Monday, October 06, 2008

Bail Out Ejects the Free Market in Iran

The history of economic thoughts and economics in Iran reads like ancient Greek tragedies. In a country where all ideas have a political role to play, even if they do not want to, free market and neoclassical economic theories have found themselves at odds with politicians more than once.
In Pahlavi era they were not welcome while a centralist government reigned over economy with a tight grip, and while most of Iranian intelligentsia was inclined toward Socialist and Marxist notions. A free market was equivalent of heresy.
In the post revolution era ideologists and politicians vacillated between absolute control of economy and privatization.
Ironically the first major nationalization program was designed and proposed by Mr. Sahabi a member of the provisional government and Mr. Bazargan’s liberal moderate cabinet. The revolutionaries might have their disagreements over many concepts such as democracy and freedom of speech however they all opposed economic freedom and free market resolutely.
Only recently during Presidents Rafsanjani and Khatami politicians reconsidered their stands and welcome some notions of private ownerships. Development plans called for extensive privatization of industries and a new interpretation of article 44 of constitution was introduced that ended the government’s monopoly in economic activities. It even seemed the most ardent critiques of free market have accepted the necessity of private free market at last.
However the new crisis in American financial markets has fueled the arguments of those who advocate an unlimited role for the government in the economy and distrust free market and free market ideas. President Ahmadinejad went as far as saying that assuming free market regulates the economy is “a great lie that benefits thieves.” There is no doubt that promoting a free economy in Iran has become more difficult.
Such statements are nourished by the fact that many Iranians, intellectuals and politicians alike, are ignorant of economics as a science and believe their experience of economy can substitute analytical tools and methodological studies of the economy. They often confuse the science with the phenomenon and instead of believing in price and inflation as signals believe in them as control instruments of the economy.
For time being many from all parts of political spectrum in Iran refer to the ongoing crisis as the greatest defeat of capitalism, however one wonders what would happen if this crisis forces down the price of oil. Would then a private free market become a good idea again?

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