The Deadlock of Economic Policy-Making in Iran

Hassan Rouhani assumed the presidency of the Islamic Republic in 2013 as a continuation of the economic policies of Akbar Hashemi Rafsanjani and Mohammad Khatami, selecting many of his senior technocrats from the ranks of collaborators of the two former presidents and prioritizing the organization of the country's economic situation. The three main pillars of the thoughts of the eleventh government in economic matters were well known, especially considering the thick book titled "National Security and the Economic System of Iran" published about two years before his presidency in collaboration with several of his like-minded colleagues. From this book, as well as his writings and statements over the past few decades and during the electoral campaign for his first term, it was clear that among the politicians emerging from the revolution and the Islamic Republic, he is one of the few who has the most familiarity with the economic issues of Iran and the world. In short, Hassan Rouhani did not hide his close connection to the ideological lines of the so-called "reformist" tendencies of the Islamic Republic and mostly chose his economic team from prominent figures associated with this tendency. More importantly, he assigned a significant role in his close circle of colleagues and advisors to Dr. Masoud Nili, a figure recognized as the main theorist of structural reforms aimed at advancing towards a free economy and who played an active role in drafting the five-year plans of the post-war period with Iraq (except for the years of Mahmoud Ahmadinejad's presidency). Thus, the "Government of Hope and Prudence" promised to adopt the same policies that had previously been presented to the country under the titles of "Economic Adjustment" (during Rafsanjani's presidency) and "Economic Organization" (during Khatami's presidency). Additionally, in his electoral platform for his second presidential term, published under the title "Iran Again," Hassan Rouhani reiterated these promises, even in a more coherent manner. These policies, aimed at extricating the structures of the country's production system from the deadlocks caused by the state and oil-dependent economy, were supposed to be implemented around three main pillars: 1) Purifying the economic apparatus by combating fundamental imbalances, including the gap between government revenues and expenditures, the gap between money supply and demand, the gap between exports and imports, etc.; 2) Recognizing the role of the market as the main factor in optimal resource allocation, liberalizing economic activity, and privatizing state-owned production units that have mostly survived by relying on subsidy injections and consuming national resources rather than creating wealth; 3) Transforming foreign trade to turn a closed, inward-looking economy into a dynamic, outward-looking economy that can align itself with global market developments and shift from focusing on raw material exports to exporting manufactured goods. Today, when we look at the significant economic difficulties in Iran, we see that Rouhani's government's promises regarding the reconstruction of the Iranian economy have met the same fate as the two previous attempts at policies known as "adjustment" and "organization." Given the current emergency situation in the country and the entrapment of the economic policymaking apparatus in ambiguity and stagnation, it is evident that Hassan Rouhani's government has faced an even more severe failure in this area than the two previous presidents. Of course, the president of the eleventh and twelfth governments emphasizes his achievement in combating inflation. It is true that based on the official statistics of the Islamic Republic, the inflation rate has dropped from about 40 percent in the last months of Ahmadinejad's presidency to below 10 percent. Nevertheless, this reduction is largely the result of currency rate suppression, price controls at artificial levels, and the intensification of economic recession, and even this "achievement" is now in question given the risk of a return to severe inflationary tensions. In other areas, from improving the business environment to reforming the cash subsidy system and adjusting energy carrier prices, neither the eleventh government nor the twelfth government has produced any miracles, and the latter is in such troubles that it is not far from complete paralysis. Apparently, Masoud Nili has quietly withdrawn, and members of the government's "economic team" have lost their morale in the face of the current situation and future prospects. Why has the ship of economic policymaking in the Islamic Republic, after rolling from one storm to another, become so stuck in the mud? We point to two examples of reasons provided in this regard: 1) Some point the finger at the policies aimed at economic liberalization, arguing that such policies do not work under Iran's conditions. These critics actually criticize policies that have never had the opportunity to be implemented in Iran and have never gone beyond words and general programs. Is it wrong to reduce the size of the government, balance the budget, open up space for talents and creativity to flourish, reduce severe dependence on oil, and create conditions for exporting non-oil and increasingly industrial goods to global markets? Should we continue to sink into a state-controlled economy and give way to rationing and couponism? 2) Another group accuses the members of the government's economic team of lacking the necessary competence and of having brought the situation to this point with their wrong decisions. The author of this note does not guarantee the competence of the economic officials of the Islamic Republic, but does not believe it is fair to break the dishes over them either, nor does he believe that merely changing them can lead to an economic miracle under the current circumstances. The endless calamity must be sought elsewhere. One of the most important issues is the ideological dogmas that have clutched the country's foreign policy like an octopus, turning it into a source of endless calamity. In fact, over the past forty years, tensions in foreign policy have been the biggest obstacle to economic policymaking in Iran. The heavy weight of this major obstacle can be better understood by comparing it to what happened in China. In the late 1970s, when the People's Republic of China decided to make a historic shift in the economic sphere after Mao Zedong's death, it turned its relationship with the world upside down. Before that, the Chinese were exporting the "Little Red Book" of Mao and providing financial assistance to hundreds of foreign groups under the title of "Marxist-Leninist Communist Parties," including Iranians. Modern China bid farewell to all these groups, shut down revolutionary broadcasting devices, and focused on attracting massive foreign investment and exporting goods to global markets. Today, we see the consequences of this policy change. However, the Islamic Republic has turned foreign relations tensions into a permanent principle of its foreign policy and has increasingly insisted on this path. Currently, Iran's fragile economy bears the heavy burden of significant political and military interventions, the relationship of which with the national interests of the country is clear to no one. According to assessments from various sources, the cost of the Islamic Republic's active participation in the Syrian crisis, support for Hezbollah in Lebanon, and the Hamas organization is estimated to be between 13 to 22 billion dollars annually, and the substantial costs of intervening in the affairs of countries like Iraq, Afghanistan, and Yemen must also be added to this. Most importantly, the 40-year conflict with the United States, the world's most powerful economic power, and the restrictions and sanctions imposed on the country as a result of this conflict are significant problems. The issue is that the Islamic Republic's interventionist and costly policies are implemented in accordance with the country's constitution. Refer to Chapter Ten of this constitution under the title "Foreign Policy," which encompasses Articles 152 to 155. Article 152 states that the foreign policy of the Islamic Republic is based on "defending the rights of all Muslims." Article 154 emphasizes that "the Islamic Republic considers the happiness of humanity in the entire human community as its ideal and recognizes independence, freedom, and government of right and justice as the rights of all people in the world. Therefore, while refraining from any interference in the internal affairs of other nations, it supports the rightful struggle of the oppressed against the oppressors in any part of the world." When a legal text places such heavy responsibilities on a nation with such limited resources with such vague phrases, where does it lead? What does "the happiness of humanity" mean in the entire human community, and how is it possible to identify the oppressed and the oppressors "in any part of the world" that are to be supported, and by what right? Can a country with such a constitution and foreign policy become a normal member of the global community and defend its economic interests? In a country with this constitution and this foreign policy, even if you hire Nobel Prize-winning economists to write an economic program for the government and employ the world's most prominent technocrats to implement it, you can be sure that they will all meet the fate of Hashemi Rafsanjani, Mohammad Khatami, and Hassan Rouhani. The speeches of this or that Ayatollah and general will unravel all their threads.