The Thirsty Fish

1789, 1979, and all that...

Sat, 04 Feb 2012 22:20:00 +0330

The French revolution in 1789 not only set the template for what a revolution is supposed to look like, it also created most categories of understanding contemporary social change. Our notions of left v. right come from it, as do our notions of reform/reaction/revolution.

A common interpretation of the Iranian revolution in 1979 is that it was the first revolution which was categorically different from all of the revolutions that had taken place after 1789. If the French, Russian, Chinese, etc, revolutions moved history “forward,” the Iranian revolution was something else entirely. The interpretive debate over the meaning of the 1979 revolution between Michel Foucault and his various critics is a good example of this. Because the social outcomes of the French revolution of 1789 forged so many of the categories we still use to look at the world, the outcomes of the Iranian revolution of 1979 seem confusing, bizarre, or out of step with the patterns of global social change that the date of 1789 marks as the beginning of our “modern” world.

So it was with much surprise that I came across several curious passages concerning the outcome of the French revolution for women in Immanuel Wallerstein’s recent fourth volume of his reassessment of global history in The Modern World-System (2011). In his third volume (1989), Wallerstein revisits the two great events of the “age of revolutions” of the late 18th century - the Industrial revolution and the French revolution - and submits them to a serious debunking. That book remains deeply controversial (if not ignored) in the history field, but subsequent revisions to East Asian scholarship - specifically the extent of market relations in 16th-18th century China - suggest that we do exaggerate the importance of the “age of revolutions” on world history. In Wallerstein’s new volume, he discusses the contradiction between the ideological claims of equality through citizenship in liberal thought and the actual implementation of unequal relations by excluding individuals from these promised rights throughout the 19th century. And he begins with the French revolution (pp. 149-153):

In the case of women, the whole matter started out badly. The royal decree summoning the Estates-General specified that women who held seigniorial fiefs had to choose male proxies to represent them in the Electoral College — nobles for laywomen, clergy for nuns. …Nonetheless, women (religious communities, societies of tradeswomen) did write cahiers de doléance.

It is well known that women played a major role in various popular demonstrations during the French Revolution, most crucially in the so-called October days in 1789, when the Parisian market women (along with national guardsmen) marched on Versailles and forced the royal couple to come to the capital to reside. …[T]wo months after these riots, on December 22, 1789, the National Assembly formally excluded women from the right to vote.

The Constitution of 1791 renewed the exclusion, and this was reiterated in a vote of the Convention on July 24, 1793, specifying that women were excluded from all political rights, which actually was something that at least aristocratic women had had in the ancien régime.

Wallerstein quotes historian Steven House in a footnote here:

‘When Philip the Fair solemnly convened the First Estates-General … in 1302, he received an assembly chosen by both men and women. For over five centuries, privileged women of all estates retained the vote, both local and national. Then in the 1790s, the revolution that proclaimed the rights of man abolished the political rights of women.’

Did the French revolution actually make things worse for women? Wallerstein contends the outcome was doubly edged.

Some improvements in women’s rights were instituted, it is true. Marriage and divorce became civil processes. Primogeniture was abolished, and the rights of illegitimate children and their mothers to financial support were promulgated. A law was passed permitting women to be witnesses in documents related to the état civil, although this matter continued to be controversial. And in the heated atmosphere of the Jacobin period, women began to organize. They began to play a much larger role in the popular societies. They stood outside the doors of the Convention, trying to control who would enter. They packed the galleries and shouted their views.

The Committee on Public Safety appointed a committee, headed by André Amar, to consider whether women should exercise political rights and whether they should be allowed to take part in political clubs. The answer to both would be no. The committee deemed that women did not have the “moral and physical qualities” to exercise political rights, and furthermore that it was the aristocracy that wanted women to have these rights “in order to put women at odds with men.”

