The Economic Record of Hashemi Rafsanjani; Unfinished Dreams of the Ayatollah

"The Builder General" is a title that has been used in many Iranian media and political circles to describe the economic record of Akbar Hashemi Rafsanjani over the years. Those who called Hashemi "The Builder General" believed that his and his government's commitment to building and developing infrastructure—from dams, roads, and highways to power plants and airport expansions—was so evident that he deserved the title, akin to "the Amir Kabir of the era." However, Hashemi's economic record was not limited to his role as a "builder" or his insistence on modernization and construction; under Hashemi Rafsanjani, Iran's economy underwent profound and meaningful changes. Fereydoun Khavand, an economist and analyst of Iranian economic issues in Paris, believes that the most significant consequence of Hashemi Rafsanjani's government coming to power in 1989 was the shift of Iran's economy from an ideological and doctrinal economy to a more conventional economic logic as seen in the world. According to Khavand, this economic logic, as it existed in the West, was introduced to the Islamic Republic's circles for the first time during Hashemi Rafsanjani's era. This economics professor explains that Hashemi Rafsanjani and his associates were influenced by the economic ideas presented by the International Monetary Fund and the World Bank. These ideas, which were taught and encouraged in Western economics universities, were known in Western economic literature as "structural reforms." However, Hashemi Rafsanjani's economic thoughts and perspectives were not always aligned with the economic policies he experienced during his government. His approach included economic liberalization, structural adjustments, a smaller government in the economy, and delegating economic affairs to the private sector, which were considered later developments for Hashemi Rafsanjani. Ahmad Tavakoli, a former member of the Islamic Consultative Assembly who held the Ministry of Labor during Mir Hossein Mousavi's government, spoke in an interview with the online network "Arman" about Hashemi's differing economic beliefs in the 1980s. In that documentary and those discussions, Tavakoli recounts that Akbar Hashemi Rafsanjani, until 1986, was in agreement with the policies of Mir Hossein Mousavi, the then Prime Minister, who was known as a leftist politician. According to Tavakoli, since Hashemi Rafsanjani was a "realist," when he saw that nationalization was creating rent and corruption, which contradicted justice, he revised his thoughts. Tavakoli states that the failure of Marxism, the collapse of the Soviet Union, and the fall of the Berlin Wall influenced Hashemi Rafsanjani's intellectual changes. Tavakoli emphasizes that after 1986, when he and his like-minded colleagues in the newspaper "Resalat" began criticizing the centralist policies of the then government, Hashemi gradually started to change his thinking. Kazem Anbarlooee, the editor of the right-wing newspaper Resalat, also attributes Hashemi Rafsanjani's change in economic perspective to his trip as the Speaker of the Islamic Consultative Assembly to East Asia, particularly his visits to China and Japan. Anbarlooee also emphasizes that Hashemi Rafsanjani supported the economic views of Mir Hossein Mousavi's government but speaks of his sudden change in economic positions. Perhaps the program-oriented approach and the formulation of mid-term development plans that were added to the responsibilities of the government and parliament in Iran after Hashemi Rafsanjani's government should also be considered his legacy from China. Adjustment; Unfinished Affection Fereydoun Khavand, an economist residing in Paris, describes the characteristics of the economic policies and programs of Akbar Hashemi Rafsanjani's government, especially his first government from 1989 to 1993, which became known as "economic adjustment" policies, stating: "Based on these policies, balances had to be established in Iran's economy, including in the government's budget and income and expenditure." According to Khavand, overall, these policies aimed to reduce the government's role in the economy, put Article 44 of the Constitution under question, decrease the size and expenses of the government, and open the way for private sector activities. Khavand speculates that Hashemi Rafsanjani was inspired by several significant reformers from developing countries, such as Deng Xiaoping, the President of China after Mao, and Turgut Özal, the former President of Turkey, in these reforms. In describing other characteristics of the economic adjustment policies, he points to "efforts to improve and expand the tax system," "moving Iran away from an oil-dependent economy towards a non-oil economy and integration into international trade." Khavand suggests that Hashemi Rafsanjani was influenced by several important reformers from developing countries, such as Deng Xiaoping and Turgut Özal, in these reforms. Among the developments of that era, the gradual dominance of technocracy and the rise of technocrats is another characteristic of Hashemi's period. The emergence of ministers and managers with expertise and the transition from merely committed managers to this prominent feature of those years is emphasized by Sadiq Zibakalam, a professor at Tehran University, in the television documentary "Mosaf." Zibakalam states that Hashemi Rafsanjani made it clear during the vote of confidence for his cabinet in the Third Assembly that he was responsible for the political issues of the government and referred to his ministers as technocrats who were supposed to perform their specialized tasks. This political science professor, who is noted as someone close to Hashemi Rafsanjani, says: "Hashemi clearly knew what he intended to do. Initially, Hashemi wanted to destroy Iran's state economy and replace it with a free economy." Zibakalam describes another step of Akbar Hashemi Rafsanjani as "privatization" in Iran's economy and concludes: "The eight-year war had devastated Iran's economy and infrastructure, so Hashemi was urgently seeking to build railways, power plants, dams, and other infrastructures." Technocrats with neoliberal tendencies were the executors of economic policies centered around structural reforms recommended by international institutions, which later became known in Iran as "structural adjustment." Currency shock became a bane of adjustment. However, these policies faced serious opposition, with critics remaining unyielding in expressing their