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The Iranian economy is in poor shape. Inflation is in double digits, and, each day, more than 4,000 people lose their jobs. Manufacturing output has fallen by almost half and investment levels are at their lowest in 20 years. President Mahmoud Ahmadinejad’s government has, in effect, printed money by raising liquidity from 6.5 trillion to almost 400 trillion rials; a grim picture, indeed. If asked to repay their debts to the central Bank, most Iranian banks could go bankrupt.
On Wednesday, Tehran witnessed sporadic demonstrations against the government's economic policies. The Tehran bazaar, once a focus of support for the mullahs, brought down its shutters for two days.
So, would the rising economic storm force Iran’s rulers to re-think their strategy? And is US Secretary of State Hillary Clinton right in claiming that Iran’s economic woes are due to sanctions that may persuade the Khomeinist regime to change its policies?
I do not regard economic performance as the ultimate measure of a regime’s success or failure. As long as a regime has not suffered a major defeat on the political battleground, it can weather most economic storms.
Iran’s problems are fundamentally political.
Even if we assume that the current economic crisis is caused by sanctions we must remember that those sanctions are the results of political decisions, especially with regard to the nuclear issue. Also political was Ahmadinejad’s decision to provide cash handouts, further fuelling inflation. Also, the regime has used easy credit to buy support and reward cronies. An estimated 5,000 individuals, mostly mullahs and members of the Islamic Revolutionary Guard Corps (IRGC), account for almost half of personal loans granted by state-controlled banks. The biggest corruption cases in Iran’s history, coming to light last year, are centered on political favors to a handful of individuals.
Constant talk of war with the United States or with Israel or both, coming from a string of Iranian generals, is also political. Such talk provokes fear, persuading people to convert their savings to “strong” currencies. The decision to back the moribund al-Assad regime in Syria at the cost of billions of dollars in military aid is equally political. Also political is the decision to transform foreign policy into an instrument for making enemies abroad.
However, none of the above mentioned political decisions fully explains the Iranian crisis today.
The problem Iran faces is caused by the very nature of a regime that has led the nation into an impasse. A mixture of Western totalitarian shibboleths and pseudo-Islamic fantasies, the Khomeinist system is a peculiar beast. In it a mullah, often referred to as “Supreme Guide”, has unlimited power without responsibility while a supposedly elected President has more responsibility than power.
In such a system, the man with unlimited power and no responsibility has an interest in cultivating a macho image and fomenting a permanent atmosphere of tension and crisis. This was exactly what Mao Zedong did in Communist China until he was reined in after the collapse of the Cultural Revolution. Visiting China in 1970, I was fascinated by the efforts of a section of the leadership to rein in Mao Zedong and crush the infamous Gang of Four.
In Iran, too, every President, from Abol-Hassan Banisadr to Ahmadinejad, and including Ali Khamenei when he served as president, ended up by realizing that the system created by Ruhollah Khomeini is the source of virtually all of the country's problems.
They failed to translate that realization into concrete corrective action for two reasons.
The first is that unlike Communist China, Khomeinist Iran does not have an organized ruling party through which rival factions could settle ideological disputes. In China, the faction led by Chou En-lai and Deng Xiaoping were able to defeat the Gang of Four inside the party machine.
In Iran any such attempt leads to an open fight. This is what happened when Banisadr challenged Khomeini, and lost. Another example was the “Green” movement of 2009 in which the faction led by former Prime Minister Mir-Hussein Mussavi tried to snatch part of power from Khameneni’s faction.
Though not as intense, the fight between rival factions led by Khamenei and Ahmadinejad is also seeping into public with the latter questioning some of the regime's key policies, including that of wanton provocation against the US. During his recent visit to New York, Ahmadinejad spoke of the desirability of negotiating with the US on five separate occasions. He also admitted that he might have been wrong in denying the Holocaust. Needless to say, the Khamenei faction has retaliated by publicly castigating Ahmadinejad for sending signals to the US while also blaming him for the deepening economic crisis.
The second reason for the failure of Khomeinist factions to change the course of the regime, as happened in China, is their fear of taking the matter to the people and inviting them to arbitrate the rival visions. They know that bringing in the people would spell the end of a regime that has lost much of its legitimacy.
The Khomeinist regime cannot be reformed even if the so-called “reformist” faction, let alone a repackaged Ahmadinejad clique, temporarily gains the upper hand.
Iran’s real problem is political, not economic.
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