by Ramin Mazaheri for The Saker Blog
Just as everyone falsely assumes that Iran’s economic history followed the standard colonial model (it didn’t), that their political cleavages are the same as the West’s (they aren’t) and that Iran trails the West in modern political thought & democratic structure (they don’t), it is little wonder that Westerners assume that “privatisation” simply must be the same as in the West (it isn’t).
To quickly spoil the ending and prime the pump for accepting the fundamentally unique (revolutionary) nature of Iran’s economy: the “selling” of state assets to other state-affiliated institutions like the Basij, the Revolutionary Guards and the bonyads (state religious charities) is not “privatisation”. Even if you disagree with that after reading this article, you will certainly concede that it is undoubtedly not THAT “privatisation” which Westerners imagine.
“Privatisation”, when used in the Iranian context, is a hollow catch phrase; just like when “neoliberal” is absurdly, inaccurately and impossibly applied to Iran.
But why privatisation at all, Ramin, if Iran is economically (Islamic) socialist?
Well, there’s no money to pay wages and pensions because of war & sanctions, brainiac…but this is not a very complete (or polite) reply.
Trotskyite Socialists like the World Socialist Web Site – who claimed “Islamic socialism is a sham” in their 3-part response to my criticism of them – while generally well-intentioned, have a real inability to put themselves in Iran’s shoes. They insist on forcing their shoes onto our feet due to their overwhelming urge to Monday-morning quarterback (instead of supporting actually-working socialist ideas).
The WSWS knows a bit about Iran…but often only enough to be dangerous. For example, they write that Iran “amended Article 44 of the constitution, eliminating the stipulation that core infrastructure remain government-owned.”
It’s good they know about this obvious, rock-hard socialist foundation of the 1979 Constitution, which mandated 3 economic sectors – public, cooperative and private, and with private designed to be the smallest. However, Article 44 was never “amended”: in 2004, after much discussion at all levels of government, the Supreme Leader declared – in total accordance with Iranian democracy – a new interpretation of Article 44. The new interpretation is that some industries – but not oil, main banks, key transportation, etc. – could be privatised, but never more than 80% (20% being considered a controlling interest in a corporation).
But were they privatised, and to that extent? I can give you a resounding and short answer: not in the slightest.
The reasons are described in this article, but let’s first consider why Iran became persuaded to reduce some socialist economic controls.
Let’s examine the situation for Iran in 1989: The Iraq war gutted Iranian oil infrastructure when they needed it the most, oil dropped to $8 per barrel in the mid-1980s, the war cost 60-70% of the entire government annual budget, made $1 trillion in damages, dislocated a million people, killed 500,000 Iranians, created hundreds of thousands of needy veterans, damaged 67 cities and 4,000 villages – the war cost Iran more money than it had earned in oil revenue during the entire 20th century.
So, Iranian Islamic Socialist dogma of redistribution must take a backseat when there is nothing to distribute; equality was achieved, anyway – everybody was broke and in mourning. That’s on the micro/national level.
Western leftists are also totally unsympathetic to the historical anomaly Iran was in on a macro/international level, which I personally find fascinating:
In 1989 Iran was a nation which was certainly the most radical and successful in terms of application of leftist economics; a nation only recently acclimated to leftism, and almost solely during wartime conditions; which just lost its political unifier and charismatic national hero with Khomeini’s death that same year; and a war-devastated society, but still bent on implementing revolutionary Shi’ism…was then totally abandoned by Western leftists as the Eastern Bloc and USSR collapsed. Thus at at time when Iran was trying to patiently explain the importance of ideology over money, “It’s the economy, stupid,” became the mantra everywhere until 9/11.
What if Iran had not been faced with this depressingly solo leftist march after 1989? There is absolutely no doubt that there were many people in Iran & at the very highest levels of government who wanted to maintain the huge amount of state ownership, but who was helping us? Nobody was our allies; our would-be allies evaporated; our enemies only switched from hot to cold war.
I raise this point to give historical context for the so-called “privatisation” in Iran: the global crisis of confidence in leftist economics after 1989 surely must have affected leftists inside Iran as well, no matter how independent they wanted to be.
Of course, despite all these things working against the Iranian economy and the worsening of sanctions in the coming decades, the economy has NEVER collapsed BECAUSE Iran was (and remains) so committed to nationalisation, to price controls, to subsidising essential goods and services, to fundamentally Islamic socialist economic & Islamic democratic ideas, etc.
But the massive anti-capitalist nationalisations ARE the economic legacy of the 1980s, and they cannot be forgotten nor dismissed because they are truly the foundation of the economic thought, experience and practice of the Islamic Republic of Iran today.
‘Privatisation’ in Iran ultimately re-distributed money to the poor, not back to the rich
That seems paradoxical, but only if viewed through Western (non-revolutionary) lenses.
In short: A broke government cannot afford to pay more salaries & pension; thus, new structures were created to fuel employment and production, and to reduce the state bureaucracy and regulation, but they were not capitalist structures and certainly not globalist capitalist ones.
Considering that 70% of the nation’s capital had been brought under state control in 1979, in 1989 there was massive support (even among the hard-core left) for new President Rafsanjani’s plan to privatise the non-strategic sectors in order to promote immediate production; foreign borrowing to rebuild also seemed unavoidable, considering the economic devastation. Where else could money come from? Furthermore, opposing this meant opposing both the democratic will and Iran’s vanguard party (the clerics).
But this is where we can stop all this crying for how rough Iran had it because (and this is what Westerners simply refuse to understand): Just become some in Iran wanted to somewhat-significantly privatise the economy, that does not mean there were not others who wanted to maintain a huge measure of state control.
I say this over and over about Iran: People simply do not appreciate that there are multiple groups, ideas, philosophies, political parties, so-called “factions” at play in Iran (though I have never heard of the US Democratic or Republican parties called “factions”). There is also a modern, constitutionally-ordered structural balance in the 1979-penned government; there has been political plurality since the war ended; there is a very vibrant and openly critical press. There is definitely no single ideology other than “guard and progress the country and the revolution”.
Beyond that – it is a free for all, like any modern society! The idea that Iran is not pulled in many different directions by many ideas – democratically – is totally wrong. Just because someone says “privatise” – Iran is not a dictatorship….
