The Lost Decade

Economy’s lost decade is a phrase we often hear these days. 

The 2010s saw Iran’s economy tailspin. These years will be remembered as the time of uncertainty about future, drastic decline in investment and surge in administrative and economic corruption, reads an article by economist and university professor, Ali Dadpay, for Persian economic daily Donya-e-Eqtesad. 

A translation of the text follows: 

Statistics are approximate. When speaking of a county’s gross domestic product, we need to emphasize that it is the sum of the monetary value of the final goods and services produced at market prices within the borders during a specific year. Thus, a part of the country’s economic exchanges is not included in the GDP. However, the change in GDP is in line with the outcome of the country’s economic developments.

According to the World Bank, Iran’s real GDP between 2011 and 2020, using constant prices of 2015, decreased from $580.8 billion to $203.5. It is patently clear that comparing the two figures indicates more than a 60% decrease. Every third grader knows the second number is less than half the first number. 

Many people would say this index is not so bad when calculated using the Purchasing Power Parity Index, as it increased from $1.045 trillion in 2011 to $1.062 trillion in 2020, registering a growth of 1.7% over the decade in review. Politicians and bureaucrats might say that the economic situation is not so bad. However, these numbers are not just numbers; they tell the story of millions of Iranians.

First of all, they don’t include all transactions within Iran’s economy; prices used to calculate them have not been obtained in competitive markets. They are only a part of transactions reported in an economy where giving reports on economic activities is not common. These statistics neither include transactions carried out in markets for second- and third-hand goods, nor do they include the costs incurred from lost businesses or unearned revenues. 

GDP does not consider damages inflicted on natural environment and water resources, or the human cost of transportation accidents due to unsafe roads. What is important is the direction of the change. From whatever aspect you look at this indicator over the 2010s, you can’t find any sign of development and economic progress. What you find is the shrinkage of economic activities and people’s spending. But no one asks how many dreams have been crushed or how much frustration has been felt as a consequence of this decline in GDP. 

A shrinking GDP means loss of foreign markets for a domestically-produced commodity and smaller local markets for the exchange of services and goods. Politicians and directors who are seeking to assess their achievements by changes in the economy blame sanctions and external factors for this loss. 

Although sanctions are the most prominent cause of challenges, the vulnerability of the economy in the face of external events is the outcome of government’s constant intervention in the economy, the increase in government’s ownership, weak governance and widespread corruption. No one dares to make an investment in an unstable economy with unstable rules and regulations.

The fact of the matter is that “the lost decade” is synonymous with disappointments for entrepreneurs and investors in ways that they no longer want to engage in economic activities. To a foreigner, such a decline in GDP is just a change in number but for millions of Iranians it translates to missed opportunities, thanks to a change in external conditions or government’s interference. 

Dreams have been crushed, plans have been shelved. “The lost decade” means millions of products have not been made.

We need to think about “the lost decade” and its everlasting consequences more seriously. Sanctions won’t be limited to this decade. Unless we see a complete shift in economic policy-making, the path leading to old policies will take us to the same place we were at the start of “the lost decade”.