Iran from the Inside

There is an excellent article by Laura Secor on Iran in the New Yorker. It is a profile of the economist Mohammad Tabibian. The details from this article help you to understand the surge of anti-Ahmadinejad voting and the undercurrents of Iranian society:

In the strange, tumultuous story of Iran’s thirty-year-old Islamic Republic, the battle over free speech has captured the world’s imagination, but the debate over free markets goes just as deep. Since the revolution, most industries in Iran have been owned either by the state or by enormous Islamic foundations that are connected to the ruling oligarchy and exempt from government oversight and taxation. While the Iranian government points to rapid economic growth, inefficiencies are rampant, and the traffic in exports, other than petroleum products, is anemic.

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Tabibian shared this ambition with the generation of Iranian intellectuals, students, and other revolutionaries who toppled the Shah, in 1979. At that time, Tabibian was studying for his Ph.D. in economics at Duke. He was a devout Muslim and a member of the Islamic Students Association, which united Iranian expatriates across Europe and North America. The revolution was a powerful tug: expatriate scholars were pulled back into Iran, which they found in a heady state of utopian promise and practical disorder. “All projects were stopped,” Tabibian recalls. “The factories were closed. The ministries were in chaos. The systems in the old administration were not there anymore. Everybody was engaged in revolutionary activities, slogans, and shouting.”

Someone had to keep the economy and the basic structures of the state from collapsing, and that job fell to the students returning from abroad. Iranian students from M.I.T. took over the Ministry of Science; those from Stanford and the University of California system ran the Central Bank; those from North Carolina took over the Planning and Budget Organization, or P.B.O. “It was based on previous relationships,” Tabibian told me. “You collected other friends who knew each other from abroad.” For Tabibian, the key connection was to Mohammad Taghi Banki—a graduate of North Carolina State University and the head of the P.B.O. Banki hired Tabibian as the director of the agency’s Macro Economy Bureau in 1981, at a moment when the P.B.O. was charged with the awesome task of drawing up an economic agenda for the world’s first revolutionary Islamic state.

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Post-revolutionary Iran was infused with leftist ideology, in particular the work of a radical egalitarian Islamist thinker, Ali Shariati, without whose Marxist-Leninist reading of Shiite theology the revolution might never have taken place. (“Shariati was a confused person,” Tabibian said bluntly. “His were an emotional type of arguments, provocative and revolutionary. But he had no clear idea about economics or politics. Unintentionally, he did a lot of disservice to this country.”) Ayatollah Ruhollah Khomeini, the revolution’s charismatic leader, was far from a leftist, but, breathing the same air, he arrived at a religious populism that made frequent reference to the righteous struggle of the oppressed against the ruling class.

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The new Iranian constitution, however, outlined an economy controlled largely by the state, partly by coöperatives owned by the public, and marginally by a private sector that would include the traditional merchant class of the bazaar. It was a fractured vision, and each of these power centers fought for control. Much of the country’s wealth and industry ended up in the hands of a few giant, semi-private foundations that were opaque to the public and controlled by powerful clerics. Tabibian recalls, “There was a mix of rational and revolutionary attitudes and emotions—pushing, pulling, disputing, arguing.”

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In 1989, Khomeini died, and the Soviet Union was on the verge of collapse. A more liberal economic plan finally seemed politically feasible. Iran’s new President, Ali Akbar Hashemi Rafsanjani, reached out to the economists and industrialists who had been stymied for the past decade, and offered them the opportunity to clean up the country’s contradictory goals and policies, scale back its inefficiencies, and lift the government’s heavy hand.

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The economic-reform program became the signature of Rafsanjani’s Presidency. One Iranian journalist in exile told me that Tabibian was “Rafsanjani’s brain.” Yet Tabibian’s ideas were once again undercut by politics: Rafsanjani was widely believed to be floridly corrupt, bestowing favors on friends and relatives and undermining the public trust. Moreover, revolutionary idealism still permeated Iranian politics. The watchwords of the revolution had been social justice and independence from the imperial West. Many Iranians were convinced that Tabibian’s reforms would curry favor with the West while inflicting pain upon the poor. This feeling persisted, even though the Rafsanjani administration protected key entitlements, such as subsidized food and medicine.

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As the price of oil rose, poverty declined, and the Islamic Republic made good on many of its promises, bringing electricity, safe water, health care, and education to the hinterlands. But at the same time the rich grew richer—conspicuously so, as the opening of the market made foreign luxury goods available in Iran for the first time since the revolution. New cars from Japan, Germany, and Korea, the sort that used to belong only to diplomats, became common in north Tehran. These visible inequities, combined with Rafsanjani’s personal enrichment, made many Iranians resentful.

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Meanwhile, for Rafsanjani, the reforms were a political catastrophe. The public recoiled at short-term shocks, such as the doubling of prices for gas, phone service, and public transportation, and at the cost of reconstructing the country after the war with Iraq. In 1993, the Rafsanjani administration bungled its effort to unify Iran’s three foreignexchange rates. Tabibian had long called for a single exchange rate determined by the market, but the government chose instead to adopt an artificially low rate. As he recalls it, “The Central Bank was in no position to support and maintain this politically determined foreignexchange rate, and it did not serve the economy.” The resulting debt crisis depleted the reserves of the Central Bank in about a month. The government bailed out the borrowers, rescheduling and paying off debts it could not afford. From nearly every quarter—the students and the clerics, the left and the right—came an overwhelming backlash. Under pressure, Rafsanjani reimposed price controls and halted privatization.

