Iran's Plan to Phase Out Subsidies Brings Frenzied Debate
New York Times / Robert F. Worth
02-Dec-2009 (one comment)

The outside world may be focused on Iran’s intensifying confrontation with the West over its nuclear program. But at home, Iranians are more concerned with an ambitious and risky new effort to overhaul the country’s troubled economy.

If it goes awry, the plan to phase out Iran’s system of state subsidies, which has existed for decades, could profoundly destabilize the government of Mahmoud Ahmadinejad, who has aggressively championed change. But it could also help wean Iran from its dependence on foreign gasoline and insulate the economy
from new sanctions — which are a strong possibility if Iran continues to defy Western pressure over its nuclear program.


Damened if they do, damned if they don't

by FG on

Any government that gets into price regulation and especially subsidies of basic goods is in for trouble.   Khoumeini's orginal promise was a boneheaded one that will create problems for any Iranian government, whether hardline or reform. Prices that are not allowed to rise to their natural level, based on supply and demand, will fall more and more behind where they should be.  Other countries survive fine with natural prices.   But for countries that have chosen Iran's course, the personal costs for indiviuals and the political costs for rulers of getting back on track become prohibitive.  Yet the consequences of not acting become in time even more prohibitive.

Perhaps the only good thing to come out of the stolen election is that the Khamenei/Ahmadinejad regime remains stuck with this problem.  Had the reformers been allowed their legitiimate victory, I'm not sure they'd have dared to address the problem since doing so would have created a political disaster which hardline Islamists would exploit.   On the other hand, not doing so would guarantee Iran's economy--with so much potential--would never be able to modernize.