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Why Iran's Green Movement Objects To President's Economic Style

  • Charles Recknagel

His critics accuse President Mahmud Ahmadinejad of "ignoring the basic principles of economics."

His critics accuse President Mahmud Ahmadinejad of "ignoring the basic principles of economics."

The chants of "death to the dictator" have been temporarily stilled since Iran's Green Movement was muscled off the streets during the 31st anniversary celebrations of the Islamic Revolution on February 11.

But political slogans and charges of stolen presidential elections are just part of the explosive mix that keeps the Green Movement alive.

Equally important is frustration over Iran's double-digit unemployment rate and the usually double-digit inflation rate. It is this frustration that ultimately may be more dangerous for the regime than electoral grievances.

The anger over the economy pits Iran's modernists, who believe growth comes with capital investments and a strong private sector, against President Mahmud Ahmadinejad's more idiosyncratic vision of economics. That vision puts a priority on handouts to the impoverished while the state-dominated economy creates few jobs and survives mostly thanks to Iran's oil income.

The controversy over the president's economic policies is rarely heard outside Iran, but rages inside the country itself. It can often be heard on the talk shows of foreign stations broadcasting to Iran in Persian, as both Ahmadinejad's supporters and opponents weigh in.

Ahmadinejad likes to distribute aid to local people personally.
One caller to RFE/RL's Radio Farda's weekly "Your Voice" program recently praised Ahmadinejad profusely. He identified himself as Mohammad, living in a village "far from Tehran."

Mohammad said that when Mohammad Khatami was president from 1997 to 2005, "he did nothing for us, we had nothing, but since President Ahmadinejad took power he delivered all kinds of wealth and facilities to our village.

Distributing Alms To The Poor

"The money that comes from oil exports is spent here in our villages. The government spends these monies to make asphalt roads for our village. We really see a very good development plan in our country."

Ahmadinejad has made it a hallmark of his presidency to visit some of Iran's poorest village and directly hand out money for local projects.

During his first term, he successively visited each of Iran's provinces, taking along his entire cabinet. He met local leaders and approved hundreds of projects on the spot. Inviting people to submit requests directly to the highest authority, he and his aides also accepted hundreds of petitions, most of them reported to be personal pleas for money to buy a house, pay debts, or make a pilgrimage.

Ahmadinejad's public tours, which remind critics of Persian shahs and Ottoman sultans of the past, has helped him put out local fires of discontent and to buy the loyalty of targeted constituencies. They also have enabled him to claim he is fulfilling his oft-repeated campaign pledges to "bring the country's oil wealth to the people's dinner table."

But the president's direct action approach has also attracted much criticism for its unbridled spontaneity. In 2007, 57 professors of economics from universities around the Islamic republic signed an open letter accusing Ahmadinejad of "ignoring the basic principles of economics."

No public tally is kept of how many millions of dollars Ahmadinejad directly pumps into the economy this way. But the amounts are large enough that they are widely considered to stoke the inflation rate even as they do almost nothing to create new jobs or increase productivity.

Lack Of Development

A recurring problem is the fact that the national budget, which is always in balance when it is approved at the start of a year, invariably ends up in deficit at year's end due to unaffordable public-welfare expenditures and losses from state enterprises.
Just as routinely, shortages of funds for the expenditures portion of the state budget are made up by transferring over money from the development, or capital-investment portion of the budget. As a result, thousands of development projects remain unfinished.

Many development projects in Iran lack funding.
All this helped make the economy a major focus of the 2009 presidential election. During the campaign, some of Ahmadinejad's rival candidates -- now leaders of the Green Movement -- openly questioned whether the incumbent had any understanding of economics at all.

Another caller to Radio Farda's "Your Voice" raised that same question recently. Identifying himself as Bahram and a law student at Tehran University, he faulted Ahmadinejad and his supporters for talking only in terms of local projects, but almost never about macroeconomic issues.

"Talking about one's performance, it is better to talk in terms of economical indices, let's not talk like some of Ahmadinejad's advisers who always say, 'We built roads, we constructed stadiums,' and so on," Bahram said.

"To evaluate economical issues we should talk according to economic indices, we need to look at rates of unemployment, inflation, poverty, and prostitution. In a recent international study, Iran rated 168th for corruption among the countries in the world. Is that our standing after 32 years of the Islamic Revolution?"