Given this reality of pluralism: how can there be a policy of pure neoliberalism when so many STILL advocate for a command economy of a socialist-egalitarian nature? Many openly say the only solution to the West’s current cold war is to return to a War Economy, as we had during the Iran-Iraq War, with coupons, rationing, command economy and mass mobilisation of workers for government projects. This “faction” is rarely reported in the West, but it is significant (and anti-capitalist).
What gets more press, and is a larger “faction”, is those who promote a “Resistance Economy”. This is about import substitution (using domestically-produced substitutes for what you can produce rather than importing foreign goods, for the sake of employment, industrialisation, modernisation and self-sufficiency.) This is most ardently promoted by Khamenei and Ahmadinejad, but has been supported on some level by literally everybody and for years because this was also an ideological part of the War Economy. The Resistance Economy it is supported at all levels of government in dramatic fashion, just some more dramatically than others – again, there is pulling in multiple directions.
So the idea that the neoliberal, globalist lobby has ascended to absolute, dictatorial dominance in the Iranian government is patently absurd, defies logic and is inaccurate. It also shows total ignorance of modern Iranian culture.
Furthermore, Western capitalist media are eager exaggerate the tiniest lemonade stand in China into proof that they are “not socialist”, so why would they call Iran anything but “capitalist”? They want to fuel ignorance, which advances their own capitalist ideology.
However, to the WSWS, any support of a capitalist lemonade stand apparently makes one “neoliberal” and seeking to humbly “accommodate” the globalist order, when that is not at all the case. Franco-German Rothschilds, America’s Waltons and the English monarchy have made little – or probably no – headway in Iran. This gives me a chance to quickly address nearly the entirety of their Part 3, which relied on totally-unproven allegations and rather shameless unearthing of the wildest conspiracy theories to try and prove that Iran is somehow pro-imperialist and just itching to ally with the same imperialists who are crushing our economy: as I said in my first written response to the WSWS in January, such allegations are not even worth taking my time to rebut.
Let’s begin the ending of this idea that Iran has gone from mass revolutionary economic nationalisation to Wall Street-istan. The reality is that such ideas should have ended in 1989.
Rafsanjani era – from 70% to 100% state control over the economy
I hope I have established that the idea that Rafsanjani’s postwar plans or Rouhani’s current economic ideas travel through Iranian society totally untouched by opposition from powerful state actors, groups, lobbies, etc. is totally inaccurate.
Yes, after the war the government allowed more entrepreneurship and created some free trade zones in the south…but they also created price-controlled cooperatives to get poor people basic goods. Again – push & pull, two revolutionary steps forward then only step back, cycles of revolutionary mood waxing and waning and then waxing again.
Did this create a new bourgeois class? No, as I said at the start it was groups like the state charities (bonyads) who mostly bought them. I described the bonyads in detail at the end of the previous article in this 11-part series on Iran, How Iran got economically socialist, and then Islamic socialist. These foundations are under the direction of the Supreme Leader. They are thus state-controlled organisations – “para-state” or “pseudo-state”, if you must foolishly insist, but just do NOT call it capitalist. I refer to them as the “1B Sector” (1 being public sector, 2 being private sector). The Iranian Revolutionary Guard, which oversees the mass-membership Basij and its co-operative foundation, both also participated in privatisation – these are two more state groups who, like the bonyads, actually own factories, businesses, banks, etc. There is no Western parallel for such a structure.
Were companies privatised during the Rafsanjani era (1989-1997)? No – because they were only partially-privatized, and almost always to state-controlled organisations, and rarely more than one-third of a company (so rarely the 80% which was authorized). The standard for company control is considered to be 20%, so the government retained absolute majority control. These facts are not at all mere nuances, and certainly contradict claims that Iran “went capitalist”.
Because people will not believe me, I quote from Anoushiravan Ehteshami’s “Iran: Stuck in Transition”. The negative title indicates why it is available in English in the West, LOL. I quote him to show what all Iranians know: privatisation is not, was not, was never intended, and could never be “privatisation” like Westerners conceive of it.
“So, by the end of his (Rafsanjani’s) presidency, 86 per cent of the country’s GDP still came from the state-controlled sector and the remaining 14% also included the share of the powerful foundations which worked closely with the state.”
So the allegedly-rabid capitalist Rafsanjani (which is already inaccurate), who is the godfather of the neoliberal Reformist Party (also inaccurate – he had many ties with Principlists, and was also a revolutionary and thus against unfettered capitalism, after all) successfully privatised much of the gains of the Revolution (also inaccurate), and thus privatisation has destroyed Iran, made a joke of their Revolution, and show why “Iranian Islamic Socialism is a sham” (to quote the WSWS).
Uh…if you say so.
And yet this is all accepted as the truth among Western leftists despite the fact that by 1997 you had 100% of Iran’s economy owned and operated by the state! This is greater than Cuba today, where the state-run economy is only 70-80% of total GDP.
These are the types of absurdities one must endure from Western leftists as an Iranian leftist…. Perhaps I am the fool for trying to explain, but I assume that some are listening and can also admit that they were wrong and lacked all the facts.
The irony here is that Westerners, left and right, are saying that “Iran has privatised” and Iranians have been saying for decades, “What privatisation are you talking about, LOL?”
Furthermore, this was never privatisation to begin with: In reality, the government gave shares to these 1B Sector foundations/cooperatives because a literally-attacked state simply could not pay the money they owed them (mostly for pensions); in a very real sense these shares were not “sold” but were debt settlements. The West only calls this “privatisation” because they know the phrase “de-nationalisation” has negative connotations, so you simply never read that phrase in Western journalism; but because the bonyads, cooperatives and Revolutionary Guards who had the ability and approval to buy these small portions of state industries are all under state control, “de-nationalisation” is not the right word, either…but that is Iran – unique (revolutionary).
The misunderstanding here is TOTAL, and caused by both dogma and inaccuracy on the Western left’s part, as they should have been trumpeting Iran’s economically socialist policies for decades. It is also caused by dogma and inaccuracy on the Western right’s part – they will do whatever they can to obscure, slander and misreport on Iran’s unique (revolutionary) economy because they want everyone to follow the Western capitalist model.
Iran did not drastically change after Rafsanjani, either. From 1997-2005, the Khatami era, these competing forces, ideas, philosophies, parties and “factions” did not just evaporate.
