September 2006, No. 41

Economy

Changes in Economic Ideas in Iran

There are other societies like China and Southeast Asian nations that are ready to accept big changes and make major revisions in their social ideas

Changes in ideas usually are gradual and take time to evolve; just like changes that are made to human face in the course of time. The question as to how we used to think in the past and how we are thinking now and the amount of this gap, which indicates our change compared to the starting point, is also an important individual question and we can assess developments that we have undergone through answering that question, it is also a very important social question. Society, like a person grows steadily and undergoes changes and developments, and therefore, its choices also change in the course of those developments.

A group of developments usually happen on an individual or social scale, which is called “learning”. Dynamism of social growth of various societies is determined by speed and depth of learning process. The fact that our beliefs now are very different from 100 years ago indicates to what extent our society has changed and is ready to accept changes. We know societies in the vicinity of our country that despite taking advantage of the latest technological and industrial achievements of the world, are actually living in hundreds of years ago in terms of their everyday and social lives and their social relations are determined on the basis of rules that were in effect many yeas ago; as if, dynamism of learning has stopped in those societies.

On the opposite, there are other societies like China and Southeast Asian nations that are ready to accept big changes and make major revisions in their social ideas. Factors that cause so much difference among various societies are different, which cannot be discussed here. What will be discussed here, is changes that have occurred in the field of economic thought over the past 40 years and evaluation of factors that have affected it.

The generation that has been living in the past 40 years is more experienced compared to the following generations. That generation has passed its youth and early adulthood in 1960 and 1970 and has seen cultural, economic and political upheavals of that period of time as well as the ups and downs of revolutionary years. It has taken charge of the country’s management at various national and provincial levels with a mind full of big expectations, has witnessed change of four governments during the first two years after victory of the Islamic Revolution, has been engaged in a devastating eight- year war and has also gone through tumultuous years of post-war era. Few generations have gone though all those experiences.

The story of evolution of economic thought in our country over the past 40 years is a happy story, on the one side, and a sad story, on the other side. It is a happy story because backwardness reduced gradually and, as time went by, proponents of a competitive liberal economic system increased.

However, each and every one of us can assess what has happened during those years and also evaluate factors that have influenced those changes in a fair manner. Unfortunately, due to behavioral double standards which govern Iranian culture and society, we evade such assessment.

The ideas that prevailed in 1960s and early 1970s were special to that time. The capitalism was introduced as symbol of tyranny and inequality, on the one hand, while China and the former Union of Soviet Socialist Republics, on the other hand, had stood in the face of the capitalistic world. Marxism had the initiative in fighting against the American capitalism in all parts of the world from Latin America to Asia and Africa and chanted slogans about classless society ruled by proletariat. Our country was no exception to that rule; especially that it was a pioneer during 1950s not only in intellectual fields, but also due to forming the biggest party that our country had ever seen. Marxism rapidly spread through universities and during a short period many books that were either written by domestic writers or were translated from Russian, were published.

Religious youth and students had been raised in strictly religious families and were facing a big contradiction. One the one hand, they felt a big urge toward spreading justice and believed that the sole way to do that was to establish a government that,  unlike Marxism, would not negate ownership of production tools and consider value of production to only stem from value of work and establish a classless society. On the other hand, they could not accept the theoretical basis of Marxism which was based on materialism and negation of God and his prophets. In reaction to this dilemma, Islamic scholars and thinkers emerged in the society who through interpretation of religious texts, came up with the same results for promoting social justice.

He Koranic verse “Everything that is in the Heavens and Earth belongs to God” indicated negation of personal ownership; another verse, “Man is in possession of nothing without having worked toward it”, referred to value and originality of human labor, and another holy verse, “We have decided to do a favor to those who were oppressed on Earth and make them leaders and make the heirs” was considered an interpretation of Marxist determinism, which only replaced the government of the oppressed for the government of proletariat. Therefore, young students avidly read all books and articles that were published clandestinely about such topics and assimilated them in their beliefs. In fact, they solved their problem with materialistic philosophy of Marxism by adapting it to religious teachings. On the opposite, they included a socialistic approach in religious texts. The late Ayatollah Sadr wrote his book “Our Economy” and translation of Seyed Qotb’s “Social Justice” was published several times. Some domestic scholars and pundits also wrote books on such issues as ownership and Islamic economy. According to their viewpoints, private ownership was worthless and the government had absolute power over giving or taking of property.

