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June 2020, No. 94


Viewpoint

We Are in A Paradoxical Economic Situation!

Dr. Masoud Nili, Economist


 

Our decision-making system is very complex, with different layers each having different goals and considerations and these goals and considerations are typically not intertwined. This means that one type of decision may be made at a particular ministry level, and then at a higher level, the same decision is made in a different way. In our decision-making system, things are very difficult in terms of information flow and expert decisions.

When a problem arises or there is a problem and its consequences appear, everyone enters the field. The public opinion expects everyone to comment and clarify their position on the problem. But unfortunately, such an expectation and partnership does not occur before the problem arises; even on the contrary; often everyone prefers less participation so that responsibilities are distributed because they cannot guess what the implications of that decision may be later on.

It is true that we have already reached relative maturity in terms of expert capability, but we need a similar cohesion in the decision-making system to be able to digest the introductions and conclusions used in an expert review while retaining its original identity. When it is not possible to digest expert decisions in the decision-making system, the result of any expert review and effort in practice would emerge as decisions that are unacceptable not only to those who have made the initial proposal, but also to those who want to implement it.

In this situation, the output of the decision-making system is also not properly explained to the people because anyone who wants to explain it is probably not in agreement with some of the decision itself and thus the public opinion is not properly informed. On the other hand, since there is no coherence in decision-making, this lack of lucidity at the implementation stage also manifests itself as executive failure. All of this is due to the fact that the growth of knowledge in the country, and especially the growth in economic knowledge over the past two decades, has not had a place in the decision-making and administrative system. It can even be said that not only has this growth not been in line with the growth of economic knowledge, but it has moved in the opposite direction. As a result, today we are faced with gears that do not spin together.

Much of the openness we have had in recent years in terms of resources is related to periods when oil prices have reached a high level and, as a result, our economic decision-makers have received God-given resources. When these resources are abundantly available to decision makers, one is unwilling to think of economic reform and make decisions to keep the economy away from the wrong course.

In such circumstances, decision makers are usually reluctant to pursue economic reform, and there is no demand for reform decisions at all, as the abundance of resources provides openings in the various fields that make the structure unnecessary to reform. Conversely, when resources decline due to falling oil prices or being exposed to sanctions, such as today that pressure on resources has made a very difficult and special conditions we have never experienced before, the conditions for economic reform become extremely unfavorable.

The commonality of these two very different situations is policymakers’ refusal to make the right economic decisions; in the face of abundant oil revenues, they think why they should take measures that would reduce their popularity as in the scarcity of resources the cost of implementation of the right decisions go up sharply.

In fact, we are in a paradoxical situation, which means that when resources are abundant, we evade the right decisions, and when resources are scarce and we are unwillingly directed to a course to make the right decisions for the sake of economic reforms the grounds are not favorable. In fact, in both conditions (resource abundance and resource scarcity), we are faced with the policymaker’s refusal to make the right decisions to solve problems, and the demand for sound economic policies, both in terms of resource abundance and resource scarcity, is a small demand. 

 

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  June 2020
No. 94