Khatami, despite being an allegedly privatisation-loving “Reformist” like Rouhani, did not seriously try to turn the economy to the right, but focused on cultural and political ideas. His economic policy was totally in-line with the dominant idea of Iranian Islamic Socialism (Iran operates on 5-year central plans, after all): social justice at home, decrease oil dependence, increase foreign trade contacts but with huge amounts of oversight and no laughable “neoliberal” total deregulation, increase entrepreneurship and competition with the state but only with huge regulations and extremely slowly, increase domestically-produced exports to earn money in a typically mercantilist and state protectionist fashion, and increase the importance of the 1B sector.
In 2004 the constitutional control of “mother industries” got its new interpretation.
People who know probably nothing of all I have written up until now said back then, “Oh, they’re going to privatise the percentage of the economy the state runs…all 100% of it,”…because all those anti-capitalist forces which fought, won and installed an anti-capitalist revolution just disappeared, right?
Not so…. Parliament (the democratic embodiment of these forces) and backed by the Council of Guardians (democratic embodiment of Iran’s vanguard party – the clergy) in 2004 immediately shot down all actual efforts at foreign investment through privatisation: two Turkish companies were not allowed to buy into two “privatised” industries. The declaration was clear: Privatisation could not be “neoliberal” nor “globalist”. That was certainly a unique decision in the 21st century, and what Iran has done instead is – as I’ve stated – embarked on privatisation from the state to the state via unique (revolutionary) 1B Sector institutions which are decidedly anti-capitalist in composition and aim.
The constitutional re-interpretation was initially pushed by the Rafsanjani-headed Expediency Council, which acts as a smoothing liaison between Parliament and the Guardian Council. I would say history is clear: there is more chance of this interpretation being changed than of Iran embarking on a massive Western-style privatisation plan for which there is no historical or cultural precedent in either modern or even monarchical Iran.
And by “Western style” I even mean to domestic capitalists – I don’t mean to foreign capitalists – good luck with that neoliberal idea in Iran!
Ahmadinejad era – more ‘privatisation’…from the state sector to the state sector
The Ahmadinejad era (2005-2013) is also misunderstood. Ahmadinejad, a former Basij member and an ideological ally of “Mr. Resistance Economy” Khamenei, was against privatisation in general and certainly foreign investment: Ahmadinejad had just $12 billion in foreign investment over his entire first 4-year term – a pittance.
And yet there was also far, far more “privatisation” than ever: By the end of 2010 – the “Golden Year” of privatisation – 275 state companies had been “privatised” worth $630 billion. Indeed, Iranian contradictions abound!
But only to the uninitiated: just 1/3rd went to the private sector. Again, the huge bulk of it went to the Basij, the bonyads, the Revolutionary Guards – all state entities. This wave of “privatisation” actually expanded the government’s payrolls and bureaucracy – it didn’t shrink them!!! Yet the most uninformed commentators will not only call this “privatisation” but “neoliberalism”! Catch-phrases may suit the West, but they do not apply to Iran because Iran has a different culture and governmental model.
Chinese commentators should know better – they get the same Western “fake news” treatment. And do Chinese Communist Party-controlled companies not qualify as “state-owned enterprises”? Of course they do, and they must – they are dependent on/controlled by the government and thus contradict the definition of capitalism. China defies capitalist cliches because they, too, have a different culture and governmental model than the West…yet they are absurdly called “neoliberal” as well.
Returning to Ahmadinejad’s first term (2005-9) only 19 percent of formerly state-owned enterprises were purchased by the private sector – all the rest went to the “1B Sector”.
It should be clear that what occurred may have been “de-nationalization”…but not really: The Iranian state, under massive foreign economic attack, needed a way to raise funds from within the country, as they distrust foreign investment; did not want to create a seemingly-totalitarian society where everybody officially works for the government (as is the case with Saudi nationals in Saudi Arabia), as this rather defies the heterogenous nature and inclinations of the average Iranian (in my opinion); would have been overthrown if they went Western capitalist (not that the government ever wanted to); would have been overthrown if they sold the country’s assets of to foreigners (not that the government ever wanted to); and so they relied on the 1B Sector.
The 1B Sector also has the rather important advantage of being pro-revolution, pro-constitution & pro-government, and thus solidifies the stability of a constantly-under-attack government by rewarding those members of the citizenry who are the most supportive of the government. That is a very complex sentence, but vital; that is also essentially a one-sentence description of the Basij, to which I devote parts 4-7 of this series.
As I have said, the 1B Sector is often criticised as being “inefficient”, and it always will be – its virtue is not “capitalist efficiency” but “socialist redistribution”. They also raised much-needed funds (funds they could not get anywhere else) and took debt of the books & permitted the privatisation of a small percentage to the private sector while still retaining massive majority state control.
Workers in France would currently just kill for the level of nationalisation and the level of “de-nationalization” Iran has. They will never get it: last week Macron announced a plan to privatise 15 billion euros worth of state assets – that represents 15% of all French state assets. Please see things clearly: The French “mixed socialist” model is dying; and it was never anywhere as socialist as the Islamic Republic of Iran. It’s quite sad that France will soon have even less state control over the economy to influence jobs, prices, pensions, etc. Now THAT is a neoliberal government.
What we can say with total clarity about Iranian privatisation is that it was not “privatisation” as the West conceives; it was very limited “privatisation”, and not in a way which ended the People’s controlling share of the economy.
I return to Ehteshami’s discussion of Ahmadinejad’s privatisations, because my analysis is likely to be considered biased, despite its clarity and foundation in facts known by the average Iranian:
“This did not amount to the transfer and control of assets previously owned or controlled by the state to the private sector. Indeed, even where the private sector was a beneficiary, it still needed state support (in terms of using ministerial contacts for securing assets being offered to the public, finance for its acquisitions, access to soft loans, elite-linked partners to shield from future state interventions, minimizing tax commitments) to ensure control of the enterprises being offered.”
So in the rare cases when the private sector was permitted to acquire more than 50% of a non-strategic sector (and how often did the government still retain 20% of a company to maintain major influence?) in order to raise government revenue amid global sanctions…the private sector was still often beholden to the state. This is reminiscent of how the Shah tapped his preferred coterie to benefit from his semi-industrialisation drive, as I described in the previous part of the series.
