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Economist discusses Rouhani's 'radical neoliberal policies'

Prominent economist Fariborz Raisdana charges that President Hassan Rouhani's administration is pursuing neoliberal economic policies that fail to address Iran's structural economic woes.

With the announcement that Iran’s nuclear deal with the world powers will take effect Jan. 20, and reports that on Feb. 1 Iran will receive the first $550 million installment in previously blocked overseas funds totaling $4.2 billion, there appears to be optimism that Tehran is taking the slow and necessary steps to address many of the issues its economy is facing. Prominent Iranian economist Fariborz Raisdana, however, believes the changes taking place under President Hassan Rouhani’s administration will not succeed in addressing the country's structural economic problems.

Fariborz, outspoken and with leftist views, was jailed in 2012 for criticizing changes in subsidy payments. He asserts that based on statements made by Rouhani’s ministers, the government appears to be pursuing the economic policies implemented during the presidencies of Akbar Hashemi Rafsanjani and Mohammad Khatami. These, he contends, will ultimately not address inequality in the economy. After several phone conversations with him from his home in Tehran, I emailed him questions about his take on Iran’s economy. The text of the interview follows.

Al-Monitor:  Previously, you had criticized the economic policies of President Rouhani. Can you please clarify why you disagree with his economic policies? What do you think his economic plans should be?

Raisdana:  You know, I did not only criticize the Rouhani administration. When it comes to the economy, I criticize all previous administrations. They were all capitalist administrations with semi-governmental monopolies. All these administrations were basically opposed to any effective form of welfare, scientific planning or democratic and cooperative programs that would increase equality. For all of them, making more profit by relying heavily on petroleum revenue, heavy capital investment, trade and real estate has always been the number-one goal. The fact that the Rouhani administration is moderate and neoliberal, that Hashemi’s administration was also moderate and neoliberal, that [Mahmoud] Ahmadinejad’s administration was conservative-populist and used radical policies against internal and external opposition groups or that Khatami’s administration was also neoliberal with a bit of tendency toward planning and organizations does not take away their common denominator. These small differences do not change the fact that these administrations all have had one major element in common: All of them were radically market oriented and were against any form of cooperative planning or democratizing the economy. It means that they were against the idea of increasing the share [going to] the workers, service personnel and government employees with middle or low incomes. Under the supervision of all these presidents, with the exception of the first few years of Ahmadinejad’s presidency, distribution of wealth either worsened or stayed the same.

There are ideologues on both sides who are supposedly concerned about religious and ideological issues. However, in reality, the rivalry between different factions is an economic rivalry over the sources of wealth, production, trade, investment opportunities and rent seeking. None of these factions can guarantee people’s democratic rights or rights of the laborers and members of unions by providing sufficient social justice and sustainable growth. Hashemi counted on foreign loans, Khatami had the support of the naive class, and Ahmadinejad relied on the oil revenue.

Ahmadinejad supported semi-governmental capitalism — meaning corporations, organizations and semi-governmental military and non-military institutions — against a governmental, clerical and bureaucratic economy. All these factions existed before, but Ahmadinejad’s administration, a conservative administration with radical right-wing economic policies, was trying to strengthen this new faction and create a new layer of capitalists. This layer established itself and took over as the main agent for investments, civil projects, extraction of natural resources, civil-military projects and developmental contracts. Rouhani’s administration has clearly accepted and recognized the existence, and the interests, of this new group. Right now, the problem is their disagreement regarding a portion of the resources and interests. We can see signs of this disagreement, for example, in [members of parliament] attempting to expose the supposed, not the real, corrupt figures.

Al-Monitor:  Do you believe that [Rouhani] is going for neoliberal economic policies? And if yes, do you think such policies will increase economic inequality?

