Mehrad Ebad, a member of Tehran Chamber of Commerce, Industries, Mines and Agriculture, has underlined the need for revising trade policies to stabilize the economy, and considers constant changes in policies as ineffective. A translation of the note he recently authored for the chamber is as follows:
The common phrase “butterfly effect”, which in economic jargon is called the chaos theory, seeks to explain chaotic or random occurrences in financial markets. Apart from weather, sensitivity to extraneous conditions could be witnessed in other dynamic systems.
Most systems in the real world work by repeating a certain process, which becomes chaotic as a result of even small changes in any of the repetitive operations; in macroeconomics, there are two main viewpoints on this matter. The first pertains to neo-classicists who consider factors causing long-term production fluctuations to include demand and supply shocks, as well as shocks caused by monetary and financial policies that are unpredictable and uncontrolled.
The second viewpoint is related to Keynesians who believe that the cause of production fluctuations is internal economic interactions, such that an increase in activity in one sector may increase activities in other sectors and vice versa.
As per the first perspective, due to the random and unpredictable nature of those shocks, there is no place for financial and monetary policies, and in fact, the implementation of these policies aggravates economic instability. But according to the second viewpoint, economic stabilization policies are of particular importance due to the certitude of processes and their predictability. Proponents of the second viewpoint cite economic chaos (butterfly effect in the economy) as evidence for their claim.
Regardless of whether these two theories are right or wrong, the importance of the commodity supply chain is not hidden to anyone, and a lack of proper communication and interaction between these chains causes disruption and chaos.
For many years, sanctions have caused economic instability in Iran, but the butterfly wing that caused a negative change in Iran’s fragile economy in the fiscal 2010-11, when the unawareness of officials at the time about international relations and their unprofessional adventures triggered a new round of economic sanctions and the butterfly effect led to economic chaos.
*** Continuation of Domino Effect
In the continuation of this domino effect, Iranian statesmen devised executive policies to face the sanctions, unaware that they themselves were the cause of the aggravation of its effect. The continuous changes in economic processes such as order registration, currency transfer method, import and export bans, and the return of foreign currency from exports in the past 20 years have greatly intensified the butterfly effect, which is referred to as internal sanctions.
Continuous and repeated changes in these processes did not create stability in economic conditions, because the policies did not have the necessary efficiency. Not taking into account the conditions of all stakeholders, neglecting foresight in tracklaying [a metaphor for planning] and not consulting real experts have gone so far that the rules governing the import and export policies have caused disruption in the market; as the production is facing a shortage of raw materials, exporters are unable to compete and importers are waiting in long queues for foreign currency allocation.
Therefore, it is necessary to revise all the executive policies of import and export in compliance with the existing facts to put an end to the continuation of the current domino-like process.
