Iran's Economy in the Grip of Politics

To prove the correctness or incorrectness of economic policies, the only criterion for judgment is the results obtained from their implementation over a relatively long period of time. Looking at the experiences gained in contemporary world history, it can be said with certainty which economic policies have been right or wrong. If we are not caught up in ideological dogmas and consider the realities, we conclude that in the decades following World War II, the peoples of Western Europe, relying on 'free economy', enjoyed more prosperity compared to the 'socialist camp' in Central and Eastern Europe, and the fall of the Berlin Wall was a symbol of this competition. In Asia, the consequences of implementing two different economic policies can be clearly seen in the two parts of the Korean Peninsula - North and South. We also see that thirty-five years ago, China's leaders, by abandoning Maoism in the economic sphere, attracting foreign investments, and exporting massive amounts of goods to global markets, lifted hundreds of millions of people out of dire poverty. The disastrous results of economic policies cannot be hidden by slogans. The 'National Liberation Front' of Algeria led this North African country, with all its oil and gas, to a dark day. Hugo Chavez and his successor also brought Venezuela, despite its abundant oil resources, to the brink of bankruptcy. For the Islamic Republic of Iran, which is not far from its fortieth anniversary, the time has come for accountability. Avoiding this accountability by blaming the previous regime is not very effective, especially since the economic legacy left by that regime, despite all the criticisms that can be made against it, is significant compared to what has been created after the revolution. Thirty-seven years is a long time during which Iran has experienced eleven governments, ten parliaments, and seven presidents. Many countries have transformed their economic structures during a similar period, achieving a diverse economy and multiplying their per capita income. During this same period, China, Korea, Taiwan, and Singapore emerged in the Asia-Pacific region, Brazil became the dominant economic power in South America, India joined the ranks of emerging powers, and dynamic economic centers developed in Turkey and the Persian Gulf region. Compared to these developments, the economic record of the Islamic Republic is very poor. Even with Soviet-style propaganda, this reality cannot be hidden. The average annual growth rate of Iran, which reached over 10 percent between 1961 and 1976, fell to minus two percent in the first ten years of the Islamic Republic. Since the end of the war, this indicator has averaged no more than about 4 percent per year. Moreover, a significant part of this growth has been due to oil exports, especially during the years of high market demand for this commodity. According to the International Monetary Fund's report on the economic outlook for the Middle East and Central Asia (October 2015), Iran's per capita GDP in 2014 was even lower than that of Iraq and Algeria. During this long period, the fundamental structures of Iran's economy have remained largely untouched and continue to be dominated by oil and the government. In the figures announced by the Islamic Republic's customs as 'non-oil exports', oil-derived goods (gas condensates and petrochemical products) hold the first place, while the role of hard industrial goods is marginal. Even in the oil sector, Iran is no longer among the major exporters. The result of this situation is the expansion of unemployment, including among a very large segment of graduates, some of whom can be seen among the flood of refugees in Australia, the Balkans, and Western Europe. Beyond the purely economic record, the country's situation in environmental fields, especially in the very sensitive area of water, is extremely concerning. Evaluations from international expert circles regarding the business environment, degree of economic liberalization, misery index, financial corruption, etc., often place Iran in a very low position. Despite this very alarming picture of the country's economic realities and prospects, exiting this situation is by no means impossible, at least for two reasons: First, Iran is a country with a population of about eighty million, possessing the fourth largest oil reserves and the second or (according to another account) the first largest gas reserves in the world, with fifteen land and sea borders, a strong and ancient identity, a considerable middle class, and a young generation familiar with the requirements and needs of the twenty-first century. Many Western experts have referred to Iran in the past couple of years as the Brazil or even the Germany of the Middle East in terms of its potential. This perspective leads them to conclude that such an authentic and important country, after years of isolation and sanctions, can achieve a dynamic economy. Second, there has been significant progress in the field of political economy in Iran over the past few decades. Contrary to the perception of those who do not know Iran, there are prominent economists within the Islamic Republic who have learned lessons from Iran's experience and are well aware of economic experiences worldwide. Today, a significant portion of academic and expert circles in Iran have turned to the same economy that is discussed in scientific centers in other regions of the world. The localized forms of theories based on 'free economy' have significantly spread in Iran and have influenced a substantial part of the technocracy of the Islamic Republic. The eleventh government, especially its president, Hassan Rouhani, is more aware than any other executive heads in the history of the Islamic Republic of the necessity of fundamental transformations in the country's economic structures and its international environment. At the same time, the quantity and quality of economic media in Iran have rapidly increased, and an increasing number of economic journalists provide a vast amount of data and analyses to interested parties. The question is, why, despite all these positive factors, does Iran's economy continue to struggle in a quagmire of difficulties? Given the poor record and favorable potential, why does the policymaking apparatus not attempt to put the country's economy on the right track? It must be fairly accepted that there is a will for change to get the economy out of the vicious cycle in the eleventh government. In fact, Hassan Rouhani came to power with an economic reform program and tried to implement it. The two 'policy packages' announced in July 2014 and October 2015, despite the criticisms that can be made against them, showed that the president and his close advisors know what they want and what needs to be done. These initiatives did not reach fruition because they faced resistance from the hard core of power in the Islamic Republic. In various areas of economic policymaking, including pricing of goods, purchasing airplanes, and negotiating new oil contracts to attract foreign investors, the eleventh government came under fire from critical forces equipped with a powerful arsenal, from state media to influential news sites and figures in parliament and Friday prayer leaders. All these critical forces unanimously demand that the eleventh government implement the 'resistance economy' policies proposed by Ayatollah Khamenei. Evidence suggests that Hassan Rouhani has fully accepted the critics' demands, probably arguing that the various components of 'resistance economy' are vague enough to be interpreted in line with the government's reform programs. Does Iran's economy need to pass through such a complicated and politically charged maze to stand upright?