Iran Analysis: Should the Greens Be Waiting for Economic Collapse?

Mr Khiabani stops by to offer this analysis for EA:

One often hears proclamations, or perhaps hopes, that the success of the Green Movement is linked to the decline of the Iranian economy. The logic is that an economic collapse would bring informal workers, bazaar merchants, wealthy businessmen, once comfortable pensioner widows, perhaps even Afghan migrants, all into the streets along with the current membership of the demonstrations.

This is not a unique wish. Iran's democracy movement shares this assumption with almost every left/liberal democratic movement in history, be it the socialists in Weimar Germany or Mondale Democrats in Reagan's America. They are often proved wrong, because an economic collapse leads to calls for order at any social cost, not further deliberation, debate, and respect for constitutional process. It also suffers from a fallacy known as the "relative deprivation thesis", whereby those who perceive themselves as most deprived are the ones most likely to rebel. (I'm not saying the thesis is always wrong, but it is not a general law). In truth, those most likely to rebel can come from a variety of social backgrounds, from small-landholding peasants to middle-level bureaucrats, depending on the situation.



This expectation that "it will get worse before it gets better" is compounded by the swirl of hearsay and inaccurate stories about the Iranian economy. If one only listened to the critics over the last 30 years, one would believe that Iran is some kind of economic wasteland, on par with Haiti or Yemen. The calls of economic doom were ratcheted up over the five years of the bumbling Ahmadinejad presidency. And, now, we are again hearing that a catastrophe is imminent.

This sometimes is tied to the success of the Green Movement itself. Mohsen Sazegara told The Times of London that he estimated 80% of the Iranian currency had anti-regime slogans on it, which would eventually lead to a currency withdrawal and a shutdown of the economy. As a resident of Tehran, and a user of Iran's sweaty currency (always in someone's hand), I find this rather amusing. Few people here have ever seen more than one or two "green bills", and the only person I know who has seen more is a guy who stamps them himself with green symbols. Yet this is a sexy story and gets repeated ad infinitum in the Western press, in lieu of real reporting on substantive issues which would be much more beneficial to keeping the Greens in the news cycle.

Those who spend hours each day picking apart the statements and even facial expressions of Iran's (admittedly fascinating) political elite rarely devote even a fraction of that time to equally careful analysis of Iran's economy, especially in comparison with its neighbors and other oil producers to see what is a possible range of economic outcomes for a middle-income country. Instead, we tend to believe the words of Iranian politicians, who use this or that economic figure to proclaim Iran's economy either as the strongest in the world (the line on the chart always going up) or as dead on arrival.

If one had believed that Iran's economy was doing so horribly the last five years, for instance, then one would have a hard time making sense of the current downturn, which began when the Central Bank of Iran hiked up interest rates (against the President's desires) ito bring down inflation to reasonable levels. Now there finally is a real crisis, both in domestic investment and in personal incomes, which may be exacerbated by the subsidy reforms as (or if) they are implemented as planned. Yet those who cried wolf for so many years are the least able to explain this particular crisis, whom it will negatively affect the most, and whom it will benefit.

This is not to imply that all Iranians did wonderfully since 2005 --- property owners benefited from housing inflation while wage-earners saw their real purchasing power whittled away by rising prices. The massive import boom, allowed by Ahmadinejad's government without any thought as to the effects on domestic industry, introduced a wide range of inexpensive East Asian goods to Iranian households, which they certainly gobbled up. But this was conspicuous consumption that sacrificed long-term economic growth in non-oil sectors in exchange for a slice of the "western" life. Any development economist could tell you that there would be a coming hangover.

The current downturn should thus be analyzed and discussed in hard-nosed ways by Green strategists, without romanticizing the "inherent" rebellion supposedly visible on each day's horizon. Anything less, including the usual calls for "once the economy goes...", ill-serves this historic democratic movement.