Last week Dissent published my interview with Homayoun Pourzad, the pseudonym for a leader in Iran’s labor movement. He had too many interesting things to say to fit into the article. So as a supplement to that piece, I wanted to share his dire predictions for Iran’s economy:
Eidelson: So what are we going to see happen with the economic situation in Iran over the next few months?
Pourzad: Even with rising oil prices, the government is not going to have enough money to continue cash subsidies.
In late autumn last year, the government slashed about 65% of all subsidies. The subsidies were a huge part of the economy and the GNP – they subsidized staples like bread, electricity, water, telephone, and – most importantly – gasoline. So these staples were available at a fraction of their actual cost, and the government paid billions and billions for this. Last year Ahmadinejad axed most of these subsidies. But because the government was afraid of a major social explosion, they went around and paid half of the proceeds in direct cash subsidies. So each person got about $43 a month.
But this was a temporary thing, there’s no way the government could keep doing it, and they are running out of money this year. That’s going to anger many people. Plus factories have been ordered to hold off layoffs, and not to raise prices on their products, so there’s a price freeze across many different industries. So these two issues are coming to a head across the next few months.
The government cannot continue with this game. You have market forces at work. It could be in 3 months, or it could be in 5 months. Then once this happens there’s going to be a huge inflationary wave. Because inputs are more expensive, everybody will have to raise prices. We literally have millions of shopkeepers in Iran. These guys will raise their prices because the energy bills are higher, the products will get more expensive, and there’s going to be massive layoffs because factories cannot afford to have this number of workers. So there’s going to be an economic crisis very soon on top of the recession that’s been going on for a couple of years.
Eidelson: How is that related to the privatization?
Pourzad: There is downsizing going on as always with privatization. These companies are changing hands from state managers to former state managers, like what happened in Russia 18 years ago. These guys are not interested in production – they’re interested in making a quick buck. So what they do is they liquidate companies, liquidate factories, or use the special exchange rates they have to get cheaper dollars and then go around and sell. So privatization is making things worse, no question.
But the worst part is that it’s increasing the wave of contract work, because companies can claim that they’re going to have new contracts, so they’re not going to go with permanent workers. They’re going to go with contract workers, which don’t have any rights. Not only hasn’t the efficiency improved – which is the logic behind privatization usually – the efficiency is just as awful, but there are all these other side effects, so it’s been a disastrous thing for the working class, although many people have become very rich in a very short period of time.
Read the Dissent piece <a href="here.