Resilient Economy versus Rentier Economy
Economic activists in the globalized and international economy today cannot
rely solely on what we have inside.
Uncertainty in Iran’s economy has probably reached its peak these days: A
climax that does not seem to descend so soon. A combination of uncertainty
and frustration has driven the economic community into hasty and emotional
actions. Moreover, the government’s record in making sudden decisions, which
are often retroactive, has left economic activists more skeptical about
making decisions. Dr Mousa Ghaninejad, an economist, believes that
today’s uncertainty is the result of yesterday’s interferences: chronic and
repeated interventions by the government in the economy, which has always
led to violations of principles such as property rights and disregard for
market rules and regulations. The unavoidable result cannot be anything
other than the state of instability and confusion today. Nonetheless, this
situation also has a solution: liberalization, which can gradually clear the
economy from rent seeking and replace it with competition.
What are the optimal tools to deal with uncertainty?
As government interventions increase, insecurity and uncertainty grow and,
in general, the state of the economy deteriorates. What’s the solution? One
word: liberalization. In practice and in reality the best supervision over
the market is done by competition. When there is rent in a society people
may be forced to resort to corrupt practices such as bribery and forgery to
get a business license. Meanwhile, unprofessional people enter the market to
benefit from rents and because of being close to power institutions. This
disturbs the state of the economy. The best example of this situation is the
recent crisis facing monetary institutes where certain individuals were able
to obtain permits that are not granted to anyone under normal conditions
through collusion and links with the power bases. The result was the
collapse of the money market, which is still unresolved and has inflicted
heavy damage on the economy.
Consequently, regarding the concept of uncertainty it should be taken into
account that it does not mean that every economic activity is definitely
successful and will be fruitful; in a competitive market, a person may fail
or make mistakes and must pay a high price for any blunder... Uncertainty is
an unnatural risk outside the framework of competition and normal business
environment; that is, political risk or the risk arising from government
interventions. For example, when the authorities decide not to join FATF,
economic activists who have to interact with the world generate excessive or
uncertain risks and cause their gradual withdrawal from the market.
In fact, the uncertainty in the Iranian economy is due to government
True. In addition to direct and indirect government interventions in the
business environment, wrong economic policy is also very effective in
emergence and exacerbation of uncertainty. The government’s wrong monetary
policy causes inflation, while the government’s decision to stabilize the
exchange rate, in conditions of growing inflation, and the government’s
inability or procrastination in checking the inflation, as well as the
gradual correction of exchange rates, in the long run, will cause a sudden
jump in exchange rates value and depreciation of the real value of the local
currency on the market.
Foreign exchange fluctuations over the past year are one of the main causes
of uncertainty in the market. Contrary to what is supposed, this problem
will not be solved with more government involvement and decisions like
supplying USD rate at 42,000 rials. The only solution is to adhere to the
rules of the game. Compliance with the rules of the game is not a normative
or ideological debate. That some, for this reason, describe us as market
lovers or market fundamentalists is incorrect because what we say is a
purely scientific argument. What happens if a civil engineer ignores the
laws of physics and mechanics in constructing a building? What he has made
will collapse and his scientific credibility will be questioned.
Unfortunately, in economics, this situation is not apparently dominant, and
as a result financial and monetary policies are totally opposed to
economics, and the consequence is the existing instability without the real
perpetrators being truly accountable. When we talk about the rules of the
game, we are actually talking about the rules of economics. Ignoring these
rules is like building a structure without regarding the laws of physics and
mechanics. The economic structure, which is based on the rules of the
market, or the laws of economics, will inevitably collapse. The difference
here is that if an engineer makes such a mistake, his license will be
invalidated and will lose his credibility and people would never ask him to
build another building. But in the realm of economics, since the issue is
complicated, and the policymakers are both the government and
power-wielders, no one is accountable. The statements made by the economic
authorities in the aftermath of the foreign currency crisis are significant.
The government set the price for the foreign currency and banned any other
rate! We still have not come out of this situation and the government has
not learned a lesson from this wrong policy.
Although the government created a secondary market, it imposed so many
restrictions that a third market had to be formed. In addition to the
limited amount of USD at 42,000 rials rate allocated solely for basic goods,
the secondary exchange market should be free and unrestricted.
Unfortunately, until politicians learn that this market should not be
limited, heavy costs are inflicted on the economy and people. These
conditions add to uncertainty and insecurity. The wrong monetary policies of
the government have led to inflation and the government is responsible for
the inflation but this is not something they can make it up.
However, with the continuation of wrong policies such as price suppression
and market constraints, the result, in addition to inflation and rising
prices, is shortage of goods and famine. Inflation will not be resolved by
pricing, as in the past few months, despite the intense activity by the
State Punishment Organization and the Consumer Protection Organization, the
upward trend of prices continues. But the activities of these price
oppressive institutions will have a consequence, namely shortage of goods.
The experiences of the 80s, 90s, and the tenth government show that the
suppression of prices and what is happening in the so-called coping with
hypermarket in reality is nothing more than an exacerbation of the shortage
How foreign policy issues contribute to this uncertainty?
In fact, there is a great fallacy in this story. I admit that our problem is
internal, but one of the internal problems is that the body of governing
institutions does not want or sometimes cannot correct the foreign
relations. Why have not we yet joined the FATF? Because, there is opposition
in the Parliament and other organs. It is our internal problem that we do
not join a transnational organization with international goals and in some
way we are exposing ourselves to suspicion. The statement by the economists
that our problems will not be resolved until trade relations with
international markets become sustainable is right. But the root of this
problem is the power struggle inside the country.
There are some inside who are opposed to improving foreign relations for the
sake of their own interests. The same people who sustained losses from the
Joint Comprehensive Plan of Action (JCPOA) are now making profits from
bypassing the sanctions and creating people like Babak Zanjani. This group
is opposed to improvement of relations with the outside world. In this
debate, one should realize these misrepresentations. They say if we solve
our own internal issues, the US cannot do anything. These words are slogans.
Why should we take a position to cut all our banking links with major
In China and Vietnam, the Communist Party is ruling and opposes the US and
imperialism and Western domination, but they are moving in the right course.
We are hurting ourselves. They block any action that may improve relations
with the outside world. Some people are after destroying international
relations by shouting false and useless slogans and cause uncertainties in
the Iranian economy. There is an important point about the intensification
of economic sanctions in the previous round and the global consensus against
us, which is sometimes forgotten; one of the factors that exacerbated the
sanctions was to question the Holocaust by the former president. My question
is what was the national interest or public good for our people to raise
this issue? Why should our official president say something that most of the
influential and powerful countries in the world take stand against us? That
was one of the main causes in sending our case to the UN Security Council.
The economic consequences of this statement were very dear for us.
Economic activists in the globalized and international economy today cannot
rely solely on what we have inside. Our economy is an oil economy and about
30% of the state budget comes from oil money. Oil is a global commodity and
traded on the world market. We are more dependent on the global market. Does
the common sense tell us that in such a situation, we have to fight the
world market or give slogans that would disrupt our relations with the
world? At the same time, some people in opposition to joining the FATF say
that this is tantamount to submission to imperialism, while they present no
reasonable argument. These actions and these slogans are contrary to
national security and interests. This may have benefits for them but brings
misery and anxiety to the people.