Eurasia Press & News
In an editorial last Monday, Kayhan, believed to reflect the views of the “Supreme Guide”, claimed that now that the Islamic Republic has defeated the American “Great Satan” in the Middle East, it must deal with hyperinflation as “the greatest threat to our revolution.”
The new tune may be partly prompted by a desire to cast the current nationwide protests as rooted in economic grievances rather than a rejection of the system as a whole.
Having registered four consecutive years of negative growth combined with a dramatic fall in the value of the national currency, the Iranian economy resembles a half-broken ship in a stormy sea with no captain in charge. Last “Black Monday,” the Tehran Stock Exchange registered an all-time historic collapse in share values, wiping out part of the savings of an estimated 2.5 million small and medium investors.
Right now over 5,000 public and private sector projects are on “pause” for lack of funds or skilled workers. At the same time, the overall economy is estimated to be losing an average of over 1,000 jobs each day. Part of this is due to a bilateral trade agreement with China, under which Beijing buys Iranian oil at a 44 percent discount per barrel and pays the price in yuans, which means massive imports from China — imports that destroy local industries producing similar goods.
A prominent Iranian economist, Hassan Mansoor, says that in Iran the government is “one of several players” in the economic field, each pursuing its own agenda and protecting its own interests.”
Economic failure is caused by bad politics, not the other way round.
Is Bill Clinton replacing Ayatollah Ruhollah Khomeini as the “Source of Emulation” (marja’a taqlid) of the leadership in Tehran? Posed by an Iranian satirist, the question cannot be dismissed as a tongue-in-cheek quip on the new discourse developed by the Khomeinist establishment.
In July 1980, the late ayatollah who founded the Islamic Republic told a group of university professors that the new revolutionary regime should not waste time on economic issues. “We didn’t give so much blood for economic reasons,” he boasted. “Economics is of interest only to asses.”
These days, however, it is Clinton’s first campaign slogan “It’s the economy, stupid!” that is bandied around in Tehran’s ruling circles in various forms.
Supreme Guide Ali Khamenei has led the chorus by designating the current Iranian year (ending in March 2024) as “The Year of Production”, insisting that achieving economic growth is his highest priority.
“We must focus on the economic challenge we face,” he told a recent gathering of the top decision-makers.
In an editorial last Monday, Kayhan, believed to reflect the views of the “Supreme Guide”, claimed that now that the Islamic Republic has defeated the American “Great Satan” in the Middle East, it must deal with hyperinflation as “the greatest threat to our revolution.”
The new tune may be partly prompted by a desire to cast the current nationwide protests as rooted in economic grievances rather than a rejection of the system as a whole.
However, it may also be seen as admission by Khamenei that his campaign for a “resistance economy”, launched 10 years ago, has failed. That campaign had been inspired by North Korea’s “Juche” (self-sufficiency) doctrine developed by Kim Il-sung in the 1960s.
Having registered four consecutive years of negative growth combined with a dramatic fall in the value of the national currency, the Iranian economy resembles a half-broken ship in a stormy sea with no captain in charge. Last “Black Monday,” the Tehran Stock Exchange registered an all-time historic collapse in share values, wiping out part of the savings of an estimated 2.5 million small and medium investors.
Earlier, official statistics showed a small drop in the annual rate of inflation, hovering close to 50 percent. And yet some economists, including Hashem Pesaran, a veteran analyst of the Iranian economy, warn that Iran may be heading towards hyperinflation of the kind experienced by Argentina, Venezuela and Zimbabwe.
The latest figures provide other reasons for concern. While the overall rate of inflation seems to have stabilized, prices of mass consumer goods, notably food, continue to rise faster than the average.
Negative growth means growing shortages on the supply side, the root cause of inflation. Right now over 5,000 public and private sector projects are on “pause” for lack of funds or skilled workers. At the same time, the overall economy is estimated to be losing an average of over 1,000 jobs each day. Part of this is due to a bilateral trade agreement with China, under which Beijing buys Iranian oil at a 44 percent discount per barrel and pays the price in yuans, which means massive imports from China — imports that destroy local industries producing similar goods.
At the same time, China adamantly refuses to invest in the Iranian economy. An investment package of a paltry $37 million in building a gas pipeline in northeast Iran was withdrawn last week for “further studies.” Another “big project” slated to attract a $200 million investment package by Oman has been veiled and unveiled a number of times. The official media now muse over possible “massive investments” from Saudi Arabia.
A seminar organized by economists close to the establishment last month warned that unless the current trend is reversed, Iran may face bread riots of the kind associated with less developed “Third World” nations.
Over the past two to three months, the authorities have organized or supported numerous seminars in the hope of finding a miracle solution.
Leaving aside the top echelon of economic decision-making that consists of regime cronies, Iran has many learned economists. They produce countless studies, research papers and policy guidelines that decision-makers either refuse to read or if they read, won’t understand.
Even then, knowingly or not, our learned economists are influenced by methods that were in vogue until the 1980s. One such method was the Marxist one, according to which the economy represents a society’s infrastructure while politics provide the superstructure. The other method is known as “political economy” advocated by the American economist John Kenneth Galbraith, author of The Affluent Society, among others, according to which economics must be in the service of “progressive” political aims.
The problem with both methods is that each, for a reason of its own, ignores the status of economics as an independent science with its own inner logic. Thus, they prevent the development of policy recommendations offering strictly economic measures which, acknowledging the primacy of politics, political decision makers may accept, reject or modify.
In Iran, we have an added complication, the adjective “Islamic” that is used to modify every noun. Thus just as we have “Islamic physics” and “Islamic medicine” we also have “Islamic economics.”
Since the root cause of Iran’s prolonged crisis is political, trying to deal with its economic effects in isolation is at best a futile pursuit and at worst and exercise in deception.
The present system makes meaningful economic decision-making difficult if not impossible. This is because what goes for government in Iran is, in fact, a patchwork of authorities controlling different parts of the economy.
A prominent Iranian economist, Hassan Mansoor, says that in Iran the government is “one of several players” in the economic field, each pursuing its own agenda and protecting its own interests.”
Some of these players peddle different utopias, thus adding to confusion. In recent months, some of those utopias have been on the retreat while still wearing their deceptive smiles. However, it isn’t clear whether that retreat is anything but a tactical move to negotiate a bad patch on the road to Khamenei’s “Great New Islamic Civilization.”
I still think both Khomeini and Clinton were wrong.
Economics is not for asses, and it isn’t the economy, stupid!
Economic failure is caused by bad politics, not the other way round.