Twenty years ago, total number of persons who defended application of the economics as is and without distortion did not exceed the number of fingers in both hands. Now those who advocate a state-run economy are forced to conceal their viewpoints and advocate that approach indirectly.

In this way, leftist ideas infiltrated into our religious culture and various terms were indigenized after some turn and twist. “Imperialism” was replaced with “world arrogance” and “the oppressed” took place of “proletariat” while “classless society” was called “classless society based on Tawhid (unity of God)”. Increased price of oil at global markets and expansion of state budget, greatly increased volume of liquidity and, as a consequence, situation of inflation and distribution of income was very dire in early 1970s and provided a good ground for justice seeking struggles. In parallel to student movements with the said theoretical characteristics, religious personalities who were centered in Tehran bazaar engaged in struggles against the government due to opposition to its cultural approaches. Both currents were guided by groups of ulema and the clergy. In the course of the Islamic Revolution, both groups were calling for the existing government to give way to a good government, which would enjoy full power for redistribution of revenues and wealth, on the one hand, and establishment of a lofty culture and related cultural behaviors in the society, on the other hand. It was also in serious opposition to the ruling system in western countries.

After victory of the Islamic Revolution the two groups emerged as political rivals. One group, known as leftist group, emphasized on social justice and thought about a totally governmental economy, which would guarantee fixed prices and was characterized by payment of general subsidies, state-run foreign trade, high tariffs as well as non-tariff barriers, a fixed official foreign exchange rate of every dollar equaling 70 rials, ownership of government over production units, moving toward complete self-sufficiency in production, gratis education and healthcare as well as imposing more restrictions on health tariffs. The other group, favored a traditional economy based on trade in which the government would cede most trade activities to the private sector. However, this group also believed in self-sufficiency and supporting the private sector through subsidies.

Although the second group was opposed to the first group in theory and sometimes opposition between the two groups appeared very seriously, in fact, policies enforced by the first group benefited the second group more than anybody else. Those policies developed trade while multiple price system led to rapid growth of unofficial economy. In fact, the second group harvested what the first group had planted. Both groups had serious contempt for liberal and competitive economy and both believed that the government should enjoy enough powers to interfere in all economic activities. Supply and demand mechanism was officially scoffed at and the private sector was introduced in the public opinion as materialization of inequality and financial bullying. Under conditions when budget deficit and increased volume of cash, on the one hand, and negative economic growth due to wartime conditions as well as severe restriction of resources, on the other hand, had greatly increased prices. Producers and suppliers were introduced as major parties to be blamed for high prices and government’s measures that were aimed at punishing hoarders as a cure for inflation were widely supported by people.

The revolutionary generation that came to power during 1960s, stopped at nothing short of a very limited definition of social justice which would lead to a stat-run, internalized and monopolistic economic system. Breakout of war and imposition of resultant restrictions had provided good conditions for that line of thought to penetrate administrative and social pillars of the society. When it came to international relations, theoretical backers of 1950s, 1960s and 1970s; that is, China and the Union of Soviet Socialist Republics, were now strategic, trade, and technological allies and with any crisis that happened between Iran and the west, whose frequency was quite high, our country got closer to those countries. After termination of war, economic policies based on eliminating a double pricing system, unification of foreign exchange rate and, in general, economic liberalization, were put on the government’s agenda. Forced fixing of prices was gradually replaced with balanced prices and efforts were made to develop trade and technological ties with advanced countries. Those policies, though not totally successful in practice, were essentially the same thing that is currently known as liberal competitive economy.

