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July 2013, No. 67


Economy

Let's Realize Economic Challenges


How to control inflation in an economy is no more an unresolved problem. Inflation in approximately 150 countries, according to the World Bank report in 2011, was below 8 percent. More than 150 countries have been able to manage and check inflation.


Dr. Alinaghi Mashayekhi

Progress in economic dimension is essential for the survival and prosperity of a social and political system. Economic development is measured by several parameters. The per capita output growth in the society, unemployment rate, inflation, income distribution among various strata of the society, average education level of the labor force, gaining access to education and health services, life expectancy, level of cultural products, ensuring living at the time of retirement and unemployment are among indicators of economic development.

In the contemporary world in which communications have become rapid and extensive, different societies are familiar with the situation of each other. Higher economic development in a society compared to other societies is indicative of the capabilities of social, political and economic system in betterment of the living condition of the people of that society. Economic development will increase self-confidence of the society and its people. Economic progress will result in preservation of human resources and prevent brain drain and even attract brains outside the country. Human asset in the meantime will strengthen the society which will itself result in further progress of the society. Economic development increases financial ability of the society for strengthening of the defense capability and consolidating human and material resources for cultural and intellectual development of the society. Economic development will result in improvement of the living condition of families and prepare the ground for strengthening of the foundation of families and reduce moral and financial corruption.

Given the importance of economic development, one of the major concerns of the society and its managers is inevitably economic development. Some of the major aspects of the country's 20-year Vision Plan are relevant to indicators of economic progress to such an extent that Iran would stand in the first position in the region. Many hints, recommendations and guidelines that are discussed at public forums are relevant to the livelihood of the people and performance of the society in the domain of economic development. With regard to the high rate of inflation and unemployment and meager economic growth under the present condition it could only be said that in most years of the past decade economic progress of the country was far away from what could be considered suitable. Such a situation would naturally pose this important question that what are the main challenges in the course of economic development of the country?  The answer to this question and its root cause could be sought in the historical background and cultural or political structure. Moreover, effects of such roots could be analyzed in the domain of economic progress and also impacts of economic progress or lack of economic progress on root causes could be studied in historical and political fields. But, this paper intends to review challenges that directly limit economic development without seeking to look deeper into the roots of these challenges in historical, political and social fields.


The fourth mental and intellectual factor which underlines economic progress is the mentality of the society towards investors and entrepreneurs.


In the economic domain, the main challenges for development could be classified into two layers. The first layer is the mental and intellectual principles and the second layer is the important manifestations of mental and intellectual layer. In terms of what will follow, challenges hindering Iran's economic development are not inflation, unemployment, income distribution, and lack of funding. All these symptoms are due to mental and intellectual challenges in the field of economic development. How to control inflation in an economy is no more an unresolved problem. Inflation in approximately 150 countries, according to the World Bank report in 2011, was below 8 percent. More than 150 countries have been able to manage and check inflation. Or the difficulty for increasing investment and reducing unemployment in many developing or newly developed countries such as South Korea, Brazil, China and Turkey have been solved. What is important and should be addressed are mental and intellectual principles which provide the ground for regulation and implementation of solutions to the above problems.

1.  Mental and intellectual principles in economic development

Four major mental and intellectual challenges that could foster economic progress or hinder it are as follows:

1.1 Development-oriented mindset: For economic progress the mindset of senior managers of the society should be development-oriented. In a development-oriented mindset, economic development and progress enjoys high priority and importance. In a development-oriented mindset challenges for economic progress are considered and solved on top of other issues. In development-oriented mindset, if the rhythm of growth and development in a region, such as Assalouyeh, slows down instantly the causes are identified and would be removed. In a development-oriented mindset, the first issues that are reviewed and resolved are the issues facing economic development. As an observer monitoring the management scenes in the country, the author does not trace indications of a development-oriented mindset in the executive management of the country. It seems that political and security challenges as well as regional and international relations, regardless of their developmental impacts, enjoy further priority and importance.

1.2 Mindset on the role of the government: Governments could play a determining role, be it positive, negative or deterrent, in economic development. The role that governments play is the result of the mindset of senior managers on the role of the government. One mindset considers the government the main factor for development. According to this mentality, the government would implement development and investment projects for the progress. To show further progress, the number of projects undertaken or launched by the government should increase. The number of dams, stadiums and factories built or opened by the government would show the statistics for progress.

