ANALYSIS: Iran’s Economy Suffers from Government’s Revolutionary Aspirations

By Roshanak Astaraki


Iranian President Hassan Rouhani has voiced optimism about the future of the country’s economy, despite a recent report by the Statistic Center of Iran showing the annual inflation rate reaching 42 percent at the end of September, and the World Bank (WB) forecasting a steady drop in the country’s Gross Domestic Product (GDP).

In a recent cabinet meeting, Mr. Rouhani spoke about developing the country’s economy and tapping into international markets. He said that economic indicators had shown positive business cycles in Iran since April.

President Rouhani’s rosy picture of the country’s economy vastly differs from the alarming reports by the Statistic Center of Iran, which is a state institution.

Failed policies and chronic mismanagement in the past 40 years have brought the country to the brink of complete political, social, and economic collapse.

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Rouhani made many campaign pledges before the 2013 presidential election, which most experts knew he could not deliver.

The reform movement had somehow recruited many economists who supported Rouhani’s unfeasible economic plans. By allowing their political affiliations and interests to taint their expert views and better judgment, they ultimately helped Rouhani to sell his far-fetched economic and social policies to the Iranian people in both the 2013 and 2017 presidential elections.

Doctor Hossein Raghfar, a prominent Iranian economist and a faculty member at the Alzahra University School of Economics in Tehran, has been a staunch critic of the government’s policies.

In an interview with the Tehran-based Fararu news website on August 25, Dr. Raghfar said: “The President claims that the prices of goods have stabilized and people have been facing less economic hardships in the past five months compared to the same period last year. Iranians have not, however, experienced any improvements in their lives.”

“The annual inflation rate of 42 percent means that prices have risen by 42 percent in the past year,” he noted. “The sudden price increases and a massive jump in the value of dollar created challenging economic conditions last year.”

“Mr. Rouhani’s positive spin on the economy differs vastly from what people experience every day,” Raghfar pointed out. “Iranians do not believe reports that say prices of goods have stabilized, and economic conditions have improved when they see the prices of products in stores rising steadily.”

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“Sanctions gave an excuse to many people to misappropriate funds,” Raghfar was quoted as saying by the Tehran-based Bahar news online on September 14. “Sanctions had a secondary role. The important issue is how bad policies have led to corruption in the country. The situation will not change until we tackle this problem.”

The country’s economic crisis is not caused by one person or a single government but has resulted from 40 years of mismanagement. Successive governments have failed to fulfill their promises and realize their economic plans and projects in the past four decades.

A comparison between the conditions before the 1979 Islamic Revolution and the state of things today exposes a disastrous economic trend that is gripping the country.

In 1978, Iran was among the top three countries with the highest GDP growth in the world. It showed an annual GDP growth rate of 8 percent. Between the fiscal year 1963 and 1973, Iran’s GDP grew at an annual rate of 13.2 percent. Average income, also known as Per Capita Income (PCI), rose by 800 percent during the same period.

During the reign of the late Mohammad Reza Shah Pahlavi (1941-1979), investment helped Iran’s non-oil economy to grow considerably, including the manufacturing and agriculture sectors and service industry.

By contrast, inflation is at 42 percent in Iran today. The country’s economy contracted by 9 percent in the 2018-19 calendar year. According to a recent report by the WB, Iran’s economy is expected to contract further by 8.7 percent in 2020.

More than half of the Iranian population lives under the poverty line.

The absence of a comprehensive and coherent economic strategy and chronic mismanagement in the past 40 years are at the root of the problems facing the country.

Many economists believe that the Islamic Republic does not have a clear economic policy. Successive governments in the past 40 years have failed to reduce the country’s reliance on oil revenue and develop a non-oil economy.

In the past four decades, the regime has focused all its energy on creating, developing, and funding religious, ideological, and military institutions to the detriment of the people’s welfare. Instead of investing the oil revenue in infrastructure projects, health services, and education system, the regime’s leaders have lined their own pockets.

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Since its inception, the Islamic Republic has invested all its energy in exporting its revolutionary doctrine instead of developing a coherent economic strategy. As a result, the country is on the verge of a complete economic collapse.

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Doctor Noah Farhadi, a strategy professional and a member of the Phoenix Project of Iran (comprised international academics of Iranian origin), told Kayhan Life: “The Islamic Republic regime has no clear strategy. It constantly changes its objectives. Before the Revolution, Iran had long-term plans and a clear economic strategy.”

“The revolutionary regime is not forward-thinking and lacks true economic vision,” Dr. Farhadi added. “It did not capitalize on the outcome of the 2015 Joint Comprehensive Plan of Action (JCPOA), better known as the Iran nuclear deal.”

Farhadi asked: “I am curious, has either Rouhani or [Iran’s Supreme Leader Ayatollah Ali] Khamenei received a degree in economics? Yet they make major economic decisions for the country.”

For instance, following the re-imposition of U.S. economic sanctions, and heightened tensions with America, Mr. Khamenei called for “severing country’s dependency on oil revenue.”

Although a good idea, reducing reliance on oil revenue cannot be implemented overnight. It needs meticulous, detailed, and long-term planning with a clear aim.

The government periodically announces a “National Vision Project,” which looks great on paper, but it lacks substance and serves only as a publicity stunt to further the regime’s ideological aims.

The regime ultimately abandons these projects. They are shelved and eventually forgotten.

For instance, in 2005, Mr. Khamenei approved the “20-Year National Economic Vision 2025,” which was part of the broader “Five-Year Economic Development Plan.”

The plan has achieved none of its objectives so far.

In October 2018, Khamenei released the “Islamic-Iranian Blueprint,” which offered a new vision for the country’s development in the next 50 years.

“Progress demands anticipation and improvement of an individual’s social values and mechanisms; hence, this is a gradual and long-lasting phenomenon that depends on faith, determination, and efforts at the national level and public patience and perseverance,” Mr. Khamenei said in a letter which outlined the plan and was posted on his official website in Farsi and English. “It requires Divine blessings that assist this nation with the continuation of the Revolution through His heavenly power.”

[Translated from Persian by Fardine Hamidi]