Can an 'Agreement' Be Reached on Iran's Economic Policy?

In today's Iran, the acceptance of the country's severely disordered economic situation has a somewhat universal aspect, and it can be said that all political factions within the Islamic Republic have reached a sort of 'consensus' on the unsustainability of this situation. However, there is no 'consensus' on the roots of this disorder and how to end it, a factor that, given the power structure and the very complex relationships among the multiple decision-making centers in Iran's ruling system, has effectively turned economic policymaking into a tangled mess. To break out of this deadlock, can all factions of the regime be directed towards convergence on the reconstruction of the country's economy? This important question arises because a significant portion of academic circles and the technocracy of the Islamic Republic has concluded that only under a 'consensus' on policymaking can there be hope for solving Iran's very large economic difficulties. One of the most important (and perhaps the most important) spokespersons for this trend is Dr. Masoud Nili, senior economic advisor to Hassan Rouhani, the President of the Islamic Republic, who has played a very significant role in shaping the country's economic policymaking over the past three decades. It would be very unfair to attribute the failure of this effort to people like him. Helping to 'indigenize' political economy in Iran and training dozens of prominent cadres, academics, and economic journalists are among Dr. Nili's other achievements. So why, despite this expert capability, which many developing countries lack, does Iran's economy struggle in such a miserable state? This is one of the most astonishing Iranian contradictions, the understanding of which can help in overcoming difficulties. The discussion about the feasibility of achieving 'consensus' on economic policymaking also leads us to the heart of this contradiction. Here, to understand the reasoning of the President's special economic advisor in justifying the necessity of achieving 'consensus' to emerge from the current situation, we refer to his recent speech at the Sharif University of Technology's electrical engineering faculty (the text of this speech was published in the September 9, 2016 issue of the Tehran weekly 'Tejarat-e-Farda'). Three points in these remarks are particularly noteworthy: 1) Dr. Nili emphasizes the dimensions of the current difficulties of Iran's economy, which, in his view, have increased in age, diversity, and depth compared to several decades ago, 'so that currently the accumulation of institutional and infrastructural issues of the country is not comparable to any other historical period in the past.' The list of problems he mentions is quite long, ranging from water and environmental tensions to inflation, youth unemployment crisis, smuggling, the state of the economy, financing, a sharp decline in investment, toxic assets of banks, a downward trend in household income, high risk of economic activity, and the danger of bankruptcy of pension funds... 2) In creating and accumulating this volume of problems, from the speaker's perspective, 'everyone' is complicit, and for this reason, 'everyone' must participate in solving them. 3) The ruling apparatus of the Islamic Republic has succeeded at several historical junctures in making important decisions through creating convergence to solve the country's issues. This is a subtle reference, among other things, to how the acceptance of nuclear negotiations and the final signing of the 'Joint Comprehensive Plan of Action' (JCPOA) occurred. The argument is that if various factions of the Islamic Republic were able to reach an agreement on accepting the 'JCPOA', why can't they achieve 'consensus' in confronting the enormous economic problems? Dr. Masoud Nili is a prominent economist, but his argument (and those who think like him) regarding the necessity of achieving 'consensus' on economic policymaking in Iran does not seem very convincing. One could even say that this argument stems from a simplistic understanding of the political conditions of the country and the close relationships that exist between politics and economics. Clinging to 'consensus' to confront the disarray of Iran's economy, in practice, means 'suspension of the impossible' for several reasons: a) Nowhere in the world is there 'consensus' on economic policies. Of course, political economy is a science and relies on a wealth of experiences. Based on these experiences, Dr. Nili prescribes free economy for Iran's development, and in the opinion of the author of these lines, he is right. In Iran, who is responsible for regulating and implementing economic policy, and what factions and powers must achieve 'consensus'? According to Article 110 of the Constitution, determining the 'general policies' of the Islamic Republic is the responsibility of the Leader, which naturally includes economic policy as well. At the same