Monday, May 26, 2008

Saving or Dismantling an Economy?

It is not a secret that President Ahmadinejad does not like the banks. He does not believe in them and considers them and their functions as a threat to himself and a barrier to combat unemployment and to increase production. There is no surprise that his acting minister of economic affairs has introduced a decree to disband all major banks and to replace them with zero interest rate saving funds. These funds can lend money only according to regulations set by the government. Iran’s private banks continue to exist but only as investors. Public banks would stop offering long-term saving accounts, and be banned from offering any service or account with an interest rate.

The government has thought of taking this step although Iran’s supreme leader has approved of privatizing publicly owned banks in Iran by re-interpreting Article 44 of the constitution and although privatization is the focus of currently in place 5 years development plan. This would stop the shares of at least 3 Iranian banks to be offered through Tehran Stock Exchange to the private investors and would send terrifying shockwaves through Iran’s economy. Although this project is nowhere close to implementation, it has horrified many of experts and technocrats in Iran.

Economy has proved to be a challenge no one in the government thought it could be. When President Ahmadinejad despite experts’ arguments and his former minister’s of economic affairs counsel decided to lower interest rates even further no one expected the governor of Central Bank of Iran Mr. Mazaheri to hold his ground. He disinclined to communicate President’s orders to the banks and objected this decision in strongest terms. It is now rumored that his days are numbered. It also is rumored that he has told the President that he would not resign his post.

The debate does not end here. Dr. Tavakoli a prominent conservative and member of parliament and the chair of its research institute told reporters that 46% of short run projects that government has put in place to fight unemployment do not exist. Dr. Jahromi, the minister of labor and architect of President Ahmadinejad’s economic policies denied this report and called it misinformation. It seems except for a few close associates few admire government's economic stand.

In the meantime inflation causes the prices to increase even higher, the prices have reached new heights in real estate market and consumers are squeezed even more in groceries and super markets. One wonders if disbanding the banks would have the effect government expects it to have, or it would intensify the crisis the economy is facing now.

Thursday, May 08, 2008

It is First of May!

Walking down the streets of Tehran in 80’s and early 90’s one would have seen the old fading revolutionary slogans: “Long Live 11th of Ordibehensht (First of May) the Workers’ day! Long Live the Workers! Down With Capitalism!” Using the 11th of Ordibehesht from Iranian calendar, some older ones date to early years of revolutions would have been read: “Long Live the First of May! The Day of Proletariat! Dawn with Capitalist Imperialism!”

These were testimonials to the leftist inclinations of early revolutionaries. Except for a few merchants of Bazar and some of the traditionally religion few felt obliged to advocate the ownership rights or a free market. Advocating capitalism was almost a crime and an intellectual suicide. Justice was the word of the day.

In following the message of justice Iran adopted one of the costliest labor codes in the region. It makes it impossible to fire a worker; so many bankrupt firms continue to keep their labor force failing to pay their salaries. Many entrepreneurs prefer to hire illegal workers from Afghanistan and neighboring countries instead of hiring Iranian workers, to avoid dealing with the labor code. Ignoring the necessities of market and profitability of production has become a norm in approaching the labor issues in Iran.

Today the questions of efficiency, productivity and the issue of unpaid employment are all valid and legitimate topics for the discussions on Iranian economy. However many instead of looking into the causes of events, still concern themselves with short-term remedies and the events. Certainly it is tragic when a worker is not paid, and there are reports of factories where workers have not been paid for several months, but many of these firms have been bankrupt for several years now and they need to adjust the number of their employees. The restrictions set by the labor code prevent the entrepreneurs from maneuvers that would save their businesses. No sales and no revenues are translated into no income, but few observe that.

It is the first of May again. May be it is time for Iranian workers to demand freedom of choice, instead of an ambiguous justice and protections that doom the future of their employment and make it an unpaid one.