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Foreign Affairs
Buying Time in Tehran
By Afshin Molavi
Afshin Molavi has covered Iran for news outlets including The Washington Post and Reuters and is the author of Persian Pilgrimages: Journeys Across Iran. He is a Fellow at the New America Foundation.
Ayatollah Ruhollah Khomeini once famously dismissed an aide worried about inflation by telling him that "this revolution was not about the price of watermelons." Today, Khomeini's successors are finding the high price of watermelons-not to mention of meat, housing, and cars-much harder to ignore. The untold story of postrevolutionary Iran is one of economic decline: the steady, 25-year deterioration of a nation that once boasted a per capita income equivalent to Spain's, pumped six million barrels of oil a day, and nurtured a vibrant middle class. Today, Iran's real per capita income is a third of what it was before the revolution; oil production is two-thirds of the 1979 level, and the middle class is being squeezed by chronically high inflation, widespread UN-and underemployment, and debilitating wage stagnation.
In May 2005, President Mohammad Khatami, who thundered into office in 1997 on a platform of political and social liberalization, will leave his job chastened and largely defeated by his conservative foes. Not only did he fail to achieve political change, he also proved unable to heal the sick economy he inherited or to ward off a looming employment crisis. With its extremely young population-two-thirds of which is under the age of 30-Iran needs to create more than 800,000 jobs a year. So far, the government has failed even to come close to that target. As a result, Iran's young people have grown deeply frustrated and hungry for political change and economic relief-even as they remain unsure of how to achieve them.
The newly resurgent conservatives think they have the answer. Having beaten back the reformers' challenge through bureaucratic infighting, organized violence, the jailing of leading reformers, and election-rigging, the conservatives now want to embark on a program dubbed the "China model" by Iran's media. The idea-which is neither new nor profound nor uniquely Chinese-is to offer economic growth, jobs, and limited social freedom in exchange for continued control of the political sphere. The conservatives are betting that Iran's citizens will be satisfied with consumerism and thus give up their demands for pluralism.
Will the Islamic Republic pull it off? If Tehran's goal is to create an economic dynamo on a scale similar to China's, the short answer is no. With U.S. sanctions firmly in place, a poor regulatory environment for foreign direct investment, a relatively uncompetitive manufacturing sector, and a cronyist business climate rife with corruption, Iran is hardly primed for an economic renaissance. Moreover, the hard-line wing of the conservative faction has shown little interest in real economic reform, preferring instead a form of crony capitalism that spends state resources on political patronage of key constituents, including the security services-a model followed widely in the Middle East, most notably in Saudi Arabia, Egypt, and Syria.
If, however, Tehran's goal is more modest-to get through a politically bumpy period by creating limited economic openings that produce minor job growth and forestall unrest-the conservatives may succeed. And such modesty is likely, given that a genuinely expansive economic reform program that enlarges the private sector, creates jobs, . . .