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Breaking loose
Realistic strategy for economic development

By Ray Smith
July 25, 2001
The Iranian

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 to defend.

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 for Iranians.

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 shortcomings.

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