Economists and political thinkers have mulled over the relationship between politics and commerce for years, all of whom stress that if this relationship is not defined properly, it may lead to adverse results. According to the findings of economists, a government is not a good merchant and the public good depends on the separation of politics and commerce, Mousa Ghaninejad, an economist, prefaced his article for the Persian economic daily Donya-e-Eqtesad with this note.
A translation of the text follows:
This separation has two aspects: One requires the prevention of the government’s direct participation in economic activities, or ownership of enterprises, while the other is the influence of politicians and government officials in spearheading economic activities toward personal or group interests.
It is easy to recognize the first aspect of the state economy but the second aspect, which refers to the misappropriation of the economy to provide personal and group benefits cannot be identified easily. This issue is not specific to our country, as it is the bogeyman of all countries.
The first aspect of the state economy, i.e. state enterprise, does not have much popularity following the collapse of the Soviet Union and the revelation of the inherent inefficiency of the socialist system. Wisdom demands the reliance of the economy on the private sector and competition.
The state economy lost its initial popularity to a great extent, once Iranian people overcame their post-revolution excitements and left behind the predicaments of the Iraqi war. State economy was not believed to serve the public interest, at least in theory, since the second decade of the revolution.
The peak of these developments was the notification of Article 44 of the Iranian Constitution in the fiscal 2005-6. The article has explicitly envisioned the privatization of the economy. But now, more than 15 years after this development, it is clear that the economy has failed to achieve the intended results because of the dominance of the government and politics over the economy, i.e. the misappropriation of the economy to serve special interests, or modern feudalism.
Modern Feudalism
The privatization process in Iran, particularly during the two-term administration of the populist president [Mahmoud Ahmadinejad] for eight years, has separated the ownership of former state-owned enterprises from the state but still kept them under political and governmental management.
What justifies the use of the term “modern feudalism” is the ambiguity regarding the ownership of the privatized companies and constant changes in their management, according to political considerations.
Most of the transferred state enterprises are in a state of ambiguous ownership. They are apparently non-governmental from the legal viewpoint, but in practice are controlled by the government. The managers of these companies are changed constantly, according to political considerations, so a strong emotional bond does not form between the managers and employees. As a result, their vision for the future is not long-term, as most of the energy is being spent on short-term initiatives and the improvement of long-term productivity is not on the agenda.
The problem is not restricted to the waste of resources and corruption stemming from modern feudalism. These semi-governmental enterprises trouble the entire economy, especially the private sector. The monopoly exercised by some of them in the national economy has tightened the screws on the private sector; the failure of the general policies of Article 44 of the Constitution is to blame on this issue.
How can we get rid of this complicated relationship between politics and commerce?
First, we need to find out the causes of this situation. The main trouble seems to be the incorrect interpretation and implementation of the policy of the non-governmental economy and basically the concept of “non-governmental.” The opposite concept of the public sector is the private sector, but the use of vague concepts such as “non-governmental public sector” and “public cooperative company” in the general policies of Article 44 of the Constitution, especially in its bylaw, has led to the current state of confusion.
The liberalization of the business environment is the first requirement for the real non-governmentalization of the economy. Unfortunately, in the general policies of Article 44, the issue of liberalizing the business environment and allowing free trade has not been regarded properly. For the same reason, the government will fail to achieve the goals it had set in the “monetization of state assets” plan.
As long as the national economy is devoid of free trade, no economic reform will produce the desired results.
