Expert Urges Gov't to Rethink Economic Role

EghtesadOnline: There is no place for outdated, broken economic goal-setting conducted by governments in today’s world.

News ID: ۷۸۷۲۰۵

26 October 2021

This was stated by Hossein Haqgou, an economic analyst, in a write-up for the Persian-language daily Ta’adol. A translation of the text follows:

From what position do the government officials speak of an increase in output, or exports of a product from chicken and steel to air-conditioner every now and then? That is an oft-asked yet unsettled question about the position of government in our economy.

Almost all government officials talk of an upsurge in output and exports of products that are being manufactured by enterprises run by the private sector. The person responsible for making decision about increasing or decreasing the production of these items is the owner of the enterprise; they may opt for or out of it depending on the circumstances and their own particular preferences; no one else can make promises over which they don’t hold legitimate rights or ownership.

Public officials might be able to make promises about commodities production, which are exclusively within the control of the government such as energy carriers or military weapons but when it comes to refrigerators, washing machines or water heaters, how is it possible that a government official presents statistics on their production and exports in the future?

Recently, for example, the minister of industries, mining and trade talked of a twofold rise in the export of home appliances in as many years. He said, “By next year, export-to-import ratio of home appliances must reach 50%; in 2023-24, we must reach a balanced level [in exports and imports], and in 2025-26, exports must be at least twice as much as imports.”

Hearing these statements coming from, say, the association of home appliances’ producers might seem logical (yet not practical) because the producers’ association of a product is capable of collecting statistics from its member companies and can present an overview of future objectives and goals in production and exports.

A forecast is just a probability; there is no guarantee that a forecast made by the association would be realized. But statistics and figures that come from a government official not only affect the market of those products but also impose legal responsibility on the official who presented them in the first place; people and their representatives in the parliament can question the official if statistics turn out to be inaccurate.

Perhaps one of the reasons behind the allocation of subsidies to manufacturers, which move only leads to their dependence on rents and consequently their collapse, is the government official’s yearning to deliver on their promises.

Promotion of security and peace, guaranteeing ownership rights, stability in contracts and macroeconomic variables, improvement of business environment, creation of appropriate and sustainable interaction with the world and development of infrastructures like airports, roads, access to water and electricity in partnership with the private sector are the main responsibilities of governments.

Planning on production of industrial goods is what enterprises should do, according to their capacities and after conducting feasibility studies (by calculating profits and losses and weighing inter-enterprise competition), and not governmental organizations and institutions.

There is no place for outdated, broken economic goal-setting by governments in today’s world. But seemingly government officials have yet to acknowledge this fact; they still see themselves as the chief employer of private enterprises and the representative of stakeholders, issuing orders on increasing production and exports every now and then.