But, in another mentality the government is considered the “executive and provider of development”. In such a mindset the government is at the disposal of factors of economic progress instead of direct involvement in development. On the basis of this mindset, the government would only become active in establishment of physical infrastructures such as construction of road and port networks and offering infrastructural services such as education, health and safety. It would regulate financial, monetary, import and export, and international relations policies in order to facilitate development and progress. On the basis of this mentality the government would attempt to pull people's capability and capacities to the scene of economic development. In the case of activation of people's talents and abilities in the scene of economic progress and preparing the ground and their support by the government, development would take momentum and the society would proceed forward with full capacity and not just through the limited power of the government.

1.3 Development-oriented judiciary: Economic development needs a proper legal and judicial background in order to solve and adjudicate legal disputes in the area of economy with sufficient speed and care. In activities which are conducted for progress, differences may arise between economic activists. It is possible for some to violate the rights of others. Under such circumstances presence of an efficient judiciary with skilled and impartial judges who could study the cases and address issues with the required speed is specifically necessary. The development-oriented judiciary is a branch which would address judicial issues in economic progress upon priorities and full dominance, safety and speed and judge them. It would also enjoy skilled judges fully cognizant of judicial cases. With the presence of a development-oriented judiciary, people would become active in economic progress with peace of mind and legal frictions and conflicts wasting the time and energy of economic activists would be reduced, violation of others' rights in the field of economy would be minimized as the violators would understand that their violation would soon be addressed and they would be punished. Therefore, violation of others' rights and creation of frictions would be dramatically reduced. In a judiciary which is not development-oriented, addressing economic cases is of lower priority. Other issues such as political and social issues would enjoy priority and judges have less knowledge, experience and skill of dealing with economic issues.

1.4 Positive mentality of people towards investors and entrepreneurs: The fourth mental and intellectual factor which underlines economic progress is the mentality of the society towards investors and entrepreneurs. Of course, the mentality of the society itself is influenced by the mentality of senior managers, mentality towards the government and presence of a development-oriented judiciary. But, in a proper mental and intellectual foundation for development, the society should respect and honor investors and entrepreneurs in the area of development.

Investors and entrepreneurs for development are the key and valuable people who would be respected and honored by the society so that people with more talents would be attracted towards entrepreneurship and investment and if the mentality of the society towards investors and entrepreneurs is negative, and if they are considered opportunists or violators of others' rights, in that case investment and entrepreneurship would not prosper and the pace of progress in the society would be slowed down. In creating a positive mentality towards investors and entrepreneurs in the area of economic progress, political and cultural managers of the society could play an effective role. The positive and effective role of managers would emerge when their mentality is development-oriented and the government is at the service and provider of development and not a direct factor for it.

2. Manifestations of mental and intellectual principles in the field of economic development

Mental and intellectual principles that were described in the previous section, would exhibit manifestations in the area of economic progress which would have direct effects on development. In this part three most important manifestations are offered.

2.1 Transparent and competitive market-based economy: When the mentality is that the government is serving development and preparing the ground for it instead of being its factor, economic activities would be shouldered by the people and non-public elements. What regulates the relationship between private economic activists would be competitive and transparent relationship in the market-oriented economy. Government intervention in the form of direct economic activity or its intervention in market mechanisms in the form of fixing prices, allocation of limited sources among economic activists on the basis of specific privileges or issuing certificates for activities of special individuals would not exist. The mentioned activities by the government could divert economy from competitive and free status and could result in rent-seeking and rent-demanding.

The experience of progress in successful societies of the world is indicative of the presence of a competitive and transparent economy. In such economies, government policies would be formulated and regulated as an incentive for development. But, such policies would not exclude the economy from its competitive and transparent status. In a competitive economy all the talents would work for increasing productivity and for optimum utilization of the limited resources in the society as well as better production and services.

In non-competitive and rent-seeking economies talents become more active for gaining privileges and more rents rather than better products with higher efficiency and productivity. In non-competitive economies people would become rich by seeking rents and concessions whereas in competitive economies people become wealthy through innovation and creativity of better products and application of more efficient methods. For this reason, competitive and transparent economy which is an indication of development-oriented and people-based mentality would result in increasing productivity and economic development.