This is also reminiscent of China, where their 1% is entirely beholden to the government for their riches and can be stopped immediately if they become corrupt or defy central planning. Just as in China, if the bonyads, Basij or Revolutionary Guards deviate from central planning, are too inefficient, or too corrupt – the “Iranian Revolution Party”, i.e. the government, has similar measures to yank them back into line.
But Ehteshami is making my same point: What privatisation in Iran?…even when it is the GREATEST LEVEL of privatisation, LOL!
So, no, the government did not sell to the highest bidder, as in Western privatisation. Yes, privatisations to the private sectors absolutely had to deal with a ton of ministers, government shepherds and government regulations. Is it supposed to be easy? It IS supposed to be easy…in Western privatisation, but not in the Iranian style – these are two very different processes both in intent and in practice.
I hope leftists are realising just how misled they have been. But wait – you are even further away from the truth!
These state-affiliated 1B Sector companies pursue decidedly uncapitalist policies in a societal doubling down of the amount of socialist-inspired policies present in Iran. This requires more explanation than I have here, but it is detailed in the parts on the Basij, whose economics are governed by the Basij Cooperative Foundation. You don’t know what “Basij” means, I imagine, but does the rest of the name indicate pure capitalism to you…?
Privatisation: Forced by the West – wanted and yet unwanted
Never raised in the West is this reality: That the US, EU and UN sanctions, and the West’s support of Iraq’s war, forced the privatisations. The WSWS and others act like Iran both started and allegedly-ended a massive revolution simply on whims.
“The Islamic regime made certain social concessions to Iran’s workers and rural toilers in the first flush of the revolution. But these have been systematically rolled back, and at an accelerating pace….”
I think have capably proven how this is hyperbole from the WSWS which hides only a grain of truth, and a tiny grain even as grains go. That “pace” is basically that of a snail; those concessions certainly went farther and deeper than anything West of Russia ever; and any dashes towards privatisations start from 90 meters back in a 100-meter race in Iran.
I hope this section has shown just how little “privatisation” has gone on, and how the political forces at play prevent a wholesale shift to a Western mindset.
And this is the key to understanding Iranian economic “changes”: “privatisation” is completely the wrong word because it has only strengthened the government’s hold on the economy and its success in maintaining socialist-style redistribution policies.…and this cannot change because no political group has the political weight to reverse it without massively ending their own popularity, thus rendering such a movement finished before they can even get it started.
Western-style privatisation simply cannot be tolerated in Iran – no political group could pay that price and survive – and this is obviously because the decades of modern political anti-capitalist discourse both before and after 1979 which is ingrained in Iran’s unique (revolutionary) society.
To give a parallel: France’s Macron absolutely can pay that price. And he is: His popularity has plummeted because he is speeding through reform after deform to rigidly place France on the neoliberal, Anglo-Saxon track. If he and his party (full of “civil society” businessmen and not politicians) don’t win a single vote in 2022 they will not care one bit – they will return to civil society and be feted by the Western capitalist community despite the damage inflicted on French society. But just as Iran has structures, ideas & possibilities which have no parallel in the West, the West also has many structures, ideas & possibilities which have no parallel in Iran…thankfully.
Temer in Brazil is another person who absolutely can pay that price. He has an astounding 5% approval rating, but the accurately-titled “parliamentary coup” and shamelessly capitalist-fascist rollback in Brazil cannot be stopped because their government structural is bourgeois (West European) and Brazilians are decidedly not revolutionary. Brazilian Parliament is working on initiatives to get their Landless Workers’ Movement and the Homeless Workers’ Movement classified as “terrorist groups”- think they care about re-election (and that it wasn’t a coup)?
The groups in Iran associated with this “privatisation” are succeeding and will not give it up willingly; their political, intellectual and cultural backers are not about to give up, either; many mullahs are not about to quit the clergy and use their government contacts to thrive in the private sector (unlike Western politicians).
Ultimately, for Iran to completely privatise (and I am speaking here of privatisation to only national bourgeois, not foreign bourgeois)…you wold have to demolish not just the structure of the government, but the very psyche of an Iran which is decidedly revolutionary on the global spectrum. I cannot imagine that anyone would fail to agree to that if they look at modern Iran objectively.
Given all the leftist economics, of course the West must destroy Iran’s economy in 2018
The sanctions really began to hurt in 2010.
Invasions of Afghanistan and Iraq did not permit the hoped-for invasion of Iran. The West realised they simply could not allow Iran’s economy to thrive and continue to set such a bad (yet ignored) example.
And, I think, it was also because the West realized that they would never be allowed to buy into Iran’s economy in the massive, dominating way they are used to. Even if Western leftists don’t understand economics, Western rightists do: they read about the 2010 Golden Year of “Iranian privatisation” in the Financial Times, made a few calls, realised they couldn’t buy Iran, and got mad.
So in 2012 the sanctions hit a truly hit a global record in terms of harshness, injustice and lack of humanity. Only Cuba and North Korea can sympathise.
That year the EU banned all trade, froze (stole) all Iranian Central Bank assets, barred all trade insurance, and barred all banking. Oil exports dropped by two-thirds. The 2013 economy would be a shocking 25% smaller than its growth trajectory previously indicated. The sanctions hurt everybody because that’s what they were designed to do – totally paralyse the Iranian economy, cause pain to everybody, death to many, and foment civil war.
Therefore, it is amazing what a one-sided story presented by leftists such as the WSWS: that cuts to social programs are thus “neoliberal austerity“, instead of being forced by sanctions – as if Iran is cutting programs for the same reason Hollande and Macron are in France?! It’s really shocking ignorance of, or insensitivity towards, Iran’s overall economic situation….
It is as if Iran was operating freely. The appalling ivory-tower stance of the WSWS in 2018 boils down to this: howling condemnation for trying to work with the capitalists (only half of them, Europe, as there is no rapprochement with the US) in order to end these horrific sanctions, but combined with muted condemnation of the capitalists’ sanctions on Iran.
Given the increase in 2012 of the sanctions on the Iranian state, in the 2013 presidential election every single candidate’s economic plan – from left to right – was based on more privatisation: the only question was “how much” and “to whom”.
