Iran’s Post-Sanctions Economic Challenges
Abstract
Lifting of economic sanctions is a necessary condition for Iran’s economy to grow. It is not sufficient, however. Iranian economy has been suffering from structural problems caused by the wrong role of the state. Using Phillip Cerny’s concept of government as provider of three types of “public goods,” here we argue that government should move away from being a direct producer and become a regulator. There must be compatibility between economy and polity. Iran’s economy, similar to many others, needs transparency, rule of law, and respect for privacy. In other words it needs democracy. By briefly looking at the history of government’s economic policies we show that inability to make such transformation was the major cause of the 1979 Revolution. Since then things have gone worse and unless some major reforms take place the lifting of sanctions will not cure Iran’s economic problems. I- Introduction Implementation of the nuclear deali that Iran and 5+1 signed is supposed to result in lifting of specific economic sanctionsii on Iran. No serious observer considers such a lifting of sanctions to have a major immediate impact other than a psychological one, and easing some of the financial restrictions. Many high level delegates from public as well as private sector of major economies of the world have travelled to Tehran or are planning to do so. There have been talks about a number of investment projects, but no major concrete action has taken place as of yet. It would be a mistake to think sanctions have been the only, or even the most damaging factor that has pushed Iran‟s economy to the verge of collapse. The real trouble is the structure of Iranian economy and the role that state (political apparatus) plays in it. Some of these problems predate Islamic Republic (IRI) and the 1979 Revolution. But IRI has exacerbated them tremendously. II- Background Iran‟s attempt to modernize/industrialize its economy started in the mid19th century under Amir Kabir. Constitutional Revolution of 1907 was a major step forward towards modernization of Iranian society. The social and economic (but not political) attempts to modernize Iran started in earnest with Reza Shah‟s reign in 1922. In those days there were no modern institution and it would make sense for the state to provide for all major requirements such as infrastructure. For example a railroad that linked Persian Gulf in the south to Caspian see in the north via capital Tehran in particular was very helpful.