Raisdana:  Yes, he is going for radical neoliberal policies, Iranian style. This unique method opens the door for rent seeking (now with a legal mask), inequality and wealth accumulation and basically benefits the same capitalism that existed before. This administration’s strategy is to have free trade with superficial planning (the previous administration was honest at least and did not pretend that it had any plans), privatization (almost as rapidly as the previous administration) and shifting the foreign currency capital to which Iran might gain access through the easing nuclear situation. It is neglecting its duty when it comes to social security, welfare, job creation, programming and organizing investment projects. If you listen to what the minister of housing and urban development, the minister of industries and business and the minister of petroleum say, you can get a clear picture of what is going on. Right now, we are in the early stages of the nuclear negotiations, but all these ministers talk about is foreign investment. They are constantly encouraging foreign investors, more than anything, with the promise of cheap labor from workers who are skilled, semi-skilled or at least capable of being trained.

Neoliberal policy is the only thing we have had since 1990. There have been minor differences here and there, but in general it has been the same policies without fail. It will be the same with the moderate policies of Rouhani as it was with the conservative populist policies of Ahmadinejad and useless reformist policies of Khatami. We will doubtless witness more inequality and increasing poverty. If foreign financial sources are to help the situation, they will be most beneficial for the same private and privileged capitalists who generated so much bankruptcy, inefficiency and loss of capital. At the most, unemployment should be brought down from its current rate of 18.5% and inflation from the 45% to 50%, but it will not be by a large margin.

Al-Monitor:  How do you assess the restructuring of the past four months?

Raisdana:  Do not use the word "restructuring." “Restructuring” means that some changes are happening, at least in the results, if not in the structure. Has there been a change in gross domestic product, distribution of wealth, welfare, civil rights, human rights or demonstration of tolerance toward the opposition? Can anyone claim such changes have occurred in the past four months? Anyone, of course, other than the members and the supporters of the new administration?

Al-Monitor:  Which countries do you think are better economic partners for Iran? Europe and Turkey or Eastern countries?

Raisdana:  Each economy, as long as it has a “national” basis, should have long-term, mid-term and short-term plans. None of these are carved in stone; they should be flexible. The issue of an economic partner should be treated the same way. Of course it is beneficial to have multiple partners since it will prevent dependency and high deficit costs. At the same time, however, it will prevent the technological structure of the county from developing through strong and consistent international trade. We should remember that the European Union is a high-cost partner and is also quite protective when it comes to technological diffusion. Japan, Korea and China are more suitable for obtaining investment goods, intermediate goods, consumer goods and intermediate-consumer goods.

If Russia has anything to offer Iran in the area of creating basic industries, then it can be a beneficial partner as long as the technology that it offers is not outdated. That said, we should remember not to be constantly following the latest brand of technology, except when it comes to communication and telecommunication. In any case, the United States must be the economic partner when it comes to certain activities and products. These are usually not consumer goods but are mostly related to civil construction and investment. Medical technology can be imported from the United States (or Switzerland and even India). However, the United States is not a reliable economic partner as it is always seeking to gain monopoly and to manipulate the partnership to its own benefit.

In any case, I believe in having multiple economic partners, but only if there are benefits to be gained in the area of matching technology and developing means of technological expansion. We should have multiple economic partners when it comes to the food industry and its production factors, so that we can make sure that the subsidies paid by our partners to their farmers is not putting pressure on our low-income citizens. We should also take care not to put our own agriculture at a disadvantage. In the automotive industry too, we should try to reach large-scale production.

But we should try not to do this in exchange for polluting our megacities. Why should Iran produce less than 1 million automobiles but in 23 different models? We should limit the models but increase the scale of production. France [is] not reliable, so we should lean more on Japan, China, Korea and even the United Kingdom for our automotive industry. Iran’s economic partner in the automotive industry, furniture, etc. … should also act as export markets. We can produce more cars than we can possibly use inside our own country. However, our experience and expertise in making cars, textiles and clothing can turn us into an important exporter of these goods. It is important to choose our economic partners based on this criterion. But more important than that is the fact that the current, and previous, neoliberal policies have either only cared about the political effects of international trade or its rent-seeking possibilities. International trade should be part of the economy and should be democratic. At this point, it means forgetting the neoliberal policies, democratizing the government and the economy and elevating the workforce to important positions of decision making and management.

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