Inflationary conditions have countless detrimental impacts on the low- and middle-income deciles by eroding a part of their purchasing power each month.
“They gradually erode the households’ resilience and push more people below the poverty line,” Nasser Zakeri, an economic analyst, said in an article for Persian-language daily Shargh. A translation of the text follows:
Inflation rate varies in different countries; some countries see zero or even negative inflation while others report hyperinflation. A brief overview of the latest statistics on inflation across the world provides us with startling information.
Imagine the world population at 100 people, 36 of them live in countries where the annual inflation rate is less than 3%, such that some of these countries even register zero or negative inflation rates. On the next level, 24 people live in countries with inflation rates of 3-6%. The number of people who tolerate inflation rates of 6-9% is 17, and finally only three out of 100 people experience inflation rates of above 26%, with an Iranian among the trio.
In fact, a majority of the world’s population either does not suffer from inflation at all or their suffering pales in comparison to what Iranians go through.
We’ll come to understand another dimension of this predicament when we notice the length of the double-digit inflation’s reign over Iran’s economy: In the past hundred years, high inflation rate has emerged in various societies, but it has usually been curbed after a short period of time. But the inflation in the Iranian economy started in the fiscal 1972-73 and continued unabated into the next five decades at an average rate of 19%. The consumer price index has increased more than 6,600 times (and counting) over the period.
Widening Gap
Although it is crucial to weigh the causes of inflation, it is more important to size up the impacts of inflation on our economy. For nearly half a century, low-income households and even the middle class have been constantly at the risk of falling below the poverty line; they have become accustomed to this enduring danger.
Many households have tried desperately to maintain their position, but usually after one or two decades of resistance, they finally succumbed to their fate and fell below the poverty line.
On the other hand, a handful of people have managed to turn their millions [of tomans] to billions and trillions, and join the multibillionaire club in the blink of an eye, thanks to their rent-seeking practices and ties with centers of power. The formation of insane new patterns of consumption and the appearance of unprecedented wealth and luxury in some neighborhoods of Tehran and other metropolises is the best sign of this change.
Budget Constraints
The role of governments and statesmen is to first control and treat the disease of inflation and then try to reduce the financial sufferings of the general public, but studies show that little success has been achieved in either of the two areas in Iran. The least the government can do is to contain money supply by increasing financial and budgetary discipline. However, as the government’s duties and the list of institutions that receive public budget increase, the government is forced to accept the inflationary budget.
Budget constraints have also affected tasks and responsibilities that lack strong and influential defenders in the country’s decision-making system. As a result, the interests of some influential groups are never restricted; they continue to have easy access to public resources, whereas the budgetary resources allocated to low-income groups have become smaller by the year. For instance, the sum of monthly cash subsidies has remained unchanged for years and false promises made in election campaigns have become impossible to fulfill.
Gradual Theft
The impact of inflation on the national economy and the livelihoods of households can be likened to a gradual theft.
Inflation swallows part of citizens’ income and properties every night. People expect the government to stop this brutal theft. In dealing with theft, we expect government officials to bring back peace of mind to the citizens by increasing the degree of security in society. But the performance of those in charge over the past few decades have been far from satisfactory, as they are telling people that, “Those who want to protect the value of their assets should quickly convert their cash into real-estate or car. Those who can’t have to accept “gradual death” as their destiny.”
The government’s reluctance to do more in the fight against inflation has compounded the sufferings of people. It has also allowed some to reach into people’s pockets and grab a portion of their income. The decline in the quality of goods and rising costs of repairs are a testimony to this claim.
The first step toward reform is for the government to return to the field for combating the effects of inflation and accepting the responsibility for the poverty it has inflicted on the people. Just as Hafez, the famed Persian poet, says, “Come to your victim and lift them from the ground.”
