5th Development Plan in Iran Further Privatizes Health and Education Sectors
I have not seen the 5th Development Plan proposed by the Ahmadinejad administration, but judging by the outbursts of a few MPs in the majles, the plan calls for privatizing large parts of the education and health sectors. The resistance by doctors illustrates that opposition exists in the health field, and one can also take heart that none of the 5-year development plans in Iran have ever been implemented very thoroughly.
According to Khabar news, the 5th development plan proposes to set up a Health Insurance Organization to regulate non-governmental funds which would shift the burden of health costs out of the public sector. “Non-governmental” in Iran does not necessarily mean the non-profit sector. It refers to any organization which is not directly under the management of the state. Much of the existing welfare system in Iran, such as the Social Security Organization, is included in the “NGO” sector. So it is unclear what this proposal actually means (though it eerily sounds like someone in Iran is familiar with Obamacare and simply added a “public option”). Whether this will push the onus of payment further onto employers or onto individuals is not stated.
Medicine and medical services, no matter who provides them (public or private sector) in Iran, are still highly subsidized. Their costs are quite low relative to both middle-income countries as well as Iranians’ average income. Notably, the subsidy liberalization plans that seem to finally be moving forward do not include reduction in these medicine and health subsidies. But out-of-pocket costs for Iranians have continued to go up as the domestic health industry has lagged behind international trends. This is not something unique to Iran, and any middle-income country who tries to provide near-universal health care runs up against such barriers.
The larger question from these debates is: why does the Ahmadinejad administration proffer privatization as its solution to all problems? The conventional wisdom is that the economy is in shambles and thus the Iranian state is forced to sell off its assets to deal with a fiscal crisis. Given that the government is still funding large projects in infrastructure, especially in remote provinces, the conventional wisdom seems to be wishful thinking, and it avoids a deeper issue of ideology.
Instead, it seems that Ahmadinejad, and whomever else he hired to write this plan and help devise his economic policy, are true believers in the magic of the market. In a television speech to the country about the upcoming subsidy reductions on fuel and basic staple foods, the president affirmed that every individual would be receiving 40 dollars a month to help them compensate for higher prices. He then told them to not go out and spend this money on new curtains or a refrigerator, but consider putting it in the Tehran stock market (I’m not joking here).
This ominously reminds one of Latin American and Sub-Saharan African countries’ embrace of orthodox economists’ advice in the 1990s, when states were seen as the problem to every economic dilemma and liberalization as the solution. The Iranian reformists cannot critique the government on this angle, because they are the ones who imported this sort of discourse to Iran in the 1990s. Thus we instead hear all sorts of critiques about technocratic incompetence from the reformists, which again portentously sounds like Latin America in the 1990s. Not a very galvanizing political strategy for the masses, by the way.
The irony is that, while Latin American and Africa countries were, in most cases, forced to engage in these sort of economic adjustments due to their balance of payments problems - the fiscal crisis leading to seeking of aid of last resort from the IMF - Iran is doing it to itself without any external coercion. This comes at a time when the major push in development economics, not to mention the actual policies currently being carried out in states like Brazil, India and China, is to increase state capacity and re-intervene in many sectors which previously had been “off limits” according to the economic wisdom.
To be clear, Iran is not going full throttle into Hayek’s arms. The subsidy liberalization that is supposed to finally commence this month is being supplemented with anti-hoarding measures by the state (basic commodities being stocked), the return of the coupon for cooking oil, rice, etc (reminiscent of the 1980s war years), and the assurances of a gradual price change for both industry and consumers. But it does herald a larger shift in Iran’s political economy, even if all things go as smoothly as the President promises.
