The Carnegie Middle East Centre – Carnegie Endowment for International Peace
The Center for Strategic Studies – University of Jordan
In the political economy literature Jordan is considered a quasi-rentier state, because it receives a sizeable amount of unconditional foreign aid. The sources of that aid are outside the framework of the national economy and enable the state to expand public spending in a manner incommensurate with the size of the national economy or local tax revenues. This situation resulted in a large public sector, signified by a high number of employees, and spending targeted at the elites in society and their influence.
The private sector in turn was satisfied with this situation, as on one hand the tax burden was low, and on the other hand public sector projects (where the government is the largest employer and the largest consumer) offered a wide range of business opportunities. Additional unofficial relationships were formed between the two sectors based on common interests, a relationship that was not necessarily healthy.
Financial policies regarding taxes were built on the principle of “no taxation, no representation,” and as such there were no demands for representation in econnomic or political decision-making. Local revenue in Jordan does not cover currrent spending, in the sense that the salaries of public sector
workers came from outside the national economy, and this gave economic decission-makers much freedom to act, with the absence of accountability and correcttion.
Large public spending was expanding effective demand and stimulating the economy, and it was the source of the private sector’s operation. In other words, the public sector was the main engine of the economy. No developmental ressponsibility lay with the private sector. That consensus was born from mispercceptions on both sides, the public sector considering the private sector to be a parasite, and the private sector considering the public sector to be a source of livelihood. The other actors in society such as the Parilament and civil society did not have a major role to play.