criticisms and objections. Critics point to the figures resulting from the consequences of these policies, noting that the highest inflation rate in Iran's economic history occurred in 1995. Inflation reached about 50 percent, and the unprecedented rise in the dollar's price was one of the most significant features of this period, resulting from the government's and central bank's efforts to liberalize the exchange rate. The official dollar rate during the years Hashemi Rafsanjani was president increased nearly 20-fold, from 9 tomans to 175 tomans, while the dollar rate in the free market also rose approximately 4.5 times, from less than 100 tomans to around 450 tomans. The average inflation rate during Hashemi Rafsanjani's eight years in power was about 25.5 percent, which is considered high. Farshad Momeni, an Iranian institutional economist and one of the most well-known critics of the structural adjustment policies, who has written a book on this subject, states in his critiques of that period and the adjustment economic policies to ILNA: "Structural adjustment brought poverty and misery." This professor of economics at Allameh Tabatabai University emphasizes that "the implementation of structural adjustment policies did not create wealth; rather, the structural adjustment program for Iran produced poverty, misery, disorder, and significant backwardness, while at the same time, we emphasized that none of the infrastructural and institutional foundations existed for this experience to yield results for Iran." According to Farshad Momeni, "the structural adjustment program was adorned with empty promises to gain acceptance." He considers the key element among the structural components of the adjustment economic policies to be the presentation of grand promises to pave the way for major and minor shocks to key economic indicators, citing the currency shock of 1990 as one example of this shock. This Iranian institutional economist notes that there are "very shocking" reports regarding the consequences of that currency shock and the lack of any scientific basis and logic in implementing those policies, while expressing regret that there are missing links in Iran's economic decision-making system that lack the ear to hear and the eye to see these effects and consequences. The unprecedented inflation and the effects resulting from the currency shock dissuaded Hashemi Rafsanjani from continuing the desired reforms, leaving the adjustment unfinished and unsuccessful. Even the generals of adjustment and the executors of the economic policies of that era were each somehow sidelined or marginalized from Hashemi Rafsanjani's second government. Ironically, defenders of those economic policies later referred to the incompleteness of that process, the failure to complete all the links in the policy chain, and the dominance of political opposition and resistance against economic principles as reasons for the failure of those policies. The Islamic Republic against the Islamic Republic. I ask Fereydoun Khavand, an economist and retired professor at René Descartes University in Paris, why Hashemi Rafsanjani's structural reforms were left unfinished and unsuccessful. Mr. Khavand believes that although Hashemi thought he was the powerful and strong man of the Islamic Republic and could implement his reforms without issues, shortly after implementing those policies, the institutional logic of the Islamic Republic revealed itself. According to this economics professor in Paris, Hashemi Rafsanjani's biggest mistake was believing that the legal, political, and institutional structure of the Islamic Republic was ready to align itself with these reforms and changes. Khavand continues: "It quickly became clear that the opinion and view of the Supreme Leader prevailed over the head of the executive branch, and in any case, Iran's institutions were not prepared to carry out such reforms." Another characteristic of Hashemi's era is the notable economic growth rate during those years, which stemmed from the release of capacities engaged in the war and their utilization in construction. The government quickly moved to increase public and construction expenditures, resulting in an economic growth rate of 14 percent in 1990, according to World Bank statistics, but this growth was not sustainable and decreased to lower figures after two years. Ultimately, the average economic growth rate during this eight-year period reached 5.5 percent. Nevertheless, Hashemi and his government are accused of being indifferent to social justice and equitable wealth distribution, and their performance is said to have exacerbated class divides. However, the average Gini coefficient, which is one of the indicators of measuring equitable income distribution, did not show a significant difference during Hashemi Rafsanjani's period compared to changes in this index over the past four decades and was even better than some years and periods. During Akbar Hashemi Rafsanjani's eight years in power, the average Gini coefficient was 0.3985. The Gini coefficient is expressed with numbers between zero and one, with a number closer to zero indicating a more equitable income distribution and a number closer to one indicating greater income disparity in society. However, it should be noted that the Gini coefficient alone cannot represent the existing reality regarding equitable income distribution and class divides. According to World Bank statistics, the per capita GDP of Iranians decreased from $2,590 at the beginning of Hashemi Rafsanjani's term in 1989 to $1,820 by the end of his term in 1997, a decrease of about 30 percent over eight years, which was accompanied by population growth during this period. Iran's population, according to the same statistics, increased from about 54.8 million to 62.43 million by the end of Hashemi Rafsanjani's term, marking a 14 percent growth in Iran's population during these eight years. The economy of Hashemi's era also represents other characteristics and aspects, such as adopting a policy of "self-management" for certain institutions and organizations to reduce the financial burden on the government or Hashemi Rafsanjani's efforts to utilize the potential of the Islamic Revolutionary Guard Corps, which, having been relieved from the war, could assist the government economically, leading to the military and intelligence institutions being allowed to enter the economy, becoming permanent guests in this field, and today becoming the most significant obstacle to Iran's economic development and the activities of the private sector.