Friday, February 10, 2017

Political economy of Iran

via Portside

Faramarz Dadvar
January 26, 2017
The danger of Donald Trump resorting to military action to prop up his failing policies cannot be over-looked. National Security Advisor Michael Flynn threatened retaliation against Iran, which for those of us of a certain age sounded like the Gulf of Tonkin incident (used as justification for War in Vietnam) - later proved to be a fabrication. What really is Iran with a population of 82 million people? Here is a report on what is actually happening in Iran today.

View of downtown Tehran from the Tochal Gondola, Photo credit: Deborah James // Global Exchange,


In Iran, since the 1st year after the 1979 people's revolution, theocratic repression has dominated the country. Although people's resistance to the Islamic Republic started right from the beginning, it never grew to a wide, mass-oriented uprising. The only major political upheaval, since the revolution, has been an upsurge of the democratic, "green" movement, in opposition to the 2009 presidential rigged election, and it, unfortunately, was crushed ruthlessly by the security forces. Otherwise, the social movements, particularly labor, women and human rights activists, continue with their daily struggles. Now, hundreds of pro-democracy activists remain in prison and, due to the absence of civil liberties and labor rights and the suppression of independent active opposition, there is no serious prospect for radical change in the political system for democracy and economic justice.
With the coming of the "moderate" Hasan Rouhani to the presidency in 2012, a nuclear agreement was made with the world major powers and it is supposed to remove economic sanctions and thus, as a result, contribute to more open economic relations with the outside world. Some improvements have already taken place and, based on the report by the World Bank, last year the rate of economical growth was 5.4 percent and production and export of oil had increased 3.1 percent (3.63 million barrels produced daily and 1.43 million barrels exported daily). But still, economic condition for the majority of people is unbearable. Inflation is near 10 percent and the official index for unemployment is 2.7 million and underemployment is over 5 million. Based on an International Monetary Fund (IMF) report, unemployment is above 11 percent (Tasnim: January 2nd, 2017). From a population of more than 80 million Iranians, around 15 million live below the poverty line. Living conditions for majority of the rest of the population is not far from poverty.
Iran, like many countries in the region, faces obstacles such as absence of the rule of law and transparency. The economy is under the control of an oligarchic group in which the supreme leader Ayatollah Ali Khamenei and the ruling elites have monopoly control of oil revenue and state budgets. As far as problems of corruption and nepotism are concerned, it is a fact that a small group of investors connected to the regime have better access to financial resources (many names including close relatives of the supreme leader and the president are exposed, publicly). In fact, the economy in Iran is primarily a rentier system, in which an unproductive economic system of activities based mainly on oil revenue, with wide class division, dominates the society. Much of the wealth is in the hands of a small ruling group, among them, top ruling clerics, governmental and military officials plus their private business partners.
The country also is entangled in a capitalist oriented economic crisis and confronts, among them, the impasse of secular economic stagnation (growth without the conventional job creation). This part of the problem is derived from the economic hurdle of primary-accumulation of capital without expanded production, but instead expansion in financialization of the economy. In today's  capitalist world, partly due to the dilemma of over-accumulation, capitalist investments are channeled towards "waste" such as in finance, service and war industries (Hans G. Despain, Monthly Review, September 2015:39-55). The 2008 economic crisis was caused mainly due to financialization of the economy and creation of asset bubbles that were byproducts of the crisis of over-accumulation and non-realization of capital in conventional economic sectors. Iran also is experiencing social complications that are partially related to financialization and the relative absence of investment in manufacturing. As reported by the Newspaper Etemad (Nov 22, 2016), in the last 10 years, 73 percent of the financial resources was invested in non-productive economic sectors.
In the view of an Iranian economist, Parrviz Sedagat, the present crisis in Iran, even though partly caused by factors such as international sanctions and geopolitical crisis in the region, is "basically, a crisis of accumulation in a capitalist economy." Its outcome has been relocation of capital from industrial to financial and commercial segments. Financial activities in Iran take place in two official and unofficial sectors. The first sphere covers institutions such as the central bank, stock market and insurance companies. Parallel to that, in the second segment, which is finance (its dealing is mainly in underground sphere), economic actions are not controlled by state institutions. Based on an official census, out of more than seven thousand financial institutions, about six thousand function without license and are not controlled by the assigned officials. From among the 50 largest economic institutions in Iran, 20 of them operate in the financial sector, and in the largest 100 companies, 57 percent and 25.5 percent of sales belong to banks and the financial institutions (Nagde Egtesade Siasi /
The privatization trend in Iran is very selective and it is done only in the interest of powerful political groups. Many of the state owned economic institutions are transformed to the semi- private institutions and foundations, most of them under the control of the Islamic Revolutionary Guard Corps (IRGC). The high-ranking military officers have become economic partners with the bureaucratic and commercial bourgeoisie, and they all remain active under the ultimate control of a small ruling elite, headed by Khamenei. Based on a report by Wiki Leaks in 2010, economic institutions such as Telephone/cable company, Ghadir investing company, Isfehan Refinery, Saderat Bank, Tabriz Caterpillar and Sina Bank are among giant financial institutions that have been "purchased" by the IRGC.
In fact, in the process of transformation of state companies (particularly the financial institutions) to semi private entities that function under the control of the IRGC and are linked, in various ways, to the ruling quarters, the Iranian national assets are being ruined. The new "owners", in order to generate more profit, put a great deal of pressure on working people. Anti-workers measures such as late payment and downsizing (layoffs) are common in the privatized economic institutions. The "labor law reform" bill, underway, imposes further hard ship on workers and imposes more work with lower pay. This bill allows employers to easily cut entitlements and expel workers. The worse part for the working people is that the new "private" owners, in some cases due to the price increase of the properties and assets, put them up for sale and often the operating institutions end up being bankrupted and dissolved which adds to more unemployment and hardship for the working people.
