Response to Economic Questions; Part One: Current Status and Future of Iran's Economy

To prevent lengthy and scattered responses, we have classified users' economic questions around six main topics: the current status and future of Iran's economy, whether to leave or stay, the future of markets, bank bankruptcies, Iran and China, and finally, the role of foreign powers in Iran's economy. 1) Current Status and Future of Iran's Economy Some users have described the current state of Iran's economy using words like "deadlock" or "bankruptcy," raising ideas and questions such as: - Why are the authorities of the Islamic Republic indifferent and not implementing reforms? - Can the date of Iran's economic bankruptcy and collapse be predicted? - Until the political structures of Iran change, its economy will not transform either. Without a change in the country's governance, no one can do anything in the economic sphere. - Given the dominance of the Revolutionary Guards over Iran's economy, can we get out of the current situation? - Iran's economy resembles a balloon that has been punctured in seventy places. Can any economic team, no matter how strong, bring such an economy to a better place? Response: Dear users of Radio Farda, you are not mistaken in your assessment of the very poor state of Iran's economy. There are many senior economic officials in the Islamic Republic who share this pessimism, and without explicitly stating it, they display their severe despair through scattered remarks about various production, financial, and commercial sectors of the country. In fact, the use of the term "bankruptcy" to describe the state of banks or bankruptcy funds in the country's media is no longer an exceptional event. The immobilization of production units, their closure, or their operation below capacity is also a constant topic of discussion among expert circles. This list can go on. In other words, the situation has gone beyond the "black portrayal" attributed to "foreign media," and few deny the dysfunction of Iran's economy. The Research Center of the Islamic Consultative Assembly explicitly states that for the development budget for the next solar year, the ladle has hit the bottom of the pot, and there is no money left. Dr. Masoud Nili, the economic advisor to the President, states that the country's per capita gross production is currently about thirty percent less than it was in 1976. Regarding water, the most strategic material for Iranian society, Eisa Kalantari, the Vice President and head of the Environmental Organization, describes its situation as follows: "In my opinion, the country's water management is in ignorance. We are no longer in a water crisis in the country. We have passed the crisis and are bankrupt. Like a bankrupt person. This is extremely dangerous for preserving this seven to eight thousand-year-old land that has had a civilization." With such descriptions of Iran's economic realities, especially from senior officials and official expert circles in the Islamic Republic, one could fill many pages. We have cited these few examples in a scattered manner to let users know that the economic disarray in Iran is felt by the people in their bones, and the officials make no effort to hide them. Can such an economy be organized through reforms within the current political system? A large number of Radio Farda users are pessimistic about whether reforms in the Islamic Republic can bring about a positive change in Iran's economic situation. This pessimism is certainly understandable. In the years following the Iran-Iraq war, three Islamic Republic presidents came to power with promises of economic reforms, but they ended their second term in the executive branch with failure. The economic policies of Akbar Hashemi Rafsanjani and Mohammad Khatami in the last four years of their administrations practically became paralyzed, and it is evident that Hassan Rouhani will not have a better fate than them. These realities cannot be denied. But can an economic analyst only emphasize the country's economic deadlock and remind us of the failure of reformist policies? What lessons can be learned from that deadlock and this failure? From the perspective of some users, an economist should logically conclude that under Iran's special political conditions (or "as long as they are in power"), any solution proposed to steer the country's economy away from the edge of the abyss is essentially futile. With this view, economists should close their offices and only say the phrase, "Nothing will progress under the clerical regime." Some Radio Farda users have repeatedly criticized the author of this piece for wasting time analyzing inflation, recession, and corruption in Iran and ways to combat these ailments. In their belief, no transformation will occur in Iran's economy unless the current regime is overthrown. Even any recommendations from economists to tackle economic constraints, from the perspective of many opponents of the Islamic Republic, including among Radio Farda users, are perceived as "collaboration with the regime." The author of this note does not agree with this view. At least for three reasons: a) Tying any positive economic transformation to a change in governance is based on the assumption that one day "they" will leave and "those" will come, and conditions will be created for establishing a flourishing economy based on a universally accepted policy. With this assumption, until that day arrives, everyone should just sit idly and think only about this political change. The reality of political, social, and economic life in Iran and the world does not align with this assumption. Iran's experience, both in the decades before the revolution and after, indicates a severe weakness in the economic culture within various political currents in the country. Many of these currents, especially among the left and religious factions, have been strongly opposed to the foundational ideas of a free economy, which is the basis for economic prosperity in all advanced countries and emerging powers, and still are. Despite the significant advancements that have created a foundation for the growth of economic culture in the country, unfortunately, the third-world leftist thoughts of the second half of the twentieth century still permeate significant layers of political currents, both in the government and outside it. It may be more realistic not to cling to that "glorious day" and to gradually create the groundwork for exiting economic backwardness based on a gradual intellectual transformation. b) Despite the weak economic culture in the political currents of the country, both in the government and in its opposition, there are many prominent economic experts and professors in Iran. They are present in the scientific and expert centers of the country, active in the media, and their research work often meets the highest international standards. Some economic media in Iran are also rich in content, comparable to their counterparts in the West or Asia. Some users may wonder if Iran has such expert capabilities, why is its economy in such dire straits? Their question and surprise are entirely justified. This should be added to the other significant contradictions that Iranian society suffers from. In fact, this expert voice barely penetrates the thick walls surrounding the core of the Islamic Republic's governance. Nevertheless, it cannot be said that the efforts of the country's expert and scientific centers to influence the course of events have been entirely ineffective. Thanks to these efforts, Iran's economy, despite the heavy calamities it has faced, has not met the fate of the economies of Zimbabwe and Venezuela. c) Reforms have largely failed, and the major economic structures of the country remain untouched. In fact, Iran continues to struggle in the quagmire of a heavily bloated state economy and survives by selling oil. We said that Hashemi Rafsanjani and Mohammad Khatami failed to change the fundamental structures of Iran's economy, and it seems that Hassan Rouhani will also experience a third failure. Despite those two failures and the prospect of a third failure, we cannot expect economists to completely abandon the idea of reforms and wait idly for favorable political conditions. They must continue their fundamental duty to scientifically analyze the country's economy, the roots of its disarray, and ways to address it. However, economic analysis and proposing solutions to escape the current deadlocks do not mean abandoning political analysis. Every economy, for transformation towards progress, needs a favorable political space both domestically and internationally. Despite the great despair arising from the current conditions, the immense potential of Iran's economy cannot be overlooked. Activating this potential is only possible if the groundwork for the participation of all Iranians in rebuilding their country is laid, and Iran, free from tensions in foreign relations, becomes a normal member of the international community. One user told the author of this piece: "Please do not give the people false hope." This esteemed user is right to be skeptical of those who create false hope. But one should be equally, if not more, skeptical of those who see all doors closed and consider the country lost. If that is the case, what is the use of such questions and answers? To be continued... Fereydoun Khavand Fereydoun Khavand, economist, economic analyst, and professor of economics in Paris, France.