Quality or Quantity of Economic Growth; Which is the Issue?

One of the campaign slogans of the "presidential election candidates" that is becoming their sacred and golden word is the promise of increasing "economic growth." Economic growth can be pursued through various approaches. However, few of these approaches are sustainable, endogenous, stable, and job-creating, and they contribute to economic-social renewal. Traditional approaches to economic growth, although having positive short-term consequences, cannot solve the deep and chronic problems rooted in Iran's traditional economy. Moreover, the Iranian economy has suffered from a low and volatile average growth rate of nearly 3 percent over the past 40 years. The problem of Iran's economic growth is not limited to its quantity; there is much to say about its volatility and quality as well. Events following the fall of the previous regime in Iran, which led to chaos, followed by hostage-taking, war, and extensive sanctions and global isolation, are just part of the reasons explaining this inadequate and volatile economic growth. However, these events do not explain all the constraints on Iran's economic growth, and there are other reasons for it. The quality of Iran's economy, in terms of the advancement indicators of goods (exports of raw materials, minerals, carpets, and dried fruits), is low and government-centered (the government is the engine of economic growth). Iran's economy is exogenous (dependent on oil revenues from abroad) and inward-looking (relying on the domestic consumer market and unable to participate in global markets). Such growth cannot lead to sustainable solutions for structural unemployment, poverty alleviation, or increasing the level and standard of living of citizens. For instance, although the Iranian economy witnessed significant growth last year (1395), according to forecasts from international institutions like the International Monetary Fund, the growth rate will be halved the following year (1396). Such volatile economic growth reflects the high risk of Iran's economy and is insufficient for job creation. Global research shows that the capacity of traditional industries to create jobs has diminished, and it is the new knowledge-based industries that have become the engine of entrepreneurship, especially among the youth, women, and educated individuals. It is worth noting that according to official statistics, the unemployment rate among educated youth is nearly double the average unemployment rate. On the other hand, the unemployment rate among women is several times that of men, and in times of unemployment crisis, it usually rises faster than that of men. Therefore, any approach to economic growth must pay special attention to these groups. Endogenous growth versus exogenous growth It is no secret that the economy, livelihood, and sustenance in Iran are mainly based on the export of a simple raw mineral, namely oil, and at most the export of traditional goods such as dried fruits and carpets, which do not have complex production processes. The extensive share of oil in exports and the budget symbolizes this, but it does not end there. Discussion about the quality of economic growth is often neglected in the electoral candidates' discourse, focusing only on its quantity, whereas the issue is the quality of growth, not its quantity. The simplicity and lack of diversity of export goods, the small share in international trade, and the lack of fundamental knowledge in Iran's economy have made it extremely vulnerable, characteristics that symbolize the high tension of Iran's economy in the global oil market. Knowledge-based economies rely on the export of goods that, unlike simple natural mineral goods, have competitive power and high added value. This is why countries whose economies are based on complex and advanced production are usually developed and have endogenous and sustainable growth. The growth of such countries is job-creating and accompanied by social and political development. For this reason, one unit of economic growth in a developed economy is not equivalent to economic growth based on the export of mineral materials such as oil and requires advanced knowledge production and management. Therefore, the quality of one unit of economic growth based on oil exports cannot be compared to the quality of one unit of economic growth resulting from the production and export of knowledge-based goods. This quality difference relates to competitive value, added value and profitability, sustainability, job creation, and also massive investment. Growth based on exogeneity versus growth based on endogeneity Iran's economy is also an inward-looking economic system; in other words, the sale of crude oil in the global market is the source of financing for investment and increasing consumption, and consequently, economic growth in the domestic market. A significant portion of economic growth in Iran, apart from oil, is the product of the domestic market and consumption. In other words, if we disregard oil and the raw sale of other resources and traditional goods, economic growth in Iran does not stem from participation in international markets, diversity of goods, and export markets. Statistics show that Iran's average share in global trade does not exceed half a percent. Iranian enterprises have not been able to make substantial investments in the field of new technology and knowledge-based industries. Therefore, it is natural that they do not have a share in the global market. Unstable and volatile growth versus sustainable growth Sustainable economic growth is conditional on appropriate investment in environmental preservation and human capital. Iran is experiencing multiple environmental crises, particularly in the areas of water, air, and nature. The amount of access to water decreases every year, and the crisis of polluted air is not a hidden problem, threatening the health of citizens, especially in large cities. Addressing these threats and adapting life to environmental standards is an advanced strategy and requires significant changes in the economic structure and lifestyle, which is not a priority in government discourse, and society does not pay much attention to it. Especially in the last decade, Iran has not made extensive investments in transforming industries and adapting the economic system to environmental requirements; therefore, this instability of economic growth is not surprising. Also, over the past 40 years, the rate of Iran's economic growth has always been volatile. Several times when this variable has shown relative increases, it has again declined after a short period. For this reason, it is difficult to predict the trend of Iran's economic growth. The volatility of economic growth is one of the indicators of the low quality of Iran's economic growth. It is clear that economies with highly volatile growth cannot attract global capital, which seeks a calm and secure environment. In this context, the volatility of the economic growth rate is incompatible with the job creation process. Furthermore, Iran's economic growth has been limited to specific sectors and geographic points. In conclusion: With what growth can jobs be created? Considering the declining share of large traditional enterprises in global employment, entrepreneurship within the framework of small enterprises and innovation in the service and knowledge-based industries has become one of the effective tools that can be utilized for job creation. Institutions active in the information industry, such as Apple and Facebook, are hundreds of similar institutions that are products of this entrepreneurial process, which play a significant role in value-added and job creation in endogenous, knowledge-based, and sustainable economic growth. Entrepreneurship in the field of knowledge-based industries, especially in an economy like Iran that faces widespread unemployment among young and educated workers, can be a suitable solution for employment, economic growth, and increasing the standard of living. Discussion about the quality of economic growth is often neglected in the electoral candidates' discourse, focusing only on its quantity, whereas the issue is the quality of growth, not its quantity.