For instance in the highly publicized (due to a very high volume of money involved), bankrupted economic institution of the financial institution Misan, 85 percent of the wasted loans belonged to only 12 individuals whose only purpose were to make profit  (The Newspaper Sharg, Nov 19, 2016). Recent protests by the workers in factories including Hapko factory, Aluminum Pars, Gulf Star Refinery of Bandar Abbas and Poly-Acryl, are in opposition to the anti-worker policies that result in further under-payment, cutting benefits and closing of many more factories and economic institutions. The neo-liberal policies pursued by the "moderate" government of Hasan Rouhani, in coordination with the hard-liners, do not contribute to constructive investments and productive economic performance inside the country, and it definitely undermines the living conditions for the majority of the working population.
The main issue here is that even in the case of "normalization" of the Iranian economy, it will remain, in various ways, connected to the imperialist system of outsourcing, and there will exist only a range of low-skilled operations profitable for big internal and external capitals without a system of organic relations between different industries of consumer and capital goods. In Iran like many other low-wage developing countries, the phenomenon of "super-exploitation" (transfer of surplus value by reducing wages below the value of labor-power) will intensify further. As the economic conditions in many other developing and even some western countries (e.g. Greece and Spain) indicate, when the finance industry dominates the already crisis-ridden capitalist economy, industrial production diminishes and the ideal all around expanded production becomes impossible. In fact, given that imperialistic relations and financialization of economy comprise the main features of the global political economy, and above all that a corrupt authoritarian regime reigns in Iran, one cannot see a bright future for economic justice in Iran.
As Judith Whitehead argues, "The capture of excess surplus-value by northern multinationals through outsourcing constitutes therefore the defining feature and mechanism of contemporary imperialism." In her view, contemporary imperialism, led by finance capital, is not only one of the major drivers of "secular stagnation," especially the relative lack of recent investment in manufacturing, but also of  impasse with primary accumulation that takes place, without the proportionate employment in large parts of the Global South. In 2012, the estimated size of the global reserve army of labor was 2.4 billion, while the total `active army' was estimated at 1.4 billion' which is almost 63 percent unemployment worldwide.  Around 79 percent of the global workforce now is located in low-wage countries and accumulation has not been followed by expanded production in many parts of the world (Judith Whitehead, Monthly Review, November 2016, 37-52).
In the past 40 years, there has been a defining shift, worldwide, in the movement of manufacturing industry from the Global North to the Global South and an increase in the share of industrial employment in the developing countries (83 percent in 2012 compared to 52 percent in the 1980s). In the same period, "the share of foreign investment in developing and transitional economies rose from 33 percent in 2006 to 51 percent by 2010." The multinational monopolies that are located mainly in the Western countries have decided to shift production to parts of the globe with the lowest unit labor costs and, under the system of "global labor arbitrage" (as the key element of the contemporary imperialist system), they exploit the workers in the periphery countries along the course of "unequal exchange based on a worldwide hierarchy of wages." Based on this "super exploitative" relation, enormous profits (often 50 percent or more on the export price of their products) are extracted by the Global North, "through process of value capture, as opposed to value creation" (Suwandi and Foster, Monthly Review, July-August, 2016: 124-125).
Since the nuclear accord between Iran and the 6 world powers a few years ago, international investors are coming back and, based on official report, so far 127 economic agreements have been made and 64 economic projects by the foreign companies have started activities (, January 19, 2017). These companies and a range of other joint or local projects will only concentrate in more profit making (and not necessarily, productive), mainly in service and commercial industries.  For this reason, no doubt, many in the ruling quarters and their private partners are in favor of continuation of neoliberal policies (privatization and deregulations for local and foreign investors) and are not concerned about the closing down of many local `inefficient" industries that result in soaring unemployment and deprivation in the society.
At the same time, many foreign investors also are not concerned about the undemocratic and repressive nature of the Iranian political system and the officials' authoritarian policies towards resentments and protests by many activists in the social movements. The regime negates all kinds of democratic rights and suppresses every kind of political dissent. It does not tolerate independent political organization, and activists in the social movements, including in labor and women's movements. Activists are often arrested, many tortured and some even executed. At these times many labor and social movement activists are in prison.
The two ruling factions, known as religious hardliners (under the command of the supreme spiritual leader, Ali Khamenei) and "moderates" (represented by political personalities such as the late Ali Akbar Hashemi Rafsanjani and the President Hassan Rouhani), still govern the country in an authoritarian manner. In the absence of transparency and democratic monitoring by the public, capital in Iran prefers to find its way to every possible economic (mostly non-productive) outlet. It is reported that every year around 17.5 billion dollars, almost half of oil income, leaves the country and most of the remaining is either absorbed by the bureaucratic capitalists, including military upper echelon personnel and their private partners. Capital flight, or its drive towards non-productive, commercial and financial industries, definitely undermines the normal accumulation and production of capital and social values in Iran. History indicates that unless a true democracy is not established and people are not able to control their socio-political destiny, social and economic justice will not emerge. A democratic revolution is imperative for the establishment of liberty and social justice in Iran.

John Case
Harpers Ferry, WV

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