[B]ourgeois feminists fared no better. Olympe de Gouges, author of the Declaration of the Rights of Woman and Citizen, was sent to the guillotine on November 3, 1793. Whichever the explanation for the Jacobin attitude, the situation did not change after the downfall of the Jacobins. In 1795, after the journée of 1er Prairial, the Convention excluded women from its hall entirely, even as listeners, unless accompanied by a man with a citizen’s card. And in 1796, the Council of Five Hundred excluded women from senior teaching positions. In 1804, the Napoleonic Code regressed over even the ancien régime. Previously, at least aristocratic women were allowed to handle property and legal matters. Now, in the more egalitarian mood of the French Revolution, all women were treated equally—all having no rights whatsoever.

As far as the texts of the new revolutionary codes went, the situation seemed quite bad for women. But, as recorded by many historians, Wallerstein looks beyond the letter of the law to peer into the social reverberations of the mass mobilizations of the revolution:

I have called this a mixed picture. One can emphasize the negative side. Abray says that it “stands as striking proof of the essential social conservatism [of the Revolution].” Knibiehler insists that it marks a “relative regression of the status of women,” one that, for George, was “more clearly inferior than that of the Catholic, feudal past, because now defined, cloaked and justified by the bourgeois deities of Reason and the laws of Nature.” Cerati asserts that the claims of women for greater rights during the French Revolution met with “a glacial reception from the [otherwise] enthusiastic [masculine] partisans of equality.”

But one can also evaluate the experience more positively. Landes points out that, after the French Revolution, “gender became a socially relevant category … in a way that it would not have mattered formerly.” Kelly compares the situation of the post-1789 feminists favorably with that of those involved in the famous querelle des femmes launched by Christine de Pisan and others in the fifteenth century. The earlier feminists, she says, lacked “the vision of a social movement to change events,” whereas after 1789 they “were animated by a notion of progress and of intentional social change.” And Moses insists that, whereas before 1789 feminism was an issue only for the upper classes, the French Revolution led to “the rise of a feminism more sweeping in its scope and more inclusive in its following.”

The negative evaluation lays emphasis on the changes actually achieved and the justifying ideas of the times. The positive evaluation lays stress on the development of the feminist movement and its mobilization.

Apart from the “justifying ideas of the times,” this sounds familiar to the changes in Iran over the past three decades. In fact, it is uncannily similar. I could point to many analyses, but let’s quote a 2007 article by Shahra Razavi, a feminist economist who has conducted numerous research projects in Iran since the 1979 revolution:

The developments under the Islamic Republic have been highly contradictory. The Islamist movement that captured state power in 1979 based its grievances against the monarchy and the United States, and its own system of government (the “governance of the jurisprudence” or velayat faqih) on a highly patriarchal, if not misogynous, interpretation of Islam. The transition to the Islamic Republic then led to the total moralisation of the “woman question” [le querelle des femmes] that went hand-in-hand with a powerful critique of modernist attempts at transforming society. Women who had been singled out by the opposition (both secular and Islamist) as symbols of decadence and crass consumerism under the monarchy were to bear the brunt of subsequent social and gender restructuring or “purification.”

Many regressive measures were put in place, such as the forced imposition of the veil, the expulsion of women from the judiciary and higher echelons of bureaucracy, the forced segregation of schools and universities, and heightened violence against women, both domestic and public. Under these repressive conditions it became extremely difficult for women activists with a secular orientation (like their male counterparts) to be openly engaged in any political activity inside the country. Many went into exile, and those who remained were silenced.

However, both the Islamisation of the public sphere and the social mobilisations of the revolutionary era were powerful forces that propelled large numbers of low-income women from traditionalist backgrounds out of the confines of their homes and into the public arena - a development that was beyond the control of any one group or political force and with long-lasting social consequences, even if thus far their access to any form of lasting institutional power has been limited.