In its "Corruption Perceptions Index" for 2009, corruption watchdog Transparency International ranked Iran 168th in the world, tied with countries such as Haiti and Equatorial Guinea.

Dismay over Ahmadinejad's disregard for the usual institutional approaches to economic management is occasionally voiced in Iran's conservative-dominated parliament.

Many deputies expressed anger last month when the president presented them a national budget proposal worth $368 billion but distributed only a handful of copies on CDs for the parliamentary review process. That appeared to show little respect for Iran's own procedures of budgetary oversight between the legislative and executive branches.

Waiting For The Imam

After this year's budget proposal became public, critics were quick to note that Ahmadinejad had directed substantial amounts of money to projects dear to his heart. Among them: increasing the funding for hard-line think tanks by 143 percent over last year's level.

The think tanks, 58 in all, are ideological institutes whose goal is to prepare the country for the imminent return of the Hidden Imam, a revered Shi'ite figure who went into hiding in the ninth century.

Shi'ite faithful believe the imam's eventual return will inaugurate an era of perfect governance and peace. But Ahmadinejad has made it a cornerstone of his presidency to raise popular expectations that the Imam's return is immediate. That, in turn, say critics, has become a ready excuse for disregarding more mundane concerns such as expanding the economy sufficient to reduce unemployment and underemployment.

One of the beneficiaries is the Imam Khomeini think tank, run by Ahmadinejad's spiritual adviser, Ayatollah Mesbah Yazdi. It is to receive $10 million.

Another is the Ayandeh Rooshan Organization, led by Ahmadinejad's brother-in-law, Sfandiyar Rahim Mashayee, who also is the head of Ahmadinejad's presidential office. It is to receive $120 million.

By comparison, the amount of money proposed for the Rooyan Institute, a leading scientific and medical research center, is just $12 million.

Domination Of The State


The Green Movement's anger over Ahmadinejad comes as Iran's economy reels from three decades of state domination that began with the Islamic Revolution's hostility to private enterprise. The result is an economy mired in bureaucracy, vested interests, official corruption, and cost/price distortions.

Many members of Ahmadinejad's cabinets have had backgrounds in the Revolutionary Guards, as does he.
Jahangir Amuzegar, a minister of finance under Iran's prerevolution government, estimates that 70 percent of Iran's economy today is controlled by the central government and parastatal organizations.

Reviewing Iran's economy recently in "Middle East Policy" (October 2009), he writes that "almost all key managers in state-owned enterprises, including oil and gas, heavy industry, commerce, transport, communications, and charitable foundations, are government appointees."

"As a result, he concludes, "the lean and struggling private sector, involving mostly domestic trade and services, does not play a significant role in the economy's direction."

Even when state enterprises are privatized under various efforts to make the economy more efficient, they still remain controlled by state-tied players, he says.

"Of an estimated $120 billion in assets owned by state enterprises, some $40 billion have so far been disinvested," Amuzegar notes. "In all cases the majority ownership and management of the 'privatized' enterprises have remained in state hands."

One of the most notable of the parastatal players is the Islamic Revolutionary Guards Corps, which reportedly controls a third of Iran's economy. Its interests are believed to be actively promoted by Ahmadinejad, who is a former guard member himself. Currently more than half of the president's cabinet is made up of ex-guard members.

Have They Had Enough?

Those enterprises that do operate entirely outside the state's orbit do so against heavy odds, including the high costs of conducting business, widespread official corruption, arbitrary courts, and uncertainties regarding the state-set foreign-exchange rate. The World Bank's 2009 international ranking of hospitable environments placed Iran at a dismal 142nd among 180 countries.

As Ahmadinejad maintains Iran's state-heavy economy and puts out fires with direct handouts to the poor, he can -- and does -- claim to be true to the Islamic Revolution's goal of "Islamic social justice."

That doctrine, enshrined in the Islamic republic's constitution has never been clearly defined but prioritizes the needs of the poor while denigrating the Western-style capitalism the revolution overturned.

How long Ahmadinejad can hope to use that ideology to keep the Islamic Revolution vigorous as the economy chronically fails to create enough jobs is an open question.

But the Green Movement has clearly had enough. And it may have as much reason to believe the poor will eventually join the protest as Ahmadinejad does to hope they won't.

RFE/RL's Radio Farda correspondent Mazyar Mokfi contributed to this report

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