Irans Economy

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Irans Economy
reflects the dilemmas of late modernization,
authoritarianism, war and the curse of oil
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Under the Shah Pushed for rapid socio-economic
modernization on the Japanese model. He did help
modernize the country, such that by the 1970s
half the population lived in urban areas. At the
same time it also led to social dislocation as
the country made a rapid jump from an agrarian,
isolated and semi-nomadic system in the matter of
a few decades. rentier statea state that
derives a substantial portion of its economy from
payments from foreign countries in the form of
rent a subset of a rentier economy which is one
where the economy is heavily dependent on state
expenditures which the state has received from
aboard
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• Oil is often a curse more than a blessing,
  especially when controlled by the state
• becomes an irresistible temptation, leading to
  corruption as state leaders siphon off the wealth
  to line their pockets or serve their own policy
  predilections.
• Since the public is eliminated as the major
  source of state revenue, those in power can
  effectively ignore the public and rely on oil to
  either repress or coopt any opposition. The
  issue of taxation without representation
  becomes meaninglessthe state can do without
  either, and is able to avoid having to make this
  tradeoff.
• Over dependence on the export of one commodity
  subjects country to the whims of the market

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• After the Revolution
• Clergy lacks experience governing
• Khomeini's famous statement economics is for
  donkeys
• red vs Expert problem
• Massive emigration of skilled professionals and
  entrepreneurs (approximately a couple of million)
• Intense disagreement among factions of clergy
• Pragmatists economic recovery via privatization
  of industry, via technocrats (Rafsanjani era)
• Radicals Enhance social justice by heavy
  government regulations and nationalization (More
  of the peasantry)
• Conservatives Reaffirmed private property,
  inequalities are ok (Most Clerics today)

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bazaaris

• The bazaaris link with conservative mosques go
  back to early Islam, Prophet Muhammad was a
  merchant as was his first wife Khadijabazaar
  guilds fund communal celebrations of religious
  ceremonies conducted by clerics
• In Iranclerics and merchants often have come
  from the same family
• The Peacock throne (of the Pahlavi family)
  resisted the bazaaris and clerics.
• Time and time again the bazaaris opposed the
  Shah and later his sons wishes (1960 and 1963
  during the White Revolution). Khomeini went into
  exile but maintained close relations with the
  local mercantile community who snuck taped
  sermons of his back into Iran especially in 1970
• Bazzarris fund the revolution

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Women shop at the Tehran bazaar. For months,
average Iranians have endured economic hardships,
political repression and international isolation.

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In the current regime the Iranian economy is
heavily controlled by the state, directly or
indirectly

• one of the central tenets of the new Islamic
  regime was to direct the state and nation toward
  greater equality
• The new constitution explicitly set forth that
  the economy is a means, not an end, in contrast
  to liberal capitalist systems where the quest for
  wealth and profit becomes a subversive and
  corrupting factor in the course of man's
  development.
• The oil and other state-owned industries were to
  remain in the states hands, with the profits
  redirected toward presumably more equitable
  goals.
• In addition, numerous private industries were
  nationalized after their owners fled the
  revolution. In many cases, their assets were
  turned over to several bonyads, or parastatal
  foundations. The objectives of these bonyads are
  ostensibly to help the disadvantaged, such are
  war veterans or the poor. However, over time the
  bonyads have become major economic players in
  their own right, controlling substantial assets
  and industries while operating independent of any
  government oversight (other than the Supreme
  Leader). cleric fiefdoms, key PATRONAGE
  mechanism