time, Article 126 states that the President is directly responsible for matters of planning and budgeting. Nevertheless, economic schools are diverse, and economists in all countries disagree on diagnosing problems and how to overcome them. In democratic countries, the government with the majority vote implements the proposed policies of its economists, while opposing economists limit themselves to criticism until the opportunity arises to implement their own proposed policies. In dictatorial systems, the ruling government has its own economists, imposes its policy as it wishes, and generally does not take others into account. The free market school in today's Iran has an increasing number of followers thanks to thinkers like Dr. Nili, but other economists are in conflict with this school and provide intellectual fodder for opposing institutions and trends. In this situation, how can 'consensus' be achieved? b) In Iran, who is responsible for regulating and implementing economic policy, and what factions and powers must achieve 'consensus'? According to Article 110 of the Constitution, determining the 'general policies' of the Islamic Republic is the responsibility of the Leader, which naturally includes economic policy as well. At the same time, Article 126 states that the President is directly responsible for matters of planning and budgeting. There is no doubt that the program and budget are a function of the 'general policies of the system.' In other words, in the field of economic policy of the country, the Leader has the final say. Since the end of the Iran-Iraq war, the Leader of the Islamic Republic has had issues with the main pillars of the economic policies of Ali Akbar Hashemi Rafsanjani, Mohammad Khatami, and Hassan Rouhani. In fact, these three presidents have been more or less inclined towards policies based on a free economy domestically and interaction with the outside, while the Leader of the Islamic Republic has favored different and even contradictory options. c) In this situation, how should 'consensus' be achieved? Should the Leader of the Islamic Republic accept the economic theories of Rouhani's government (which are based on the theories of people like Dr. Nili), or vice versa? Until now, Mr. Rafsanjani, Khatami, and Rouhani, except in a few cases, have retreated before the leadership apparatus, and none of the fundamental economic reforms that have been successfully implemented in many countries have reached fruition in Iran. It is not coincidental that Iran's economy remains state-controlled and oil-dependent, along with a mountain of problems that Dr. Nili rightly names. Should 'consensus' be based on bargaining and compromise between the proponents and opponents of a free economy? d) The conflict between supporters and opponents of economic reforms in Iran is not merely theoretical. Powerful centers that strive to maintain the status quo in favor of the survival of the state-controlled and oil-dependent economy enjoy enormous rents, fiercely defend their privileges in state enterprises, foundations, and headquarters, and possess very powerful arsenals to preserve all these advantages. How can consensus be reached with them? e) The President's senior economic advisor knows better than anyone that Iran cannot get its economic wheels turning without 'interaction with the outside' and rebuilding bridges with the international community. In contrast, Ayatollah Alam al-Huda, the representative of the Supreme Leader in Khorasan Razavi province, speaks of a 'malicious triangle' composed of the JCPOA, FATF, and new oil contracts, which, according to him, have caused Iran to lose everything. If these words came from an anonymous and isolated cleric, quoting them would be meaningless. The issue is that this very accusation is repeated in various ways by a large number of influential centers that have close ties with the top of the power pyramid in Iran. How can consensus be reached with them? Given all these factors, linking fundamental economic reforms in Iran to 'consensus' is, more or less, equivalent to giving up on making reforms and submitting to the status quo. In response to this bleak conclusion, supporters of 'consensus' may argue that under the current political conditions prevailing in the country, this is the only realistic proposal that does not cross red lines and can at least make reforms possible, albeit in a slow manner, in this or that area. This response may be convincing, but 'tortoise reforms' cannot do much against the mountain of economic problems facing the country. Instead of insisting on 'consensus' on the country's economic policymaking, which will likely lead nowhere, it may be better to bring the role of the helmsman of Iran's economic policy into the discussion. In principle, who is responsible for regulating and implementing this policy, and who should be held accountable? Given the text of the Constitution and what is happening in practice, answering this question is not very easy.