At that time, disintegration of the Union of Soviet Socialist Republics and the east bloc of communist countries had not yet occurred and, therefore, the model of socialism as practiced by the east bloc was still in place. The revolutionary left, which had been established according to beliefs and notions of 1960s and 1970s, saw threats to justice and maintained that its mission is to fight with all its power against policies that were introduced as economic reform policies as they were considered to have been prescribed by the World Bank and International Monetary Fund. A review of the archives of the sole leftist newspaper of that time will clearly reflect this reality and a situation in which, due to idealism which rose from abundant petrodollars, an imaginary world was favored where the government was the sole fair distributor of income and various goods at very low prices. On the other hand, traditional attitude to economy was very concerned and closely followed economic reform policies. Various rents were eliminated gradually and major margins between two systems of pricing were eroded. Producers and investors, who had experienced successful activities under a foreign exchange rate of one dollar equaling seven tomans, now saw all those facilities gone. The competitive economic system had no support among the two rival factions and, on the opposite; both of them had signed an unwritten agreement to bring those policies to a stop. Economists who were advocates of competitive economy were in dire straits. The formerly revolutionary friends charged them with favoring the American capitalism and following suit with prescriptions of the World Bank which means indifference to social justice. The opposite political group also believed that those policies will lead to cultural chaos. That group of economists who were working within the administrative system, were among the most important critics of those policies, not due to principles that governed those policies, which were quite logical and correct, but due to method taken for their implementation, especially with regard to stabilization of macroeconomy, volume of debts and growth of liquidity, on the one hand, and incompatibilities resulting from that approach in economic and political fields, on the other hand.

The 50-percent inflation of 1995 and foreign liabilities crisis of 1994 gave more maneuvering room to the leftist revolutionary approach while economists advocating competition were marginalized. After election of former president Khatami, critics of economic liberalization policies entered the stage with all their capacities and took charge of economic and executive management. They were in their middle ages now, were more experienced and had started revisionism of the past from foreign policy sphere. Of course, they sometime persisted on their past stances when it came to economy. Prevalence of leftist forces in managerial posts and their practical knowledge of modern economic teachings in addition to implosion of the communist Union of Soviet Socialist Republics and the resultant loss of theoretical backing in the east bloc as well as success of economic development experiences in newly emerged economic powers of Southeast Asia, which introduced a new model for rapid economic growth accompanied with improved distribution of incomes, gradually bolstered the mentality that less intervention by government in economic affairs, privatization, and on the whole, economic reforms are more in line with requirements and realities of the country and are not necessarily prescriptions by foreigners for the ailing Iranian economy. Thus, the revolutionary leftist generation was moving, although very slowly, toward a competitive liberal economy.

The Third Economic Development Plan, as a full-fledged plan for economic reforms in all fields including correction of foreign trade system with regard to tariffs and nontariff barriers; development of the private sector; downsizing government; privatization; elimination of monopolies; establishment of private banks; and unification of foreign exchange rate; although was met with a lot of skepticism and took a lot of time at various decision-making centers, an example of which was discussions at 45 meetings of Cabinet, was approved under Mr. Khatami’s government and in cooperation with former critics of liberalization of economy. However, doubts were cast on the success of the Third Economic Development Plan once it was ratified. Therefore, the expert team in charge of drawing up the plan was set aside. Although during the eighth presidential election, the Third Economic Development Plan, as a plan which had been formulated in the first term of Khatami’s presidency and included such topics as economic liberalization and privatization, was set aside and a book called “Second Step” was introduced as a basis for plans to be implemented during Khatami’s second term; the Third Economic Development Plan finally found its rightful position. Financial limitations and new conditions also attuned new directors of Plan and Budget Organization to the Third Economic Development Plan. Therefore, the Fourth Economic Development Plan was drawn up under the general atmosphere of the Third Economic Development Plan.

