The Iranian economy is a form of state capitalism and the private sector has been marginalized, or it only plays a ceremonial role, says Gholamreza Kiamehr, an economic analyst, in an article for the Persian daily Jahan-e-Sanat.
A translation of the text follows:
A vast majority of economists and sociologists in the world believe that governments are not good businessmen, industrialists and producers. The growth and development of the private sector and the withdrawal of governments from economic stewardship in free economies is the result of this mindset.
As per this theory, governments have limited their role to policymaking, supervision, governance and setting the stage for private sector players to take the lead and make investment in the world’s free economies.
Of course, there is fundamental difference between the American free economy where the social responsibilities of the government and the provision of insurance coverage for the general public have been largely forgotten and the European, particularly Scandinavian, free economy where the needs of human beings and their wellbeing is the top priority.
High rankings in Hope Index and citizens’ satisfaction with the living conditions and governments in these countries is the outcome of the mechanism of their free economies.
Unfortunately, the Iranian economy is a version of state capitalism; the private sector has been marginalized or only plays a ceremonial role. Here, the capitalist system is run by government technocrats; there is no impetus for competition, economic spending and improving the quality of products and services.
Entrepreneurs, employers, economic players and producers who have no affiliation with centers of power and aim to help the growth and development of the country only through their own capital and without access to various rents are being taxed illogically despite the fact that our economy is hemmed in by inflationary recession for years.
Economic sanctions and restrictive rules and regulations have also taken their toll on investors, paving the way for human capital flight.
Sea of Hurdles
I can confidently say that the designers of taxes for private sector producers have never experienced in their entire lives the problems associated with setting up and running a workshop or even a small business. These officials with the executive and legislative branches of the government decide for business veterans, churning out regulations without the counsel of Iran Chamber of Commerce, Industries, Mines and Agriculture; the House of Industry and Mine; or trade associations and unions. There is a sea of hurdles in the way of private sector economic players. Two of the common challenges are constant increase in foreign exchange rate and rules regarding social security. Both these, disguised in the form of support for labor force, won’t allow producers of the private sector to offer quality products, competitive with their foreign counterparts, to Iranian consumers. On the other hand, the government’s monopolized car manufacturing companies are allowed to sell their lemons at prohibitive prices to consumers who don’t have any other choice.
Producers, entrepreneurs and private sector employers are also hit by the Social Security Law; you cannot find any sign of support for employers in its clauses and chapters.
In an article on workers’ insurance premiums, the law stipulates that 7% of the premiums must be deducted from the monthly wage of workers and 23% of the premium must be paid by the employer to the Social Security Fund. There is no question about the fact that employees must be supported during their retirement and sick leave, but one must wonder why the government fails to shoulder the financial burden of this 23% now that a private sector employer has created jobs in a country with one of the highest unemployment rates and costs? Isn’t job creation one of the responsibilities of any government? Now that employers are creating jobs for the people with their own money and on behalf of the government, shouldn’t the government at least pay the employers’ premiums?
Such investment deterrent laws and regulations are plentiful. Either government officials or parliamentarians are unaware of them, or they are reluctant to take any step to fix them. They spend their time on sloganeering about improving production and employment. Is it the time for the government to work out a solution for the huge problem of state capitalism, particularly at this time that taxes envisioned in the Budget Law of the fiscal 2022-23 are sending shivers down many economic players’ spines?