The only true capitalism in Iran – the Black Economy
It’s not as if the US hadn’t been cutting off Iranian access to banks prior to 2012, but it really became all-out war then (pushing Iran into an arms race is another impoverishing tactic of theirs). The sanctions force Iran to be a heavily-cash economy – no bank will give us a line of credit, after all: with Iranians it’s “payment up front”, and that’s when they condescend to do business with us.
All this cash obviously increases the chances for corruption. Liquidity in Iran is thus excessive – it is not tied up in investments, and only the rich have liquidity of course. They real estate speculate and goods speculate, and don’t invest properly because it’s not secure. Iran also attracts highly-capitalistic people, because there is higher reward for the higher risk. This worsens the economic situation – and it is not the government’s fault, but the fault of Western governments.
So the government can’t be faulted for the Black Market – black market is citizen corruption by those who won’t follow the People’s laws for selfish gain, as well as people who forced into moral compromise due to terrible situations caused by non-Iranian factors.
I promised an answer to this question in the previous article: “Is Iran the most state-run economy in the world today?”
I can’t fully answer that question, because of the Black Market. But take out the Black Market and I would say – and there is just not clear data I can link to, nobody has such information – that Iran is still very similar to 1997, when the state controlled 86% of the economy and informally controlled the other 14%. Certainly, people smarter than me have affirmed that the 100% of the economy is controlled (not owned) by the State.
This should not seem surprising anymore – Iran has been close to that level for about 100 years
This means that only North Korea has a higher percentage of state control, as they do not explicitly recognise private economic activity. I wonder if, like Iran, you can have a big chunk of cash/factories/land/workers and operate without some level of government control in North Korea? I wonder if there is a huge mass of single entrepreneurs like in Cuba? It doesn’t seem that way….
LOL, and is North Korea “not socialist” economically, just like Iran? Nonsense….
But back to the Black Market. If you’re looking for unfettered capitalism in Iran you are only talking about the Black Market – it’s perhaps 15% of the entire economy, but that could be an exaggeration. It is obviously just a big as threat – culturally, economically, morally, politically – to the Iranian system as it was in the USSR, where decades of tolerance for the Black Market was obviously one of the prime reasons the USSR fell. China, seeing this, is on perpetual anti-corruption campaigns. Iran has chosen now to wage an unprecedented war on currency traders, Bitcoin (temporarily, I’m sure) and other Black Market financial instruments to regain control of the Black Market.
Controlling the Black Market would increase tax revenue, but what people also likely don’t know is that Iran also has very few taxes by modern standards, and certainly not in any country of comparable size or development.
Farmers pay zero tax, and one-third of 22 million guild workers pay no tax. Nearly half the economy is tax-exempt, and tax revenues compose just 7% of government revenue. This rate is over 20% for most Western countries and 16% for OECD members, because they capitalistically tax labor and not production, unlike (Islamic socialist) Iran.
The only significantly Iranian industry in which the government is not involved is the hand-made carpet weaver industry – that is totally privatised, as it is a cottage industry which long predates the Islamic Republic. Carpets compose around 1% of GNP, 2 million full- and (mostly) part-time jobs, and sometimes 20% of our annual non-oil exports, but it may simply be impossible for the state to control non-machine-made carpet production.
Iranian carpets are so good it’s amazing that the entire world doesn’t buy them; if I am honest, I think you are all Philistines and true savages for walking around on bare floors in your cold residences, and I can’t possibly imagine how you live that way! A room without a carpet is a room without a soul; and how can one prefer the monotone (“chic”) Western carpets instead of the Iranian explosions of color, geometry and order? Floors are universal – like the mousetrap, there is only one possible solution: nice carpets, right? Right? So let’s focus on ending the sanctions so you can massively import some nice carpets in order to pull your lives together and stop living like savages. Even Iranian nomads have carpets, and they have no floors!
Does the WSWS want Iran to remain under sanction forever?
We can really say that since 2013 Iran has been a situation of nearly unparalleled cold war, considering how much more valuable Iran is to the world economy than Cuba or North Korea and Iran’s much larger economy overall. The desire of the Rouhani government to create “mutually beneficial” (the government’s constant mantra) capitalist deals – to both call off Europe’s side of the war, to raise money & to increase the quality of Iranian industry – must be seen in this accurate context.
Just as I have proven that “privatisation” is a word which is only used because Iran’s revolutionary structure has rendered the English economic language inadequate, so “neoliberal” is a terrible, terrible term to call the deals by the Rouhani government. I covered those deals for PressTV in France (which have not even been implemented, LOL) and they were joint ventures, technology transfers and 50-50 deals – as I said repeatedly then and say so now, this defies the definition of neoliberalism, where the bigger corporation wins; all capitalism is not “neoliberal” – how can one be a journalist and not realize this?
And yet Iran still refuses to obsequiously play by the rules of capitalist diplomacy: As Total Oil dawdled on the bellwether project between Iran and Europe, the $5 billion South Pars gas field project, Iran’s ideology (and perhaps pride) insisted on doing something considered extremely rude Iran – handing them an ultimatum: Total had 60 days to negotiate the exemptions from the US which Total said they needed…or China takes over.
“But wait, Ramin,” you say, “If China takes over they’ll have 80% of the project – doesn’t that contradict the government’s claim of ‘mutually beneficial deals’.”
A reasonable objection…. The South Pars natural gas field (along with Qatar’s half, called North Dome (which is the reason why Iran and Qatar will always have good relations)) has nearly as many recoverable reserves as all the world’s other natural gas fields combined!
I have crunched some numbers and determined its total value: roughly, a bazillion kajillion dollars (rounded upwards).
Therefore, $5 billion is rather a small portion of that. If Iran gives $4 billion to China to learn the latest extraction technologies and train the Iranian workforce, thus permitting Iran to extract the remaining bazillion kajillion dollars worth of gas (less $5 billion)…this is clearly not a “neoliberal capitalist” deal, but an intelligent investment.
It’s not great that Iran becomes so beholden on one source – China – but the West are bunch of liars and deal-breakers: what can Iran do about that? What they have never been willing to do is give up their ideals and the Iranian people to create a shah-like 1% which seeks “accommodation” with global capitalism.
Conclusion: Iran’s economy is under unjust attacks in reality and in leftist intellectual circles
The WSWS wrote: “as Mazaheri himself concedes, pursued neoliberal policies”.
