Realistic strategy for economic development
By Ray Smith
July 25, 2001
For well over a century Iranians have been trying to get on a path which
would lead them to an acceptable level of economic development. The progress
made in this direction, in comparison with other countries engaged in a
similar effort, would rank it as a below average. Rarely has this effort
been based on a deliberate strategy.
Certain groups continue to believe that a religious revival would lead
to the reform of the political system, which they consider to be the driving
force in achieving the ultimate objective; others sought the solution in
embracing Western technology by sending their children to West to study
science and engineering.
Jalal Aleahmad, who clearly knew little about the subject, even suggested
that Iranians should go to India or, more plausibly, Japan, to learn how
to develop without "losing" our culture. At no point is it evident
that any of these approaches were based on either the requisite analysis,
or a strategic plan which would have led to the road of economic progress.
Consequently, one should not be surprised that the disparate efforts
of many well meaning individuals or groups inevitably failed. Reza Shah's
industrializations and social modernization efforts, despite their enormous
pain proved superficial. Mossadegh's nationalization struggle, drove an
already poor economy to the ground, and the bazaaris to conspire with clerics,
monarchists, and foreigners against him.
When the famous Dr. Schacht advised the Iranian government in the 1950's
that Iran cannot develop as an agricultural economy, the "nationalists"
dismissed his advice as another Western attempt at neo-imperialism. I must
digress here momentarily to note that "nationalism=fighting the West"
was the "umbrella" under which any group whose interest was at
risk of foreign competition, or aspired to benefit from elimination of some
foreign influence, would rally the "masses".
Whether it was, the bazaari opposition to the Reuter concessions, the
landlord's resistance to agricultural reform, or the clerics' counsel against
baths with showers, they were all wrapped in anti-foreign nationalism, even
though none of these groups had much concern for the masses they pretended
The only attempt at a strategic approach, whether one agrees with it
or not, appeared in the middle sixties, when the government implemented
a development program based on attracting the rural population, where the
vast majority of people lived, to higher paying urban jobs. They would have
never achieved income levels necessary for social and economic development
so long as they continued their subsistence farming.
A fundamental change of this magnitude inevitably upset many established
interests, and the rate of its implementation was too rapid for adjustment
by its intended beneficiaries who saw the immediate imbalances of the strategy
more readily. But these did not have to lead to its collapse, as it did,
had the political leadership not been fatally rotten.
In the post revolutionary period, although the objectives of breaking
loose from oil revenues, and achieving a general improvement in income distribution
and social services were regularly spoused for sometime, little was done
towards their implementation on a sustainable basis. Early on, oil output
was cut and popular expenditures were undertaken, but in absence of replacement
revenue sources, these populist gestures ran out of steam.
The current efforts by the government to bring back Western oil companies,
more or less at any cost, is pitiful and a clear indictment of a great failure.
Even if this effort is successful, it will be more of a short term pain
reliever than a cure to the long term problem. In fact as long as the resolution
of the country's current economic vows are predicated on the decision of
foreigners to remove sanctions or provide assistance, it is safe to assume
that whatever the outcome, it is unlikely to be to the benefit of, or satisfactory
On the other hand if the government formulates a realistic strategy for
economic development based primarily on resources and tools it controls,
sooner rather than later, foreign investment and other overtures will follow,
and in areas which will benefit the general population more fundamentally.
Actions speak louder than words, specially empty words, or tired repetitions.
The point of departure must follow the realization and acceptance that
as in a life-saving surgery, the remedy to Iran's economic problems is going
to inflict short-term pain. It also requires political courage to fight
off the interest groups which benefit from the status quo, and political
skills to garner popular support despite the painful process.
People generally tend to be more influenced by the direction of change
than the absolute level they are at. Therefore, even though the initial
pain will persist for several years, the improving trend and increased opportunities
will make it less painful for the vast majority of the populace to endure
the pain of transition.
An equally important aspect for the government would be to have firm
conviction of certain principles, and the courage to clearly communicate
them to the populace. These include believing that people, left alone, will
serve their own, and community's interest best, that we cannot achieve our
goal without being open internationally, that the best government is one
that governs least, and that the objectives number one, two , and three
are to create increasingly well-paying and worthwhile jobs, and it is not
important who creates these jobs.
If the government has the conviction and the courage to adopt these principles,
then the parameters upon which a strategy can be devised will be clearer.
Without it the most likely outcome will be repeating the past pattern of
engaging in half-cooked measures, hoping for a miracle to make up for the