Predictions amidst uncertainties
Yassamine Mather looks behind the rhetoric of the ‘resistance economy’
Massive inflation has eroded the pensions of the 1979 generation
According to the latest International Monetary Fund report on Iran, after years of sanctions the country’s economy seems to be on the road to recovery - at least on paper.
The report, dated February 24, sums up the situation as follows: “The Iranian economy has had an ‘impressive recovery’ following sanctions relief last year, though uncertainty regarding the fate of the nuclear deal and relations with the US threaten to undermine it.”1
On the face of it this is good news for Iran’s capitalists and the state. After all, “Growth is expected to be 6.6% in the calendar year ending March 20, reflecting the rebound in oil production and exports, and stabilise at 4.5% “over the medium-term, as the recovery broadens.”2 Yet the warnings are also clear. Most of the economic forecast is directly dependent on the continuation of the Iran nuclear deal and that deal is seriously threatened, given the position of the new US administration. Israeli prime minister Binyamin Netanyahu and the US president are firm allies.
The IMF is very clear on the subject: “If the agreement is derailed, the economy could risk recession.” Of course, Iran’s economy has also benefited from higher oil production, but growth is expected to ease to 3.3% in the next year. However, the questions over the nuclear agreement could “deter investment and trade with Iran and short-circuit the anticipated recovery”. And if sanctions were to be reimposed, that would “lower direct investment and capital inflows, and disconnect Iran from the global financial system”.
Jafar Mojarrad, IMF executive director for Iran, has stated: “Regrettably, remaining US sanctions and related uncertainty have hindered the return of global banks to the Iranian market and continue to hamper large-scale investment and trade.”3
Almost four years ago, president Hassan Rouhani came to power on a promise to pursue nuclear negotiations with western governments, with the sole aim of improving the country’s economic situation. As we approach the next Iranian presidential elections in May 2017, ordinary Iranians are seeing little benefit from the lifting of sanctions and the positive rates of growth. In the last few weeks, as the Islamic parliament in Tehran discussed the minimum wage for the coming year, workers have stepped up protests against low wages, short-term and ‘white’ contracts (where the employee signs a blank page to be filled in later by the employer), unpaid wages and lack of job security.
Retired teachers, nurses and state employees have mounted relatively large demonstrations on the issue of pensions, the funding for which is facing a major crisis. Some Iranian papers have reminded us that the retirees are the generation of 1979 revolution, who will not accept government excuses about the world economy, uncertainty amongst international investors, etc. They have paid every month into pension funds that are now worthless - not least because of the astronomic rates of inflation in the last years of Ahmadinejad and the first years of the Rouhani government.
Ironically the pensioners’ protests are a reminder that the February uprising of 1979 did not start with calls to establish an Islamic republic, but with demands for political and economic rights. Probably wary of such sentiments, Iran’s supreme leader, Ali Khamenei, used a nationwide TV broadcast last week to criticise Rouhani’s economic policies: “Of course, the government has taken remarkable steps, but if the resistance economy had been implemented fully and widely, we could witness a tangible difference in people’s lives.”
On the face of it you might think he was talking about a third-worldist economy, in opposition to western transnationals, and pursuing the kind of vision put forward by non-aligned countries in the late 1960s and 1970s. Sections of the Iranian left and the nationalist opposition to the shah were very forceful on the subject of disowning the ‘comprador bourgeoisie’ and building the national economy, and, of course, Khamenei remembers some of those arguments. However, do not be fooled: his “resistance economy” has nothing to do with those (albeit misguided) aspirations. As usual in Iran’s Islamic Republic, rhetoric and sloganising is used to disguise the opposite of what is being said. Our religious leader is a staunch defender of “capital and entrepreneurship”: he knows that Iran’s capitalist economy has no option but to work within the confines and under the dominance of global capital.
So what is this “resistance economy”?
A few years ago Rouhani declared the key objectives presented in this policy and they have been repeated in the last few days in the conservative press and media in Iran:
- Domestic capacity building with maximal utilisation of the country’s resources.
- Promotion of a knowledge-based economy.
- Increased efficiency in economic activity, improvement of economic competitiveness.
- Improve Total Factor Productivity based on the empowerment of domestic human resources through skills education.
- Promotion of domestic production, especially in strategic products and services and the consequent reduction of dependence on imports.
- Consumption management based on the promotion of consumption of local products parallel to the qualitative improvement of domestic production.
- Comprehensive reform of the financial system to respond to the country’s needs.
- Targeted promotion of exportable goods and services through legal and administrative reform as well as the promotion of foreign investment for export purposes.
- Increase the economy’s resistance through regional and international economic collaboration, especially with neighbours but also through diplomacy.
- Reduce vulnerability of oil and gas exports through the selection of strategic buyers and involving the private sector in diversifying sales channels.
- Increase oil and gas strategic reserves and production to have an impact on international markets.
- Implement reforms to rationalise government costs, increase tax revenues and reduce dependency on oil and gas export revenue.
- Increase transparency in financial matters and avoid activities that pave the way for corruption.4
Contrary to the claims of both the exiled rightwing opposition and the diehard supporters of Khamenei, his declarations have nothing that distinguishes them from the general aspirations of any capitalist country. In fact some of the statements fit in with elements of a neoliberal economic plan.
Khamenei might not like all the publicity about the widening gap between the rich and the poor in his country, 38 years after the February uprising. However, the truth is that for more than three decades he has been the supreme leader of a country where most elements of neoliberal economic policy, dictated by international organisations such as the IMF - privatisation, casualisation, end of state subsidies, a rise in the price of petrol, etc - are adhered to by both ‘reformist’ and conservative factions of the Shia state.
No wonder the World Bank praises Iran for its economic policies:
Iranian authorities have adopted a comprehensive strategy encompassing market-based reforms, as reflected in the government’s 20-year vision document and the sixth five-year development plan for the 2016-2021 period. The Iranian government has implemented major reforms of its subsidy programme on key staples such as petroleum products, water, electricity and bread, which has resulted in a moderate improvement in the efficiency of expenditures and economic activities.5
So how do you get World Bank and IMF approval when you are the leader of an Islamic regime, calling for “resistance economics”?
Well it is true that the government has made major savings by cutting almost all subsidies, but it is ordinary Iranians who are paying the price of these cutbacks. The policy of implementing cash subsidies has been a total disaster, producing a whole new web of corruption based around the distribution of this type of subsidies. In 2015-16 the government asked “comparatively well-off citizens” to voluntarily opt out. Although 2.5 million Iranians did so, 73 million did not. Clearly the voluntary withdrawal had limited effect on the country’s growing budget deficit - and last year a bill was passed that will exclude 24 million people (almost one third of the population) from subsidies.
However, Iranian newspapers are full of stories about how relatively well-to-do Iranians with connections to government ministries, mosques or Islamic charities have been able to remain on the cash subsidy list, while the poor lose out. In one example a middle class beneficiary used the money to buy an expensive car! Maybe this is what the supreme leaders means by “jihadist entrepreneurship”.
In the meantime, crumbling pension funds, banking troubles, budget deficit and unemployment are amongst the major challenges faced by Iran’s economy, according to a senior economic adviser to Rouhani. Of course, Rouhani’s response since the election campaign of 2013 has been to blame previous administrations. This from his advisor, Masoud Nili, last week: “Today we are grappling with water shortage and air pollution, and have inherited banking and budgeting problems from the past decades.”6
So on the eve of the Iranian new year that will see presidential elections, workers are fighting for unpaid wages, pensioners are asking what has happened to their pensions and young people face a highly uncertain future. All this when the prospect of further sanctions and even war are very real.