I have never conceded that, LOL. What I wrote is: “The WSWS website is correct that Iran has embraced some neoliberal capitalist changes.”
The key word here is “some”, and definitely not “neoliberal” – Iran has not, and cannot, go whole hog over to neoliberalism, and this article illustrates why. The WSWS is implying that the Iranian government has only pursued neoliberal policies.
It is my fault for writing that poorly-worded sentence but I hope I have clarified my view: embracing “some” neoliberalism does not make one a rabid capitalist; embracing some capitalism does not deny Iran’s socialism, nor North Korea’s, nor Cuba’s, nor China’s, etc. I also think the WSWS fails to comprehend the economic context of things like subsidy cuts amid sanctions; I think they don’t read the fine print, as I do, on Iran’s capitalist deals with places like France.
If I am being precise, and I regret not being so earlier: it is impossible for Iran to pursue neoliberal policies. “Neoliberal” is the extreme-right form of capitalism, and I would imagine the number of adherents in Iran to this form – which clearly violates multiple key tenets of Islam – to be a tiny minority. Such people are obviously atheists who perform their business as if God is not watching, and not all atheists are neoliberal capitalists, of course.
The WSWS wrote: “Declared Khomeini, ‘As long as there is Islam there will be free enterprise.’”
This is obviously only a problem for the most radically anti-capitalist, but I want to clarify the situation: Yes – the Koran explicitly sanctions trade.
What the Koran also does – radically then as well as now (as the Revolution of Islam was an immediate political, social and economic revolution, unlike Christianity) – is to repeatedly forbid cheating in business practices and usury. And thus, by logical extension, also the tactics of modern Western finance and neoliberal capitalism.
So, I see the total abolition of capitalism as un-Islamic, and many Muslims do too. However, as I have relayed in Part 1 of this series, and which was truly the first piece of ignorance about modern Iran which I sought to overturn: Khomeini explicitly said the needs of the Iranian state must come before the imperatives of Islam. This is why, in a debate which was long, public and contentious in Iran, the Islamic Republic of Iran is explicitly based on “religious knowledge” and not “religion”. This is not a mere nuance.
But it is all a moot point: Trotskyists cannot even present Iran with a working system where some free enterprise isn’t necessary to survival. Nor can Trotskyists point to any existing system of theirs which works better than Iranian Islamic Socialism. And, certainly, I think very few people among working socialist countries – not ivory tower socialists – want to abolish all capitalism democratically. Certainly not in China, Cuba, North Korea, Vietnam…you know ALL the socialist countries.
Finally, I don’t know why the WSWS is so very desperate to portray Iran has having accepted modern capitalism? Don’t they like little victories?
There are many shades on the capitalist spectrum, and every shade away from the neoliberal variant on the far right should indeed be trumped as a victory in 2018 because that’s how bad the situation is for the Western Left. The WSWS’s failure to trumpet implies that there can be no gradual victories, nor inspirations for other nations, no innovative ideas: all there can be is total, complete, already-decided Trotskyism, which will be born fully-formed.
The main problems with this refusal to see in shades of victory is not that it is “we want all or nothing” – that is revolutionary idealism – but that it is not desired democratically anywhere, and that it is not actually advancing socialism.
Regardless, what these two parts on Iran’s economy have shown – and which the upcoming parts on the Basij will reinforce is:
Economic liberalisation has a political price which no group in Iran can afford to pay if it wants to remain a part of the political process.
This is because economic questions are at the heart of Iranian morality and have been for decades; no group has a free hand, nor will. The result will have to be compromise between competing groups – some economically (Islamic) liberal, some economically (Islamic) socialist. The only common denominator is: upholding the ideals of the 1979 Iran Islamic Revolution, which are explicitly anti-capitalist to a large degree, and also a degree which is almost unparalleled currently in the modern world.
Clearly, since 1979 Iran’s economy has undergone drastic changes, seen major economic redistribution to the poor, resisted Western economic attacks, rejected globalisation and coalesced into something which is accurately called “Iranian Islamic Socialism”.
But what needs to be grasped is just how deep-rooted these revolutionary economic changes have dug into grassroots Iranian society and culture: The next four parts will discuss exactly that. They will discuss something the West has long tried to ignore, the Basij.
I think readers will find this unique (revolutionary) institution rather fascinating. They certainly are controversial even in Iran, perhaps because it is such a unique concept.
The WSWS did not see fit to even mention the Basij, but I contend that it is impossible to understand Iran without knowing what they truly are.
This is the 3rd article in an 11-part series which explains the economics, history, religion and culture of Iran’s Revolutionary Shi’ism, which produced modern Iranian Islamic Socialism.
Here is the list of articles slated to be published, and I hope you will find them useful in your leftist struggle!
The WSWS, Iran’s economy, the Basij & Revolutionary Shi’ism: an 11-part series
How Iran Got Economically Socialist, and then Islamic Socialist
What privatisation in Iran? or Definitely not THAT privatisation
Structural similarities between Iran’s Basij and the Chinese Communist Party
Iran’s Basij: The reason why land or civil war inside Iran is impossible
A leftist analysis of Iran’s Basij – likely the first ever in the West
Iran’s Basij: Restructuring society and/or class warfare
‘Cultural’ & ‘Permanent Revolution’ in Revolutionary Shi’ism & Iranian Islamic Socialism
‘Martyrdom and Martyrdom’ & martyrdom, and the Basij
‘The Death of Yazdgerd’: The greatest political movie ever explains Iran’s revolution (available with English subtitles for free on Youtube here)
Iran détente after Trump’s JCPOA pull out? We can wait 2 more years, or 6, or…
Ramin Mazaheri is the chief correspondent in Paris for PressTV and has lived in France since 2009. He has been a daily newspaper reporter in the US, and has reported from Iran, Cuba, Egypt, Tunisia, South Korea and elsewhere. His work has appeared in various journals, magazines and websites, as well as on radio and television. He can be reached on Facebook.
Again; Thank you Ramin. I am left with a question about the social control of money in Iran. Does Iran create its own social credit?
privatisation = give our NWO’s friends and associates the power to control the sheeple – hence this world Gd’s kingdom given the privilege they enjoy.
