[lbo-talk] Iran's Economic Change (was Russia's economy)

Yoshie Furuhashi critical.montages at gmail.com
Fri May 11 10:36:56 PDT 2007


On 5/11/07, Doug Henwood <dhenwood at panix.com> wrote:
>
> On May 11, 2007, at 7:50 AM, Yoshie Furuhashi wrote:
>
> > There are many books and articles by Iran Studies scholars that are
> > worth reading. See, for instance, Djavad Salehi-Isfahani (a professor
> > of economics at Virginia Polytechnic Institute & State University),
> > "Revolution and Redistribution in Iran: Poverty and Inequality 25
> > Years Later," August 2006,
> > <http://www.filebox.vt.edu/users/salehi/Iran_poverty_trend.pdf>. See,
> > especially, "Table 7: Per Capita Income and Expenditures Per Day in
> > 2004 Rials, 1974-2004" on p. 49, "Table 8: Poverty Lines, Consumer
> > Price Index, and PPP Exchange Rates" on p. 50, and "Table 9: Poverty
> > Rates" on p. 51. It is clear from Salehi-Isfahani's work as well as
> > other studies* of social and economic change in Iran over the last
> > three decades that the government of Iran, through its fiscal policy
> > and public investment, has diminished poverty and raised the standard
> > of living for working people.
>
> I'm confused. In your early cheerleading for Ahmadinejad, you said
> his election and his subsequent rhetoric were a response to popular
> discontent over poverty and inequality - a not uncommon analysis. Now
> you're telling us things aren't so bad after all. Salehi-Isfahani
> resolves this apparent contradiction in his abstract this way: "I
> suggest that in the context of a distributive economy such as Iran's,
> in which wealth accumulation is seen to depend more on political
> access than individual productivity, more subjective feelings of envy
> and fairness may matter more than ob jective indicators of poverty
> and inequality." That sounds like a fairly orthodox economist
> talking. You agree?
On 5/11/07, Doug Henwood <dhenwood at panix.com> wrote:
> What an interestingly selective rendition of this paper you present!
> And your picture of Rafsanjani is at odds with the author's.

Salehi-Isfahani is clearly sympathetic to reformists, and also to their neoliberal economic understanding of Iran, so obviously his view of Rafsanjani differs from mine, but even he notes that, despite poverty reduction and relative stability of overall inequality even in the post-Khomeini era, individual earning inequality (as opposed to overall inequality) and economic insecurity have risen due to reforms: e.g., "Individual earnings also mark the rise in inequality of earnings in the post reform period (after 1989) more sharply than household expenditures or incomes" (p. 34) and "When the reforms began 60 percent of wage and salary workers were employed in the public sector, compared to 40 percent in 2004" (Salehi-Isfahani, p. 42).
>From working people's points of view, transfer payments, social
programs, etc. that managed to stabilize overall inequality did not eliminate their discontent.

Moreover, the electoral contest that pit Ahmadinejad against Rafsanjani happened in the midst of oil boom, and boom years tend to sharpen people's discontent. In countries whose economies and state revenues are highly dependent on one or two extractive industries, the question of distribution of profits from them tends to get very politicized in boom years, and especially so in countries like Iran whose history began in social revolution aiming for social justice and whose economy is very statist. Last but not the least, just about everyone agrees that Rafsanjani is among the richest men in Iran, and he was and still is perceived to have been one of the biggest beneficiaries of post-Khomeini economic reforms.

You cite Salehi-Isfahani:
> [T]hese results question the suggestion that pro-market reforms
> during the Rafsanjani and Khatami administrations left the poor
> behind, and thus contributed to the reformists' electoral defeat in
> June 2005. As it happens, the largest declines in poverty coincided
> with periods of reform, suggesting that, to the contrary, reforms may
> have been good for the poor.

In terms of facts, there is no contradiction between rises in earnings inequality and declines in absolute poverty in the periods of reform that coincided with economic growth. What Salehi-Isfahani fails to consider is that Iran's workers want more than declines in absolute poverty and resent rising earnings inequality and economic insecurity that came with reforms. -- Yoshie



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