No Reverting to Economic Policies of 1980s

EghtesadOnline: One of the wonders in this day and age, in Iran, is the formation of a taskforce to intensify the fight against hoarding to help maintain market balance by the Ministry of Industries, Mining and Trade.

News ID: ۷۸۳۳۷۴

22 July 2018

Words such as “hoarding”, which had dropped out of market discourse in recent years, along with certain economic policies devised during the 1980s seem to be making a comeback these days, the Persian weekly Tejarat-e Farda reported.

In the 80s, people in Iran were witness to the gradual decline in oil revenues from around $20 billion in the fiscal 1983-84 to less than $6 billion in 1986-87. In the fiscal 1988-89, the ratio of deficit to the country’s total budget exceeded 50% and the share of capital expenditures reduced from 32% to 19%.

The inflation rate had increased to 28% in the same year. The government’s economic intervention was at its height: Market regulation and pricing of goods were the norm; foreign exchange rates had stabilized—of course by command and control; essential goods were rationed and people were given coupons and—wait for it—black markets of different items (such as pharmaceuticals) and foreign currency trade as well as hoarding of food were growing, Financial Tribune reported.

Two decades on, Iranian policymakers, who happen to be the same decision-makers of the 80s, but older and grayer, talk of reviving the same guidelines in the face of looming sanctions as if they are itching to go down memory lane, as if rational and economic decision-making has become scarce.

On May 8, US President Donald Trump withdrew from the 2015 Iran nuclear deal and unilaterally restored sanctions on Tehran, in defiance of the deal’s five co-sponsors—Britain, China, France, Germany and Russia.

You can hardly find a researcher or top executive in the government who would flaunt the achievements of that decade without being politically myopic. This is while market economists and prominent figures of the private sector have time and again warned against the adverse consequences of such policies.

“That the Iranian economy managed to survive in the 80s, despite government policies, rationing and penalizing businesses and individuals, was thanks to the moral standards of people. They were keen on assisting the government and were hopeful about the future,” Mohsen Jalalpour, a former president of Iran Chamber of Commerce, Industries, Mines and Agriculture, said.

According to Jalalpour, the Iranian community will not tolerate a return to the economic policies of the 80s. He believes the change in people’s thinking today is due to statesmen’s misguided policies, embezzlements and administrative corruptions.

“Today people call for confronting rent seekers who have emerged due to the government’s policies. An overcharging of few dollars by a retailer is too small a matter to bother people,” he said.

Asked why the same failed policies of the 80s are being reintroduced by the government, the former ICCIMA chief said, “There are two explanations behind the behavior of the government. Either the policymakers, themselves, are eager to follow these lines or people [outside the government] are dictating these interventionist policies to the government. These people are profiteers who wanted the return of sanctions, those who sought to disrupt international balance and Iran’s relations with the world, and generally those who benefit from sanctions.”

Jalalpour noted that the policy-making arena suffers from a lack of experts capable of taking scientific decisions, those who have been pushed out of the system or were forced to immigrate.