Regarding your comments about the black market: I agree it is a very corrosive to society and encourages corruption. There are cases when the black market can help. During the war in my country, sanctions were introduced for oil & gas. Black market prices for fuel in Yugoslavia were 3 x the price than that in Romania. This encouraged many enterprising citizens, both Serbs and Romanians, to bring fuel to Serbia for a profit. It was expensive but it did provide for a small trickle of fuel, a lifeline for the country.
By the way, I laughed out loud at your comment about carpets! There is nothing more luxurious than sinking your feet into a beautiful carpet when you walk not a room. Alas, I avoid these modern carpets like the plague, as they are filled with nasty chemicals..one day if I can afford it I will look for a nice carpet from Iran (hopefully without chemicals)
I totally agree – three cheers for carpets!
I think your anecdote about the Black Market is telling – sometimes the People are forced into bad situations where they have to morally compromise themselves in order to even keep warm in cold countries. The problem is that those who are the best at being “enterprising” are often the most ruthlessly competitive, and then they gain money and influence, and then they gain power, and that’s when the People get really poor government.
Whatever Iran has for an economy (public or private) is not working for its people.
The economy is so bad that Iran is entering its third day of near riots. The Iranian regime’s diversion of finances to pay for foreign wars is a frequent complaint from the protesters.
As I wrote – economic issues have never gotten so bad to seriously threaten a counter-revolution because of the presence of socialist-inspired economic policies and safeguards.
Iranian people protest – it is not like the US where it’s just “grin and bear it” no matter how foolish you look – so Iran is not panicking over something new. The sanctions have been terrible since 2012. Iranians know it, but it’s too bad Westerners don’t realize it and are generally obsessed with talking about women’s hair (but this a state-sponsored diversion of Western regimes).
Your “frequent complaint” is pure propaganda – check any Iranian poll and you’ll see dominant to overwhelming support for the government’s foreign policy from Palestine to Syria to Iraq and beyond. Iran is not even paying massive amounts of money to being with – it’s not the US or France.
Ramin Mazaheri, your work pours hope into those who wish to learn from the words. Pours.
I found this article astonishingly uplifting. It was like fresh water flowing onto a thirsty ground, with pure knowledge and facts about Iran soaking into my own ignorance. I am beyond grateful – I urge you to persist in the struggle. You do great work.
From this and your previous writings I have drawn much comfort from knowing that a revolutionary socialism is possible on this earth, and that it can thrive and endure, and sustain itself even as it safeguards the happiness of its people.
I see, as you say, why the west must destroy Iran’s economy. And I see why the only socialist economies are brought and held in place by strength of arms, and revolution.
The money power of this world is not insulted intellectually by a socialist experiment. Nor is it challenged ideologically. It cares nothing for either of these things. But is is rebuffed systemically by socialism. Its tentacles cannot find purchase, cannot sink into the economy and steal its created wealth. This is why socialism must be destroyed – it stands in the way of plunder. This is why it takes a revolution and a savvy security state to create a socialist society.
Ah, but when it happens, and it works, then the obvious alternative to the predatory evil of capitalism becomes abundantly clear. And abundant clarity among the ordinary people who create the wealth is the greatest fear of the exploiting class, so it will strive to destroy this.
You, on the other hand, Ramin Mazaheri, strive to replenish and build this clarity. Thank you. May the heavens bless your country and its people, and its noble journalist.
Yes Grieved, I must endorse your praise! We ought to be well informed about Iran if we read all the instalments.
I was ready to write in the same way you did it here. Thank you to Ramin for his explanations about the real Iran and socialist republics around the world.
Bravo!! Very clear description of some of the mechanics of Iran’s political-economy. Indeed, it’s rather symphonic in its beauty and structural depth morally/philosophically. And it helps me understand how Islamic economic ought to work, which is likely at the base of the animosity toward Iran from other supposedly Islamic nations. Given the massive immiseration and corruption present everywhere in the West, I think I’d be rather content living under sanctions in Iran. The failure of WSWS to promote Iranian socialism is both puzzling and troubling.
If it were not for the “black market”, the Iranian economy would grind to a halt.
The fact is that Iran has always been dominated by the state-sector – and that is why it will always remain a 3rd world country. Anyone with an ounce of intelligence and education tries to get out. Creativity is abhorred. The status quo must be maintained at all costs.
When I lived in Iran, the dollar was at around 80 Rials – now it is 80,000+. Blaming it all on foreigners is a big mistake. A little bit of economic freedom would do wonders to the economy. The corruption there must be even greater than under the Shah
Thank Ramin, Very enlightening. So much duplicity on the part of the mainstream media and Trotskyist. Beware of permanent revolution folks…
Here is Shayan Zarrin, an Iranian American, saying that Khomeinis 1979 revolution was a western/jewish coup. Because they had to dump the Shah, became too nationalistic. And that Iran are now doing exactly what Israel wants.
He also states this, that alt-media is completely lured by the elites:
“Alongside this, the BRIC nations are challenging the U.S. dollar. This is being cheered on in the alternative media, but people do not understand the ramifications of this. The Bric nations’ proposed gold standard could cause the dollar to lose its value, which will in turn, cause the western economies to crash. Once the western world goes down, the world will be ripe for the New World Order led from Jerusalem.
This is a clear example of the Hegelian Dialectic. The elites will say, “The western capitalist world has caused the western economy to collapse, we need a world currency that will benefit all nations, through a multi-polar world order.”
This multi-polar world order is being cheered on by the alternative media as the solution to Zionist globalism. Yet Israel is leading the way in this multi-polar world order shift. This is the Orwellian technocratic system that we are all supposedly fighting, yet most in the alternative media are cheering this on. ”
Israel can’t exist without Western support and protection, should the West collapse Israel will cease exist in short order.These Jewish schemers seem to have huge blind-spots in their plans.
Ignore those western-educated, Chinese commentators fawning over the west.
As a Chinese myself I’m sick of watching those toadies extolling de-facto double-standard “western values” over Chinese ones whenever they have the chance.
It’s clear to everyone’s eyes that common sense doesn’t even exist anymore in the west – If left uncontrolled, the rich will be controlling the whole country.
Have a look at those articles and even comments on many of the so-called “alternative” news websites and you will notice that how many times the words “left” “socialist” “communist”, etc have been abused.