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sixty percent of the economy is directly
controlled by the state, while another ten to
twenty percent is owned by the bonyads
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Iran Iraq war
devastated by the long war with Iraq, which
destroyed infrastructure, drained the national
treasury, and killed many of its young men. By
1988, when the war ended, Irans per capita GDP
had fallen to just over half of its 1979 level
The eight-year Iran-Iraq war resulted in USD350
billion in damage in Iran alone.
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2 Iranian Gas Stations Burned Over Rationing
TEHRAN, June 27 2008 Angry drivers set fire to
at least two gas stations overnight in Tehran
after the government announced that gasoline
rationing would begin Wednesday just after
midnight. . . . Iran is OPECs second-largest
exporter of oil. But it needs to import half of
its gasoline at a cost of 5 billion a year
because of high consumption and low refining
capabilities. Inflation in Iran had already been
high, as a result of a combination of economic
factors and government decisions. The price of
dairy products like milk, butter and yogurt
increased this week by at least 20
percent. Analysts had warned that the decision
could have a direct impact on inflation.
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By 1988, when the war ended, Irans per capita
GDP had fallen to just over half of its 1979
level. Since that time the economy has steadily
rebounded, although as of 2003 it still remains
below its level some twenty years before. In
addition, the reliance on oil also means that the
Iranian economy is dependent on the international
market in times when oil prices have been in a
slump, the state has lacked the revenues
necessary to keep the economy moving. Oil
production itself has been in decline, with the
country producing probably around half of what it
did in the 1970s. Some twenty percent of the
population lives below the poverty line, with
some estimates putting the figure at double that.
Unemployment is estimated to be around 15-20
percent. Irans economic equality, a cornerstone
of the revolution, is no better than that of the
United States. Finally, compounding matters is
the fact the Iranian economy faces the challenge
of providing employment for millions of young
Iranians who enter the workforce each year for
members of the labor force under age 24, the
unemployment rate is over 30 percent. This
economic marginalization of the young in turn
increases their hostility to the regime, as
occurred under the Shah
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Solutions to these economic problems are not
easy. Iran can expect that revenues from its
existing oil reserves the development of natural
gas will help sustain the state budget however,
this is not likely to diversify the economy or
provide new sources of employment. Under the
Khatami presidency there were efforts toward
privatization of state owned industries, as well
as to encourage foreign direct investment. But
both policies are controversial and not part of
Ahmadinejads approach. The bonyads are loath
to give up their firms, even if they are
unprofitable, since they are a source of power.
Greater governmental oversight is similarly
unwelcome. The idea of foreigners investing in
the development of natural resources, too, is
unacceptable to much of the clerical ruling
elite, as it smacks of the pre-revolutionary
period of imperial domination. Until these
obstacles to reform are overcome, Iran is
unlikely to make any significant improvement in
its economy
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• Irans application to join the World Trade
  Organization (WTO) in 1996 had failed in part
  because of its legal impediments against foreign
  investments and in part because of U.S. opposition

• Their most important supranational organization
  membership has been with the Organization of the
  Petroleum Exporting Countries (OPEC)
• OPEC was formed in 1960, with Iran as a charter
  member

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TEHRAN, April 11 Iran announced Tuesday that
its nuclear engineers had advanced to a new phase
in the enrichment of uranium, and President
Mahmoud Ahmadinejad and a series of the country's
ruling clerics declared that the nation would now
speed ahead, in defiance of a United Nations
Security Council warning, to produce nuclear fuel
on an industrial scale.
Iran has never had much use for the Security
Council. When Saddam Hussein invaded Iran in
1980, the Council at first did not even call for
a cease-fire or the withdrawal of the Iraqi
troops to the border. When Iraq used chemical
weapons against Iranian soldiers later in the
decade the first verified use of chemical
weapons since World War I the Council refused
to impose sanctions.
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Iran responds by saying that Western opposition
to its nuclear energy programme is
politically-motivated, since there was no
opposition to the Bushehr nuclear power plant
project when it started before the 1979
revolution with German involvement.
Key nuclear sites
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New Iran and global economy
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Voting System
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Iran's economy is marked by a bloated,
inefficient state sector, over reliance on the
oil sector, and statist policies that create
major distortions throughout. Most economic
activity is controlled by the state. Private
sector activity is typically small-scale
workshops, farming, and services. President
Mahmud AHMADI-NEJAD has continued to follow the
market reform plans of former President
RAFSANJANI, with limited progress. Relatively
high oil prices in recent years have enabled Iran
to amass nearly 60 billion in foreign exchange
reserves, but have not eased economic hardships
such as high unemployment and inflation. The
proportion of the economy devoted to the
development of weapons of mass destruction
remains a contentious issue with leading Western
nations
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        24.29 million note shortage of
skilled labor (2006 est.)