Iran's Economy: Ten Constraints and Two Escape Routes: Social Inequalities

Among the ten economic constraints of Iran outlined in the introduction of this discussion, Fereydoun Khavand examines the seventh constraint, which pertains to "social inequalities." Social inequalities are a much broader concept than the gap in income or wealth among individuals in a society. In fact, social inequalities are the groundwork for the unequal distribution of income and wealth within a society, although they are not the only source. We know that social values that generate benefits are not equally distributed across various fields, from political and economic to religious and cultural. In other words, not everyone has equal access to these values and the benefits derived from them. Individuals in a society are placed into different social groups based on their degree of access to the desired values, and their affiliation with a particular group often affects their income level and wealth. The social values that generate benefits are not the same in all societies. In many contemporary societies, success in work and education and obtaining solid university degrees is a high social value. However, even in the most advanced Western societies, access to this value does not occur under equal conditions. A newborn in a culturally affluent family naturally benefits from "position rent" from the very beginning and, due to familiarity with good writing and speaking, access to books in the family environment, and early knowledge of the various stages of the educational system, from elementary to university, has better opportunities for advancement. In France, various statistics show that children from the cultural class, especially primary and secondary school teachers, are optimally prepared from the outset to benefit from the educational system and obtain the best university degrees. Naturally, children from affluent classes are also in a better position to access the most expensive educational institutions at national and global levels. In contrast, in a country with the political, cultural, and economic characteristics of Iran, university education is not a pathway to advancement and has even become an obstacle to employment. Additionally, a series of social "values" that are completely contrary to the advanced societies of the 21st century have created deep social inequalities that naturally exacerbate income gaps: - Being a woman is a serious obstacle to employment and advancement in social hierarchies. The very low participation rate of women in the Iranian labor market (the active female population compared to the total female population of working age) and the negligible percentage of women among senior officials and managers of production units display the social inequalities arising from being female in Iranian society. - Being a Shia is a "social value," meaning that not being Shia becomes a counter-value and hinders access to a "normal" life. In fact, children from religious minorities face obstacles and difficulties from the outset that children belonging to the majority religion do not encounter. - Being born into the "insider" class provides a very lucrative social value. In fact, the more or less obvious discrimination between "insiders" and "outsiders" is one of the most important factors generating social inequalities, and its role in creating and deepening economic inequalities should not be overlooked. Many of the most prominent experts in the country, because they do not belong to the "insider" spectrum, cannot access power centers in the Islamic Republic. For them, becoming a minister, a member of parliament, or even a mayor is among the impossible. The rents that generate inequality are not exaggerated when we say that in Iranian society, factors such as gender, religion, and "apartheid" based on "insider" and "outsider" have turned into rents and, from this perspective, also affect the distribution of income and wealth. The gravity of the issue is that such rents have become a normal phenomenon for a large segment of society, including victims of discrimination. This statement does not mean that all men in Iranian society can be described as "rent-seekers" in comparison to women. What is meant is that the intertwining of a series of common discriminations in the Islamic Republic is the groundwork for severe social and income inequalities. A girl born into a Sunni family in a deprived area lacking an acceptable educational system will have a completely different fate than a boy born into a Shia family belonging to the "insider" class in affluent areas of Tehran. Alongside these kinds of discrimination, which have taken on a "normal" and "natural" form, the Iranian economic system relies on mechanisms that practically serve the very unequal distribution of oil rents. Within the vast bureaucracy of the Islamic Republic, the "discovery" of privileged individuals enjoying astronomical salaries has recently caused a major scandal known as "Fishgate." This concerns salary slips of several tens and even hundreds of millions of tomans for managers of certain institutions and government units who also benefit from other privileges such as "sports expenses" and "child leisure allowances" and have access to loans of several hundred million tomans at interest rates below five percent. The very extensive "quasi-state economy" composed of units under the control of foundations, the Revolutionary Guard, etc., also plays a significant role in the distribution of rents among the privileged of the Islamic Republic without being accountable to any authority. Moreover, production units under the control of the government and quasi-state institutions block competition to maintain their exclusive income, thereby eliminating those who could generate real wealth and create job opportunities from the scene. To understand the roots of income inequalities in Iran, the role of other factors such as inflation, severe currency fluctuations, and the very high interest rates of a sick banking system should not be overlooked. Inflation destroys the homes of deprived households, while it brings wealth to some speculators. Some billionaires in the Islamic Republic owe their wealth to the multi-rate currency system and the exploitation of severe currency fluctuations. Also, those who deposit several billion tomans in Iranian banks enjoy astronomical profits that are unimaginable for a European or American depositor. Another source of inequality in the distribution of income and wealth is the widespread corruption that has engulfed various sectors of the country's administrative and economic apparatus. The examination of this factor, which has taken on a gangrenous nature in the country, will be addressed as the eighth economic "constraint" in the near future. We reiterate that inequality in income distribution is the most tangible consequence of social inequalities. One of the most important scientific tools for measuring inequality within countries is the well-known "Gini coefficient," which was developed by an Italian expert in demographic and statistical issues of the same name. This coefficient fluctuates between zero and one hundred. Zero means complete equality, and one hundred indicates a society at the peak of inequality where all wealth belongs to one person. Typically, in Northern European countries, where income distribution inequality is the lowest in the world, the Gini coefficient is below thirty, whereas in some countries suffering from severe inequality, particularly in Africa or Latin America, this coefficient can sometimes reach sixty or higher. Statistical centers of the Islamic Republic, including the Central Bank, state that between 2011 and 2016, the Gini coefficient in Iran rose from above thirty-seven to above forty, meaning that Iranian society has become more unequal in terms of income and wealth distribution during these years. The increase in social inequalities during this period has likely stemmed from factors such as inflation, severe currency fluctuations, deep recession, economic sanctions, and, of course, the spread of corruption. If we compare the Gini coefficient in Iran with the same indicator in other countries, we see that the level of income inequality there is significantly higher than in Western European countries, Japan, and Canada. Furthermore, Iran lags far behind India and Pakistan in terms of ensuring equality in income distribution. Let us not forget that the fight against social inequalities was one of the main slogans of the 1979 Revolution. The Constitution of the Islamic Republic also promises the establishment of a "government of the righteous," one of the goals of which is to "eliminate unjust discriminations and create equitable opportunities for all in all material and spiritual areas." Fereydoun Khavand, an economist, economic analyst, and professor of economics in Paris, France.