[lbo-talk] Inflation: Iran and Venezuela (was Party turns on Ahmadinejad over attitude to inflation)

Yoshie Furuhashi critical.montages at gmail.com
Fri Sep 21 05:56:27 PDT 2007


On 9/20/07, Doug Henwood <dhenwood at panix.com> wrote:
>
> On Sep 20, 2007, at 1:32 PM, uvj at vsnl.com wrote:
>
> > Robert Tait in Tehran
> > Thursday September 20, 2007
> > The Guardian
> >
> > Iran's president, Mahmoud Ahmadinejad, has suffered an embarrassing
> > blow to
> > his prestige after his own party attacked him for adopting a
> > jocular tone
> > towards inflation at a time of rampant price rises.
> > http://www.guardian.co.uk/iran/story/0,,2172852,00.html
>
> The rest of the piece is quite excellent:
>
> > The Islamic Revolution Devotees Society - a fundamentalist grouping
> > of revolutionary veterans co-founded by Mr Ahmadinejad - has added
> > its voice to a rising chorus of economic discontent by warning the
> > president that spiralling living costs are hurting the poor and
> > undermining his stated goal of social justice.
> >
> > The society says the government is to blame because it embarked on
> > extravagant projects while failing to control the money supply.
<snip>
> > That may partly refer to one of Mr Ahmadinejad's most
> > controversial recent moves in which he ordered banks to cut
> > interest rates to 12% - below inflation, which is estimated at
> > between 20% and 30%.

What makes you think that a call for raising interest rates and diminishing government spending for working people is "quite excellent"?

In any case, here's what we'll never see in the Left Business Observer:

<http://montages.blogspot.com/2007/09/inflation-iran-and-venezuela.html>

. . . . . . . . . . . . . . . . . . . .

Neither is the current level of inflation -- which Tait exaggerates, citing no sources -- new in Iran, which has seen much worse. According to none other than the International Monetary Fund:

Iran has a history of relatively high inflation, with CPI inflation

averaging more than 17 percent since the 1979 revolution. . . .

The 1979 revolution clearly represents a breaking point in the

money-inflation relationship. Inflation increased significantly

following the revolution (from 6.6 percent to 17.4 percent on

average), but the acceleration in money growth was almost

negligible (from 23.8 percent to 24.6 percent on average).

After the dramatic increase experienced in the mid-1990s,

when it reached a peak of 50 percent, inflation declined up

until the first quarter of 2006/07, though the annual average

remained in the double digits. (Leo Bonato, "Money and

Inflation in the Islamic Republic of Iran," IMF Working Paper,

May 2007, p. 3-5)

See, also, "Figure 1. Money Growth and Inflation, 1958/59-2005/06" on page 4 of the same paper.

Inflation in Iran

Iran's Central Bank calculates that inflation stands at 17.1% now ("Summary Results of the Consumer Price Index in Urban Areas in Iran," 22 June - 22 July 2007), which is just about the post-revolution average. The IMF estimates it to be 17.8% in 2007, projected to decline to 15.8% in 2008.

It's basically the same domestic policy of low interest rates as Venezuela's, and the same global economic trends, that are adding to the price pressures in Iran, and the same policy of large subsidies as Venezuela's also cushions inflation's impacts on the poor in Iran, despite economists, technocrats, and journalists speaking in the name of the poor but actually rooting for neoliberal solutions -- namely raising interest rates and cutting subsidies for the poor.

Mark Weisbrot and Luis Sandoval write in "The Venezuelan Economy in the Chávez Years" (July 2007) that "[r]eal interest rates have been negative throughout the recovery as measured by the 90-day deposit rate or most of the recovery, as measured by the lending rate" (p. 17). Pushed also by expansive fiscal policy, Venezuela's inflation, currently running at 19.4 percent, exceeds the government's target. But they also note that "it should be emphasized that double-digit inflation rates in a developing country such as Venezuela are not comparable to the same phenomenon occurring in the United States or Europe," pointing out that Venezuela experienced far worse inflation in the 1990s (p. 2).

Inflation in Venezuela

The same can be said about Iran.

Why have Weisbrot and Sandoval made efforts to clarify the economic history of Venezuela? Because they know that journalism heightening economic anxieties, which in turn will have negative impacts on real economy, is part of the ruling class propaganda that needs to be countered.2

Leftists ought to be doing the same about Iran's economy, but they don't. Rather, most of them do the opposite, apparently having convinced themselves that any economic propaganda against the "Iranian regime" is in the interest of Iran's working class, which isn't true. All that propaganda against populism does is to help Iran's ruling class push for neoliberal economics and help Washington in its campaign to economically isolate Iran.

1 One learns that Tait has an agenda promoting Rafsanjani, which in part explains how he reports on Iran's economy and domestic faction fights: Hossein Derakhshan, "Robert Tait Markets Rafsanjani to Americans," Editor: Myself, 21 August 2007.

2 They know their history: "Predictions of economic collapse under Allende were replayed in CIA-generated articles in European and Latin American newspapers" (Church Report, "Covert Action in Chile 1963-1973," 18 December 1975). But nowadays the hegemony of neoliberal economics is such that the CIA doesn't even need to plant a story. The media do it all on their own. -- Yoshie



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