In this way, the story of evolution of economic thought in our country over the past 40 years is a happy story, on the one side, and a sad story, on the other side. It is a happy story because backwardness reduced gradually and, as time went by, proponents of a competitive liberal economic system increased. Twenty years ago, total number of persons who defended application of the economics as is and without distortion did not exceed the number of fingers in both hands. Now those who advocate a state-run economy are forced to conceal their viewpoints and advocate that approach indirectly. Until a couple of years ago, when the Third Economic Development Plan was being drawn up in 1998, 1999, and 2000, you could seldom find a newspaper which would not write anything against economic liberalization policies. As if, ideas of the Iranian intellectuals were sealed with a leftist stamp and were not ready to give it up. Perhaps, it is for the first time that such changes happen. Today, the default choice for most of domestic newspapers is competitive, liberal economy.

However, it is a sad story because the lion’s share of domestic capacities and oil wealth was spent on unreal idealism, many capable forces were pitched against each other and the country’s managerial capabilities were wasted. Believing in competitive economy by a large portion of leftist forces happened when it was late and now, most of them have lost their grasp on power for an unspecified time. After lapse of early post-revolution years, exploitation of oil resources is the main factor that determined dimensions of those ideals and degree of independence from principles of economics. Big expectations are realized through high oil prices and economic principles are, once against, pushed to the margins.

Now, when we look behind after forty years of thinking and about 30 years of post-revolutionary managerial experience, we find many factors were effective in evolution of the growing trend of economic thinking around the pivot of competitive economy. Undoubtedly, global developments played a determining and important role. However, nobody can ignore role of teaching principles of modern economy and defending the content of economics when it was threatened by unwise criticism and negations. This issue immediately directs our minds toward those who started to work alone and are currently witnessing the results of their efforts. At a time when economics was being scoffed at and was charged with promoting hedonism and even many economists pioneered the struggles for negating principles of economics, defending integrity of this knowledge and criticizing policies that were based on state-run economy and rent-seeking called for a lot of courage. Any review of those who had the most effect in defending principles of economics over the past 25 years and were instrumental in promotion of those principles ends in a single name: Dr. Mohammad Tabibian.

Taking advantage of salient scientific and personality features, Dr. Tabibian has endeavored since 1980 to promote modern economics and, through his profound and unique understanding which resulted from adapting economic principles to tangible realities of our society, he was greatly successful in conveying the main concepts of economics to those who were even unfamiliar with this domain of human knowledge. When I decided to write something to commemorate him, I was inevitably directed toward the course of evolution of economic thought over the past four decades. The reason for this association is that Dr. Tabibian has, undoubtedly, played a salient role in the evolution of modern economic thought in our country and has moved a long distance from what was known as economic thought of late 1970s and early 1980s (which required total negation of market economy, supply and demand mechanism as well as role of prices in allocation of resources) to the current economic conditions where domestic economy has undergone many changes to accept market mechanism. Therefore, he is undoubtedly the father of modern economic knowledge in our country.

Science plays an undeniable and determining role in solving social problems. Engineering and medical sciences never face major challenges because they never overlap with politics and are usually revered. On this basis, politicians always laud scientists in those fields and thank their efforts. However, one can daresay that the degree of success of any society is a function of importance as well as role and status of science in solving social problems. For example, proportionate to the role played by economics in solving economic problems of the society; firstly, economics will be respected and, therefore, be made stronger; and secondly, economic situation of the society will improve. If gratitude to persons and their efforts was a custom in our country and if we were to praise various persons for services that they have provided the society, the writer strongly believes that Dr. Tabibian would have topped the list of those who provided valuable services to domestic economy, both in word and practice.

Alas, people like me afford no more than writing several pages on him. Of course, I hope that our people will known the value of such scientists and those who serve them and there is no doubt that the Almighty God will value their efforts by giving them loftier status in the world and bestowing precious rewards on them in the Hereafter. Now, that services are not respected, what would have happened if somebody had even a bit of doubt in his/her heart about the Afterworld?              

By: Dr. Masoud Nili