Economic Wounds of Iran

On the occasion of Government Week, which begins on Tuesday, September 2, and the end of the first three years of Hassan Rouhani's presidency, Tehran media and representatives of expert circles are examining the economic performance of the eleventh government from various perspectives, especially in the areas of prices and growth, which most affect people's daily lives. The limited comparison of the decline in the inflation rate is, as we know, the most important indicator that Hassan Rouhani emphasizes each time to defend his record. There is no doubt that the transition of this key indicator from the range of forty percent to below ten percent between 2013 and 2016, and the prospect of further reduction in it, will be one of the most important tools used by the current executive leader to overcome his rivals in the upcoming presidential elections, which will begin soon. The reaction of rivals and critics of the eleventh government is also well-known. They argue that reducing inflation is not particularly commendable if it is accompanied by such a heavy recession, and overall, Rouhani's government has failed to get the country's economic wheels moving. Of course, the negative growth rates of -6.8% in 2012 and -1.2% in 2013 rose to 3% the following year, but in 2015 this indicator returned to the zero range (or one percent according to the Iranian Statistics Center). Recently, Hassan Rouhani announced that Iran's growth rate increased to 4.4% in the first quarter of the current year. This is a positive development, but details published by the Iranian Statistics Center indicate that the increase in growth during the period under review was mainly due to the rise in Iran's oil exports following the beginning of the sanctions relief process, and its reflection is not seen in the leading sectors of the country's economy (including construction) or in the labor market. In short, the country's industrial units and the entire market continue to struggle in a heavy recession. The resolution of the nuclear case and the signing of the Joint Comprehensive Plan of Action (JCPOA) prevented the further collapse of the country's economy and its 'Venezuelanization.' Fereydoun Khavand Despite all these 'buts' and 'ifs', from any angle we look at it, compared to the indescribable chaos of the previous presidency and the turmoil he imposed on internal governance and Iran's international relations, the management of the country's economy is now in more capable hands. The resolution of the nuclear case and the signing of the JCPOA prevented the further collapse of the country's economy and its 'Venezuelanization.' Iran's oil production and exports have more or less returned to pre-sanction levels, the country's image in international economic circles has improved, and several bridges of communication with the international financial and banking system have been rebuilt. In other words, it can be accepted that Hassan Rouhani has been able to compensate for some of the devastation left over from the previous presidency to some extent. However, if we go beyond this limited comparison and assess Rouhani's government performance in relation to the mountain of problems weighing on Iran's economy, our judgment about the current president's record is turned upside down. Fereydoun Khavand This perspective on Rouhani's economic record, which can be considered optimistic, is only justifiable in comparison with the performance of the current president and his predecessor. In other words, it can be accepted that Hassan Rouhani has been able to compensate for some of the devastation left over from the previous presidency to some extent. But if we go beyond this limited comparison and assess Rouhani's government performance in relation to the mountain of problems weighing on Iran's economy, our judgment about the current president's record is turned upside down. The ruined house In fact, considering the myriad of calamities that have befallen Iran's economy, the changes made in areas such as inflation and growth rates, no matter how significant they may be, fade in importance. We are faced with a house that is fundamentally ruined, and its reconstruction depends on making fateful changes for the country's future. Hassan Rouhani knows the difficulties, but he lacks the will and ability to confront them. To better understand the economic miseries of the country today and to grasp the colossal dimensions of the effort required to confront them, we refer to a very meaningful comparison made by Dr. Masoud Nili, the economic advisor to the president, between two time periods for Iran's economy: one in 1988, the final year of a deadly eight-year war with Iraq, and the other currently. To better understand the economic miseries of the country today and to grasp the colossal dimensions of the effort required to confront them, we refer to a very meaningful comparison made by Dr. Masoud Nili, the economic advisor to the president, between two time periods for Iran's economy: one in 1988, the final year of a deadly eight-year war with Iraq, and the other currently. Fereydoun Khavand This comparison was recently made by Dr. Nili in a speech titled 'Iran's Economy and the Necessity of National Consensus on National Issues' among professors and students at Sharif University of Technology. The statements of the president's economic advisor were quoted from the latest issue of the weekly 'Tejarat-e-Farda' published in Tehran (Issue 189, Saturday, August 20, 2016). According to Dr. Nili, Iran's economy in 1988 faced significantly fewer and less profound difficulties than today. He stated, 'The problems that have accumulated in recent years have created a very difficult situation for policymakers. There has never been a time in Iran's economy when so many problems have manifested simultaneously.' Hassan Rouhani's economic advisor says, 'Iran has not been managed in a way that ensures long-term sustainability over the past decades. It was expected that one day various wounds would surface and cause major and complex problems for the people. In the past, in 1988, some of these wounds surfaced when they were very few, creating significant issues. At that time, the country did not face a water crisis. The air in cities was clean everywhere, both in the center and at the borders. The pension fund not only did not have a deficit but was also in surplus. The large number of births in the early 1980s were either in kindergartens or in their first years of elementary school. The country's administrative and managerial system had not yet experienced the heavy blows of the past decade. Fereydoun Khavand The pension fund not only did not have a deficit but was also in surplus. The large number of births in the early 1980s were either in kindergartens or in their first years of elementary school. The country's administrative and managerial system had not yet experienced the heavy blows of the past decade. Most importantly, there was a high capacity for growth in the economy. Today, the list of problems is longer. The dimensions of some issues, such as the amount of jobs needed, are much larger. The very important point is that conflicts of interest are unprecedentedly evident. In 1988, there were fewer problems, and their depth was greater. While currently, the number of problems is greater, and the depth of many of them is also greater.' National Consensus? Given all these problems, what should be done, or rather, what can be done? Dr. Masoud Nili suggests a 'national consensus' on the current issues of the country and states: 'To succeed in overcoming the problems and to be on the path to economic prosperity, a kind of convergence in discourse is now needed. By creating a national consensus on the country's problems, their solutions, and national solidarity in taking executive steps, we can hope to solve the country's current dilemmas.' The statements of the president's advisor about the number and dimensions of the country's economic miseries reflect the realities. However, the prescription he proposes to confront these miseries through the creation of a 'national consensus' does not seem particularly convincing. The 'national consensus' he envisions means that all existing political tendencies in a country have united to implement a series of common economic policies. Which country in the world has such a consensus on economic policies? In democratic countries, the majority party implements its desired economic programs, while the minority merely criticizes in hopes of gaining power in the next round. In dictatorial systems, it is the ruling power that imposes its economic policies without facing open criticism or opposition. In the Islamic Republic, the privilege of being elected and taking the reins of power is reserved for the 'insiders.' However, the 'insiders' have also gathered in different and even rival centers, and although they are committed to the general defense of the system under the banner of 'unity of word,' they have fundamental disagreements in other areas, including economic policies. Moreover, the 'conflict of interest' among them has, according to Dr. Nili himself, reached an unprecedented level. In this context, the only authority that can have the final say and effectively legitimize a unified economic policy and create a 'national consensus' in the economic sphere is the 'Supreme Leader.' However, Ayatollah Khamenei is too prudent to want to engage with economic issues and their ups and downs. Instead, whenever he wishes, he can prevent the implementation of the government's economic choices. Rather than taking a clear stance in favor of a specific economic policy, he prefers to stick to vague and general guidelines such as 'resilient economy.' These guidelines are inevitably accepted by all factions, albeit in different ways, and interpreted and explained in line with the choices of each faction. Amid these tedious acrobatics, Iran's economic miseries continue to grow deeper and more profound year by year. Fereydoun Khavand Fereydoun Khavand is an economist, economic analyst, and professor of economics in Paris, France.