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In 1997, Rafsanjani was handily defeated by a Presidential candidate from the left: Mohammad Khatami. The incoming President, who served two four-year terms, introduced a new openness in Iranian politics and culture, but in the arena of the economy his administration lacked a clear direction. He tentatively resumed the reform program Rafsanjani had abandoned, but he quickly terminated any policy that was not well received by the public. Meanwhile, higher oil prices gave the illusion of prosperity: poverty declined, inequality did not rise, and by 2005 the standard of living in Iran was the highest it had been since the mid-seventies. None of this, though, was a result of government strategy, which remained an ad-hoc affair.

The country’s unemployment epidemic made clear that the economy still had festering troubles. Iran’s population had doubled since 1979, and the revolution had made education available to more Iranians. But there was no role for these people in an economy that depended not on productive industries but on the dispensation of oil rents, which tended to create unskilled jobs. During Khatami’s two terms, unemployment among illiterate men declined from seventeen per cent to eight per cent; among men with advanced degrees, it leaped from fifteen per cent to twenty-three per cent. (Among the most educated women, it was forty-three per cent.) The unemployment problem alienated Khatami’s core constituency of educated young Iranians. Moreover, Khatami’s penchant for lofty intellectual rhetoric signalled to many unemployed Iranians that he was out of touch.

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embers left. Tabibian stayed, though he spent less and less time there.

Unemployment and inflation continued to dog the Iranian economy, and Khatami, embattled on other fronts, showed little will or aptitude for addressing Iran’s systemic ills. In 2005, he was swept from power by the radical populist Mahmoud Ahmadinejad, who campaigned on the promise to end corruption and to deliver oil money to kitchen tables. His base saw him as the last hope for reclaiming the revolution for its foot soldiers: veterans of the war with Iraq; the armed young men of the Revolutionary Guards and the Basij militia, who felt snubbed by Rafsanjani’s technocrats and Khatami’s intellectuals; and the rural underclass, which survived on government subsidies and felt a kinship with Ahmadinejad, whose family migrated to Tehran from the village of Aradan.

Ahmadinejad didn’t just campaign as a populist; he governed as one, doling out billions of dollars on his tours of the provinces. He was assisted immeasurably by the continuing oil boom; in 2006, revenues were almost fifty billion dollars. But Ahmadinejad’s policy of funnelling this cash directly to his constituents backfired. The ensuing rise in inflation made food and housing—the two things nobody can do without—particularly expensive. The analyst Saeed Laylaz said of Iranians who rent their homes, “One night they slept, and they awoke in the morning and they realized that they were under the poverty line.” Nearly seven hundred thousand urban Iranians fell into poverty in 2006. Inequality had worsened for the first time since the Rafsanjani reforms.
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In January, 2008, more than half of Iran’s two hundred and ninety parliamentarians had signed a letter blaming Ahmadinejad’s policies for rising unemployment and inflation.

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During the Rafsanjani era, many left-leaning student activists had bitterly protested the reforms that Tabibian pushed through. Yet, in 2006, when pro-democracy students demonstrated against Ahmadinejad, one of them waved a placard that read “Bring Back Tabibian.”

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But under the Islamic Republic, Iran has become a modern country with few visible signs of squalor. All over the capital, commerce is brisk, from the upscale shopping malls in the north to the clogged passageways of the Grand Bazaar and the modest curbside shops of low-income quarters.

Even so, many Iranians are enraged by the state of their economy. Not only do they complain about high unemployment and income inequality; they are angered by the pervasive cronyism and political corruption that reward the ideological faithful. Three decades of populism have won the Islamic Republic the fealty of the rural underclass, but at the cost of rendering the educated middle class ineffective, unmoored, and nearly irrelevant to the country’s economy.

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One Friday morning, outside a mosque in the working-class neighborhood of Narmak, where Ahmadinejad grew up, I met a young man who rented a narrow basement apartment. He had been trained as an electrical engineer with a specialty in jet engines, but he worked in a tire factory and had not been paid in five months. “Because of the wrong policies of Ahmadinejad, our factory’s door is locked,” he told me. “I have two engineering certificates, but unfortunately there is no place for technocrats in this country.” He had voted for Ahmadinejad in 2005, but he had come to believe that the President’s economic policies were “a hundred per cent wrong.” He echoed the credo of Tabibian: “Economic freedom will come together with political freedom.”

Young people in the run-down neighborhood of Naziabad, in south Tehran, told me that they saw no point in going to school. The best they could hope for, if they wanted to make money, was a life of crime.

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“We have a bad economic situation at the moment—a sick economy with poor management. Thirty per cent of the people have family money. They sell their property, buy something cheaper, and spend the difference.” And the other seventy per cent? The real-estate agent laughed. “We have a stadium over here,” he said. “They go and hang themselves.”

Last April, Ahmadinejad gave a speech in Qom addressing Iran’s economic woes. Iranians should be grateful, he proclaimed, for twenty-two-per-cent inflation. Foreign powers wanted Iran to suffer seventy-per-cent inflation, but his administration had fended off their schemes. Still, he could not deny the persistence of corruption and other economic problems. These problems, he said, were the fault of sinister elements within his own cabinet.

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Even if Iran’s middle class is finding ways to live decently, it contributes little to the economy. Khajehpour’s research has shown that many middle-class Iranians live on unsustainable and ultimately unproductive sources of income: remittances from relatives abroad, second jobs, brokering deals between third parties, selling off family property. It’s a precarious existence for the class that would normally stand at the core of a healthy economy. And that is no accident.