Spotlight on Persistent Problems in Iran’s Economy

EghtesadOnline: Mohsen Jalalpour, the former president of Iran Chamber of Commerce, Industries, Mines and Agriculture, has spelt out Iran’s most persistent problems in economic policymaking in a write-up for the Persian monthly journal Ayandehnegar.

News ID: ۷۸۷۳۶۵

28 November 2021

A translation of the text follows:

The Iranian society has seen a steady decline in per capita income over the past decade, as the economy is depreciating constantly and poverty is increasing in the absence of new investments.

It is evident that the foundations of the economy have been destroyed; growth is nowhere to be seen.

The slowdown in economic growth in recent years has been largely blamed on sanctions and misguided economic policies. These factors, together with the outbreak of Covid-19 over the past two years, have lowered investment and production.

This write-up centers on what economic experts see as one of the major challenges of present-day Iran, i.e. the continuation of misguided policymaking.

The accumulation of problems poses one of the biggest challenges in the country. The policymaking institution has itself turned into a challenge-manufacturing factory and the administrative system is constantly losing its strength. Do other countries resolve their problems like us?

One of the unsolved puzzles of governance in Iran is the constant repetition of mistakes. If a government commits a mistake in a period of time, other governments are expected to learn from it and avoid a recurrence. But this is not the case in the Iranian system of governance; mistakes in economic policymaking are being repeated perpetually and no one is accountable.

From the 1970s onward, all mistakes made in economic policymaking have been repeated, with the difference that as time went by, policymakers not only failed to fix these mistakes, but they also helped compound the scope and threat of these mistakes.

One of the scourges of our administrative system is the isolation of various organizations and decision-making divisions. Every minister or economic director considers themselves the custodian of the island on which they preside. That explains why it is believed that the administrative system in Iran resembles a set of islands, each of which has its own rules and regulations.

Our politicians do not care about the damage they inflect on areas outside the purview of their mandate. Many of the policies implemented in the ministries and organizations might be appropriate but most of these policies seriously damage other areas.

Everyone has their own rules and regulations in the Iranian administrative system and they do not interact with each other. Each of them don’t care that some of these rules might clash with those of other organizations.

The abandonment of scientific methods and utilization of unscientific and quasi-scientific methods by policymakers is another issue in the Iranian system of governance. Policymaking needs tools that our political structure deems unnecessary. Do you know of any Iranian government that has cherished expertise and knowledge?

Distortion of Policymaking

Basically, we do not have anything called policymaking in Iran. What exists in Iran is called resource sharing, which is neither policymaking nor resource allocation.

Over the years, the government has tried to influence the economy only by relying on the distribution of money, and not through policymaking.

According to one of the heads of the Plan and Budget Organization, the division of resources in Iran is based on familial relationships. The very mechanism we call policymaking has always been subjugated by populism. So, basically, the mechanism that we have is not resource allocation, but a destructive resource sharing.

Iranian policymakers have a specialty in drilling the so-called bottomless wells. Scores of bottomless wells have been dug in the Iranian economy, devouring resources on a very large scale without an end in sight.

Perhaps the most important problem today is the sway some stakeholders seem to have on policymaking. In recent years, certain groups have become stronger in the Iranian economy and their interest lies in maintaining the status quo. The current situation is ideal for informal economic operators and certainly not for people who are pursuing honest business practices.

Under the pretext of countering sanctions, a large underground economy has been formed in Iran and along its borders. These groups are the illegitimate children who uphold the contingency theory of skirting sanctions.

When we use smugglers and informal groups to circumnavigate sanctions, soon we’ll have to concede our legal markets to them.

As we speak, the country’s official markets are under the control of smugglers. These groups have infiltrated the country’s decision-making structure and as a result, policies are being made in favor of smugglers and informal economic players. These groups have grown so big that they both seize resources and steer the formal economy and markets into whatever direction they want.