The Puzzle of the Iranian Economy
France 24
05-Sep-2011 (one comment)

...the RG takeover was claimed to have reduced the ability of sanction supporters to monitor and reduce the flow of capital and technology into the economy, especially to the energy sector. This policy has backfired since the increased role of RG businesses in the energy sector has magnified the effectiveness of sanctions...

The net result of the mismanagement of the economy, along with the expansion and cartelisation of RG commercial activities, has led to a situation in which, in all key economic indicators, Iran has fallen behind all its neighbours barring those in conflict. This has occurred despite having the second largest natural gas reserves in the world, the fourth largest oil reserves in 2009 and one of the best-educated labour forces in the region. The puzzle facing the Iranian economy is that despite having all the raw ingredients for rapid economic development and industrialization, there has been a gradual but very clear downward spiral in industrialization and technological growth. It seems that the more the RGs businesses are pushed to the forefront of the economy, the greater the decline in key economic indicators and social wellbeing.



Iran the Paradox

by FG on

An Islamic-ruled society--like rule by the people in a communist state--may sound nifty in theory but it CANNOT run an economy, regardless of available resources.  Mullahs with a narrow religious education lack the skills yet for political reasons fear to hand the job over to the best qualified (a private middle class).


Khamenei knows how greatly a nation's military capacities are affected by improved economic performance but he fears the historical risks in doing what's necessary.  The middle class that made medieval states become more powerful and wealthy demanded in return a share of political power proportionate to its contributions.  That share could only come from the ruling aristocracy.  Today the ruling mullahs won't share power either despite the fact they too offer nothing at all of social  value--no more than ancien regime aristocrats in 1789 or Soviet politburo members in 1989.  Indeed all three had "negative value," hindering prosperity and success so long as they could stick around.


To run the economy ruling clerics have turned to the Third Option--IRCG generals as unskilled and prone to corruption and incompetence as the clergy.  The missing cure for such ills is a free press that can expose what works badly and thereby discourage it.  Unfortunately, to tell unwelcome truths in the Islamic Repunlic is to "undermine national security."   Thus the second economic "must" is prohibited for political reasons.  The regime is free commit heinous crimes and brazen lies it wants but it can't make people love it or believe it anymore.   The same tactics which have backfired in other Arab Spring countries backfire now in Iran.  Khamenei probably knows that but, having burned too many bridges, what option does he have now?


Life in Iran can only get worse at this point--day by day, year by year, decade by decade unless the existing system is ditched completely.  No more than the Soviet Union by Brezhnev's time, can it offer a political or economic model that anyone with half a brain would want to imitate.