Abstract
In late industrializing developing countries the state plays a central role in the economy and economic development. The effectiveness of the state in the process is determined by the existence of autonomous and competent agencies with access and control over the necessary economic resources. Accordingly, the autonomy of rentier states and their control over economic resources should make them ideal candidates for spectacular economic development. A comparison of Iran and Turkey, however, shows that the failure of rentier states to outshine the economic performance of tax-based states creates a legitimacy dilemma and makes rentier states vulnerable to societal challenges. The rentier nature of the state, however, means that the challenges result from noneconomic structures and ideologies.
Tax-based states like Turkey are dependent on domestically generated income. Consequently state revenues are directly affected by the domestic economy. State revenues could only increase as a consequence of growth of the domestic economy. To ensure economic growth the state has to respond to the needs of the private sector. Institutionalized links with the private sector allow the state to respond to the private sector in a systematic fashion while at the same time "guiding and controlling" it. The Turkish state's reliance on domestic resources created economic cleavages within the society and gave rise to the emergence of economically motivated groups competing with each other for the control of the state and the associated economic benefits.
Rentier states like Iran under the Shah, on the other hand, are heavily dependent on externally generated rents. The state's heavy dependence on externally generated oil revenues meant that it was cushioned against fluctuations of the domestic economy. The Imirian state, like other rentier states, could increase its income through manipulation of the price and volume of exported oil instead of encouraging domestic economic growth. The large sums of money available to the state not only decreased the economic pressure on the government, but they also minimized the economic rationale for the institutionalization of ties between the state and the private sector. At the same time the slow pace of class differentiation and the relatively small size of the productive economic sectors discouraged the development of economically motivated interest groups. Although the state was successful in impeding the growth of economic interest groups, it found itself incapable of dealing with challenges to its moral authority and was brought down by a movement that reduced the country's economic problems to the moral decadence of the state elite.