In today’s Iran, both sides of the economic equation feel trapped. Workers complain that with current wages, labor no longer pays off. Employers, on the other hand, find hiring increasingly uneconomical. The same imbalance can be observed in the goods and services market: consumers struggle to afford basic needs, while producers barely keep operations running. When both sides lose, the question becomes—who gains?
Economically speaking, such a situation suggests the presence of a “third player” who extracts the surplus that should have been shared between workers and producers. This player is not an individual, but rather the set of government interventions that distort prices, reduce efficiency and shrink the very size of the market. As state interference expands, the room for voluntary exchange—and thus overall welfare—contracts. The outcome is an economy in which both citizens and businesses act defensively, focusing on bare necessities instead of growth or innovation.
Over time, these distortions have drained the country’s stock of productive capital. With limited investment and high depreciation, labor productivity has declined. As a result, neither wages nor profits have kept pace with inflation. A healthy economy allows capital accumulation to enhance both workers’ incomes and business returns. But Iran’s isolation from global finance and its heavy regulatory burdens have reversed that dynamic. Sanctions, arbitrary restrictions and persistent currency interventions have scared off investors who might otherwise respond to attractive returns.
The state’s pervasive presence has created a feedback loop of stagnation: declining capital reduces productivity; low productivity depresses incomes; low incomes suppress demand; and weak demand discourages new investment. The system keeps tightening around itself, leaving little incentive for productive risk-taking.
Reversing this trend requires more than temporary relief or monetary adjustments. It demands that the government step back from markets where its influence destroys more value than it creates. In an economy where both the worker and the entrepreneur feel they are losing, the real challenge is not to redistribute what little remains—but to remove the third player that absorbs the nation’s potential. Only then can Iran’s economy regain its lost dynamism and restore a sense of purpose to those who drive it.
