corruption by the rentier states by providing an illustration of a case study on
Venezuela.
Theory Framework:
The state from the very beginning played an important role in constructing theoretical
debates on the fact that whether rentier states enhance corruption or not. The concept of rentier
state has been able to provide a better understanding of the theoretical debates on the topic that
why corruption is often associated with the rentier states (Levitsky and Loxton 2013). The two
major theories of international relations have been propounded by Mahdavy and Karl which has
been described as rentier-state approach and petro-state approach respectively. In 1970 the
rentier-state approach was developed by Mahdavy in order to analyze the role of Iran in oil rents
(Mazzuca 2013). The rentier-state approach thereafter proved to be beneficial for modern
scholars in explaining the economic regime in oil rich countries. Rentier state theory is a theory
based on political economy which intends to draw an attention of the state society relations in

4CAN RENTIER STATES ENHANCE CORRUPTION?
order to provide an explanation to the generation of large amount of income from rents which are
externally derived by these countries (Fuccaro 2013). The Karl petro-state theory Karl contends
that oil countries are portrayed by identical social classes and patterns of mutual action. It can be
observed that in countries like Venezuela the dependence on petroleum is increasing which leads
to excessive fiscal dependence on petrodollars at the expense of state affairs. With the creation of
oil booms, this constitutes the deception of prosperity and development in order to diminish
regimes with the reinforcement of oil-based interests by weakening the state capacity in the
process (Schiller 2013). Karl's petro-state theory since time immemorial has been successful in
uniting structural approaches by illuminating the fact that how the decisions of policymakers are
ingrained in institutions while interacting with domestic and international markets.
Analysis:
The case of Venezuela is one that has been simplified from time to time by many scholars
and has been refereed as an exceptional case in the history of mankind. It is obvious that
countries contribute significantly in increasing the revenue of natural resources. A case study of
Venezuela can be presented by explaining the importance of oil as it played significant role n
improving the economic growth of Venezuela. According to the views of modern economists
Venezuela like very few rentier states has undergone radical shifts in government structure
where consolidated power is considered to be the common attitude (Purcell 2013). Scholars have
debated regarding the point that Venezuela as a state is more isolated from economic crisis and
because of this reason authoritarian government influences the power in this state. The
production of petroleum and oil changed the economic scenario by making the state rich and
powerful without any hindrance from other internal state actors. The establishment of modern
Venezuelan state and society has been determined in relation to oil production and exports and

5CAN RENTIER STATES ENHANCE CORRUPTION?
therefore it has been considered as a petro-state (Colgan 2014). According to the rentier-state
theory, oil revenues have significant effects on autocratic regime. The rentier-state theory has
been applied in order to explain the scope of rentierism in stabilizing the economic pattern of
Venezuela in late 1980s and 1990s which increased violence by creating a situation of
disturbance (Maya 2014). Karl Marx laid emphasis on the part that there is little opportunity for
private enterprises in Venezuela and therefore the establishment of domestic trade is closely
bound to the state (Corrales 2015). In this context it is noteworthy to mention that such activity
increases the state power however it promotes corruption in the long run. Venezuela as a country
has been placed as a typical rentierist state. The policymakers of Venezuela sought to use oil
revenues in funding developmental projects. In this regard it can be stated that the socio-
economic pressures arose in Venezuela after the collapse of oil prices in 1980s. While examining
the importance of rentier states especially when compared with the case study the importance of
petro states theory can also be applied. Petro-states have been divided into- the extreme rentierist
states and the other rentierist states whose revenues do not completely depend on mineral
resources. In this regard the petro-states approach is best suited for the Venezuelan case study.
Petro-states in particular can be defined as those states whose main source of revenue comes
from abroad through oil sales. Terry Karl in his petro-state approach emphasized on the tax
revenue structure of Venezuela the State developed the oil industry extensively however failed to
pay attention in developing a competitive industry (Fuccaro 2013). According to Karl boom
periods led to an expansion of jurisdiction for a State which caused centralization of powers in
the government (Levitsky and Loxton 2013). In this regard it can be stated that the rentier-state
approach was able to maintain the political order however in the long run it led to a poor
utilization of resources. It can be observed that as a result of this structural framework of

6CAN RENTIER STATES ENHANCE CORRUPTION?
incentives and its relation to the other policies that favored redistribution over production and a
fall in revenue prevented the State from changing the behavior of the state leaders. In this
context, institutional structure was not created by the petro-states that favored economic
development which was less dependent on a sector vulnerable to external revenues (Purcell
2013). However with the advent of petro-states it hindered adaptation to bust periods by
targeting the degeneration of the political administration.
Methodology:
For the purpose of this case study research has been carried out with the help of
qualitative comparative policy analysis method. It can be stated that in quantitative method the
availability of valid and reliable data would not be possible especially in this case. The variable
involved in his research such as the quality of the institutions, the role played by state actors and
their performance and perception is quite difficult to quantify. Therefore in this research the use
of quantitative method has not been possible. The qualitative method selected for the purpose of
this assignment is based on the interpretation and analysis of primary and secondary data. The
research was also conducted with the help informal structured interviews and conversations with
Venezuelan policy makers and state actors representatives (Kent 2014). However the research is
based upon renewable energy with the emphasis of social, political and economic analysis about
Venezuela. In order to create a qualitative framework it is required to consider the importance of
oil in explaining the political, social and economic structure of Venezuela (Waldner and Smith
2013). It can be stated that with the help of qualitative method it was easier to conduct the
interview process and conversation as it made possible to look beyond the official statements and
the development programs. In this regard qualitative method is best suited in order to conduct

7CAN RENTIER STATES ENHANCE CORRUPTION?
such research however quantitative methods can be used in order to provide statistical
information and graphics.
Conclusion:
In the conclusion it can be stated that since 20th century the future of Venezuela was very
much dependent on the oil industry. The relationship of the country with the oil resources has
been significant from the very beginning. It has been difficult for the rentier states like
Venezuela to focus on internal development due to the existence of authoritative government
which is likely to intensify corruption. However Venezuela as a petro-state was unable to tackle
various cycles of oil boom. Venezuela as a rentier state was however able to increase the revenue
of the state as much of the economic dependence was on oil rents. Lastly, it can be concluded
that Venezuela both as a rentier-state and petro-state contributed abundantly to the social,
political and economic development of the country.

8CAN RENTIER STATES ENHANCE CORRUPTION?
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