2.2 Separation of economic expertism and management from political management: Management of the economy and management of economic corporations is a specialized task which needs the required knowledge and expertise. Despite the complexities that exist in the economic system, today an important field of human knowledge has addressed and developed the process of economic management in a society. Many outstanding talents from various societies have developed the economics in an effort to understand economic development in societies and draw up policies for accelerations and facilitation of the progress. In addition to economics which would generally address macro management of the society, the knowledge of the process of administration of economic organization and corporations would grow and develop in accordance with the expertise of successful managers and pondering of thinkers and scholars in the area of management. Familiarization of the knowledge of management and expertise of successful organizations in the world along with paying attention to local conditions and culture as well as acquiring practical experience in management are essential for the successful administration of organizations. Either in the area of economy or management irrespective of theories as well practical and scientific achievements of human beings success could not be gained in comparison with societies in terms of economic progress. Trial and error in economy and in management and efforts to “reinvent wheels” would result in wastage of resources and opportunities and economic backwardness of the society in comparison with other societies. Lack of economic progress in comparison with other societies would result in creation of doubt in the ability of social and political system in developing the society and would cause the emergence of substitute ideas and motives or reforming the social system.

When economic expertism and management are not separated from political management with the change in senior political managers in the society and formation of a new political team, economic managers and even senior experts would be appointed with regard to political affiliation criteria on the new management team. In the absence of such separation, in the selection of managers for large general or public firms priority goes to their political affiliation rather than their managerial knowledge, experience and ability. When managers are selected upon emphasis on their political affiliations, their managerial capabilities would be placed in the second or third place and the quality of economic management of the society and its economic corporations would be downgraded, economic productivity would reduce and the pace of economic progress would be slowed down.

If in mental and intellectual mentality, mindset of senior managers of the society is development-oriented, economic development and progress would be prioritized. In that case in order to gain access to economic progress in selection of economic managers and experts, priority would be given to capabilities and knowledge of their management and economy. Thus from among them with higher experiment and knowledge those who have a sound record of activities and satisfactory managerial record would be selected. The first criterion for such selection is expertise and managerial ability not political affiliations. Based on a development-oriented mentality, issues of expertism and economic management would be separated from political affiliations in order to avoid economic development and progress to become a victim of political affiliations.

2.3 International relations: In the contemporary world, economic progress is based on science and technology which is progressing at an unprecedented speed. Rapid development of science and technology is indebted to all human races in different parts of the globe. Economic firms, academic and research centers, scientists, industrialists and managers in many societies and countries of the world are conducting research works and making discoveries; they invent and innovate. Producers by focusing on specific products are manufacturing unique products in different countries that are not produced in other countries due to scale economy or the right of monopoly to certain invention.

In human societies a type of distribution of work and activity takes shape. Some societies and countries due to possessing certain resources or holding specific expert knowledge or registered invention produce certain products that are not considered economic in other countries. Countries exchange their commodities and services and go ahead. By gaining access to goods and services in other countries, the scale of products could increase and production could become more economical. Movement of knowledge and technology, capital, goods and services among countries would facilitate their economic progress.

In the contemporary world there is no country to have been able to remain in isolation and achieve economic progress in the absence of interaction with other countries. In the contemporary world economic progress of each country necessitates economic and scientific interaction with other countries. If the mentality of senior managers of the society is a development-oriented mentality international relations of the country would be administered as such that while preserving political independence, economic interaction with other countries would be facilitated and would assist economic progress of the country. In regulating international relations with market development for domestic products, priority would be given to access of national economy to knowledge and technology, to the possibility of attracting foreign investment and international resources and finally to promotion of interaction in economic business for economic progress.

3. Practical results

If mental and intellectual principles of the society for economic development are sound, that is to say when senior managers enjoy development-oriented mentality; social and political system consider the government as serving and preparing the ground instead of being a factor; the state judiciary solves legal challenges of development in a fair manner with due regards to priorities and restore their rights and finally when investors and entrepreneurs enjoy respect in the society, then important practical manifestations could be observed in the society.

Through a proper mental and intellectual infrastructure for development and progress instead of a rent-based or public economy the following would occur:

  • A competitive economy would exist wherein talents instead of seeking rents and concessions would work to raise productivity and producing more commodities and services by offering higher quality and more reasonable prices.

  • Talented economic managers and experts would undertake management of the macro economy and economic corporations and would prepare a proper ground for economic development and progress.

  • International relations would prepare the ground for scientific, technological and economic interactions and businesses.

  • Investment and entrepreneurship would promote.

  • Unemployment would be reduced.

  • Growth of national income would increase.

  • Inflation would be checked through scientific and proper management of the macro economy and more products and, services.

  • Economic progress would be attained.

  • Financial strength would get prepared for progress in other areas such as cultural, social and political fields.

 

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  July 2013
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