Thank you for this article. I look forward to the whole series and hopefully knowing and understanding more about Iran. Genuinely, I think it is important that you write this, not just from the perspective of a socialist doctrine (though I understand that is important) but just generally so the world can hear an Iranian perspective on Iran.
I have a couple of questions though. Likely stupid.
1. If privatisation in Iran is needed for the government to have money, because there is no money, where does this money to buy the assets come from? How do the 1B sector get the money?
2. Also, if they are ‘inefficient’ because they are meant to contribute to socialist redistribution, how do they keep functioning?
Is this something we’ll learn through later articles on the Basij, or have I missed something? (apart from an education in economics)
1. As I wrote, but could have stressed more, the assets were “bought” mainly as a way for the government to settle their debt, mainly in the form of pensions. For example, the French rail industry has just been opened up to privatisation, with the main reason was “it was in debt”. Well…the simple fact is that it is “in debt” because the state made it that way – they starved this state-owned enterprise of money. Had the government wanted to, with the stroke of a pen they could have allotted the rail system more money – voila, no longer in debt! It’s not a capitalist enterprise and thus plays by different rules. This is why calling it “privatisation” in Iran is so absurd and so misleading. These partial shares were essentially “handed over” to state-backed cooperatives, leaving the government free of debt and giving them less direct responsibility. How can a group like the Revolutionary Guards get money…when they are not capitalist, not independent of the government, nor comprised of wealthy individuals…they can’t! “Privatisation” to groups like them are just a transfer of responsibility, really, and changing things on paper. “Privatisation? What Privatisation?” I am certainly glad about that…but it is not true that all Iranians are 100% thrilled about it and say this transfer was done 100% perfectly.
2. They are “inefficient” for the same reasons Chinese State-Owned-Industries are – they are meant to be that way. They are designed to keep people at work and out of trouble, not to make profits; the government figures it’s better to put people to moderate work and moderate productivity rather than just hand over a welfare check…leaving them unoccupied and thus rather “in” trouble. But practically, this means “too many” tea breaks and an overall more relaxed approach to all aspects of business as compared with capitalist businesses.
An educational article, thanks.
it seems the revolution consciously split the government into major pieces (bonyads, Basij, etc.) very early on, perhaps to prevent an easy counter-revolution. Is this so?
The more I read Ramin’s writeups the more it lift the veil of the myth of western superiority accumulated in me for decades. I never had any idea about the sophistication and holistic types of knowledge acquired by the clerics in their howza, I always felt it is restricted to jurisprudence, how wrong I was. For forty years and in spite of inhumane and extreme measures, the mullahs based on Islamic ideals have been successfully keeping the western hounds at bay and even progressing and carrying out their own counter strikes.
They have demonstrated a better alternative to the western neoliberalism and show how religion and politics can be fused if it is based on wisdom & faith, pragmatism & principle, expediency and determination.
Thanks Ramin for a job well done and please keep this going, I cannot overemphasise how much these means to people like me.
It’s not just WSWS.
See these 2 articles today (June 27 2018) in thetruthseeker.co.uk.
Iran Serves Israel by Dividing Sunni & Shia Muslims: http://www.thetruthseeker.co.uk/?p=172258
Iranian Leaders have Longstanding Ties to US, Israel: http://www.thetruthseeker.co.uk/?p=172311
Instead of reading people like Shayan Zarrin making wild conspiracies, why not read Khamenei or any of the hundreds of current government figures who constantly say Sunni-Shia sectarianism is unIslamic, is a plot by the enemies of Islam, is a tool of imperialism, is exactly what Israel wants (a weakened Islamic world so that they can stay a colonial power), etc.
You know…read the truth.
Iran absolutely does NOT foment sectarianism – it was the Islamic Revolution, and not the “Shia Islamic Revolution”. But such an idea is foreign to Muslims and certainly anti-Islamic…as Iranian leaders repeatedly complain (to those who will actually listen).
Ramin, your articles here enlightening. Keep them coming, please! At some point can you give some indication of the Christian and Judaic minorities in Iran and how they fit into the larger Shia culture?
This article was very helpful. Thank you. It destroyed many of my illusions about contemporary Iran. Ramin, you ask, “Where else could the money have come from?” Well, you can find a good answer to that question offered by the MMT (Modern Monetary Theory) school of economics, which has been gaining a lot of currency lately. You can find a lot about MMT on the Internet, but one particularly useful explication can be found at, “Bill Mitchell – Billy Blog,” which deals with various politico-economic issues from an MMT point of view on a daily basis.
I have two questions I hope you’ll address in the future:
1. What is the status of labor unions in Iran?
2. I recall reading an article last year by an Iranian economist (whose name I forget) who is teaching in the US that claimed Iranians are growing dissatisfied with the fact that president Rouhani is allowing the Iranian financial sector to grow to bloated proportions and to play financial “games” and enforce austerity rather than loaning money to small businesses that need the money to grow and create jobs. Is this true? Also, to what extent does the Iranian government control interest rates? And is there an Iranian system resembling the former Glass-Steagall Act in the US that separated ordinary banking from investment banking, and is there adequate regulation of derivatives, which are now endangering the world economy?
Jesus Christ was an anti-capitalist, the very archetype of socialism and communism. Modern leftists know this as do the Russian people. This is how the dialectic has now come full circle to a higher spiritual understanding and civilization itself.
“. . .Iran was (and remains) so committed to nationalisation, to price controls, to subsidising essential goods and services, to fundamentally Islamic socialist economic & Islamic democratic ideas, etc.”
Unlike, I’m sure, nearly everyone else who is reading this, I have read several translations of the Koran, I’ve read the Sira, and I’ve read extensively among the Hadiths. My reading of the three Islamic texts makes it crystal clear to me that there is no such thing as “Islamic democracy.” To the extent that a nation is democratic, it not Islamic, and vice versa.
Well that’s a rather doctrinaire view of both democracy and Islam – I do not, and nor does any Muslim I know, believe that Islam and democracy are mutually exclusive.
On a related note: perhaps you should check out the first part of this series. Pretty much the first incorrect idea about modern Iran which I sought to overturn was to point out that Iran openly decided, after much pubic debate in the 1980s, to be based on “religious knowledge” and not “religion”, i.e. literalism. Therefore, Iran is “democratic”, is also an “Islamic democracy” and is able to use what both God and man have provided to make society a more perfect place.