Economy, Domestic Economy

Where Is Iran’s Economy Headed?

Where Is Iran’s Economy Headed?Where Is Iran’s Economy Headed?

Economic reform is a choice between short-term relief and long-term reward, and “creative destruction” is what the doctor has prescribed for Iran’s economy.

That is the central idea of Donya-e-Eqtesad’s Monday editorial titled “Where Is Iran’s Economy Headed?” by business journalist Ali Farahbakhsh. It analyses the status quo as follows:

Economies engulfed in years of stagnation need momentous, life-and-death decisions.

In fact, there is no simple way out of economic problems. Those who put forth quick-fix solutions are either uninformed or have ulterior motives.

Policymakers should be brave enough to sacrifice special interest groups for the wellbeing of the majority. Structural reforms also require making sacrifices today for tomorrow’s betterment. This can be likened to quitting drugs and the period in which the addict has to pay a heavy price for his future.

The concept of “creative destruction” in economics can be compared to post-operative recovery in medicine. Just like a patient who needs to go through a long recovery period after a major surgery, economies should undergo a process of industrial mutation.

This process revolutionizes the economic structure from within, destroys the old one and creates a new one. Jobs might be lost and industries might run aground in the process, but new jobs with better benefits will emerge.

Economies with structural weaknesses have two options ahead: either to cope with this chronic disease–the proverbial grin and bear approach–or to give in and accept that major surgery, once and for all. That short-term pain would bring about long-term gain.

“Cold turkey” is a term used to describe this condition. It describes the abrupt cessation of substance dependence and the resulting unpleasant experience, as opposed to gradually easing the process through reduction over time or by using replacement medication. Most addicts give up the former solution and fall back into their old habits.

Economically, as we get closer to election time, governments opt for handier solutions. They dodge structural reforms to avoid its costs. This is most apparent in countries like Iran where populist policies have put down roots.   

Three years into his tenure, President Hassan Rouhani needs to boast a tangible achievement for the upcoming election. Economic policymakers had mothballed most of their reformist policies until the conclusion of the nuclear deal.

Now they are faced with slight chances of realizing their domestic and foreign plans, at least in the short run.

This is while the implementation of costly reforms in the final year of the administration is no easy task. That’s why statesmen should increasingly pay heed to planning in the limited timeframe they have at their disposal. Just like the manager of a football team who saves the game by making a “super-sub” in the dying minutes.

Unfortunately, it seems that policymakers have not fully acknowledged the current situation and can’t make a solid decision about the fate of the country. They have reconcile the country’s economy to “if and when”.

Of course, their sole decisions won’t suffice. People should be convinced to cooperate all the way. In recent years, the government enjoyed a high popularity ratings. So they need to take up this opportunity and encourage people to accept the major but life-saving economic surgery by warning them against the dire consequences of going down the same, bumpy path.