[T]he creation of separate male and female spaces and the donning of hejab (head cover) in educational establishments, offices, and indeed all public spaces allayed the fears of traditionalist families regarding women’s presence in public life. Meanwhile, the revolution was experienced very differently by women who were secular upper and middle class compared to those who were from more traditionalist and working-class backgrounds.

A few simple statistics can help capture the contradictions unleashed by two decades of revolutionary Islamic rule. The Islamic Republic lowered the minimum age for marriage of girls from 16 years to 9 years - a highly controversial move, which effectively sanctioned child marriage. And yet, the mean age at first marriage for women before the Revolution was 19.7 years (1976); twenty years later it had gone up to 22.4 years (2003) [now it is 24 (2011)]. Female literacy, which was 35.6 percent in 1976, rose to 80 percent in 1999 (and for rural women it rose from 17.4 percent to 62.4 percent), and by 2001 more than 50 percent of university students were women.

Education has had a privileged position because it is viewed by the regime as a vehicle for disseminating its ideology, and school curricula were rapidly changed to beef up the Islamic content. Nevertheless, the social implications of the mass entry of young women into universities across the country have been potentially enormous but remain under researched.

The widespread availability of contraception, falling fertility rates, and women’s increasing access to education (at all levels, including tertiary) are making it increasingly likely that women of different social classes will seek paid work and greater financial autonomy.

Two points are worth mentioning after this lengthy comparison.

First, dropping all the metaphysical connotations of modernity that the French revolution supposedly symbolizes, as well as the connotations of anti-modernity that the Iranian revolution is equally charged with, it turns out that a crucial fact for both countries is that they experienced revolutions - large-scale mass mobilizations of the population that challenged existing political and social powers. Maybe 1789 and 1979 are not polar opposites after all.

Second, these mobilizations had unintended consequences for both countries well beyond the new regimes’ intentions for their citizens. Their populations believed the universalizing rhetoric of egalitarianism that their revolutions were based on, and the social transformations of the post-revolutionary period laid the groundwork for an empowered notion of women’s rights. In other words, against the wishes of the male French revolutionaries, their own actions let the genie out of the bottle. To anyone who visits Iran today, it is quite clear the same outcome is occurring in the Islamic Republic - not in spite of the 1979 revolution, but because of it.

Subsidy Payments in Iran: Too Much or Not Enough?

Sat, 03 Sep 2011 23:17:00 +0430

It is still less than a year since the targeted subsidy program went into effect in Iran, replacing cheap energy and low-price basic foodstuffs at the point of consumption with cash payments to nearly everyone. In addition, the government is providing low-interest long-term loans to local industry, well below the rate of inflation, to upgrade their energy infrastructure so that they can produce their goods more efficiently. I’ve written about the lack of vision in the country’s industrial policy elsewhere, but since my comments went up there have been more promises of action at least. Some industries and provinces report that they are finally getting these loans, while others are still waiting.

Predictions of success or failure are premature, however, because the point of the subsidy liberalization programs is not to garner revenue for the state, but to starkly restructure the incentives for both capital investment and individual household consumption. A colleague in Venezuela, a country with its own subsidies for energy consumption, tells me the local elites there are very excited about Iran’s recent moves, which is probably the first time opponents of Chavez and the Ahmadinejad government shared a policy goal. The IMF, eager to promote price liberalization across the Middle East, has also given high marks to the country’s efforts, though they are rather taciturn on how Iran can foster growth in the labor-intensive, high-skilled sectors that the country needs to promote to absorb the growing ranks of the educated yet unemployed youth.

Conversely, projections of total collapse and mass rebellion were also misplaced, even though few people ever got fired over the last 30 years for predicting the implosion of the Iranian economy (Maybe the Iran Nostradami should start a thinktank with the economists who thought the US housing bubble would go on forever). I can’t remember anyone inside Iran I ever spoke to who predicted that people would start an uprising over such matters - in fact the famous “riots” that occurred in 2007 due to gasoline price hikes were not widespread at all. I was in Iran during that time and the whole thing was over in 2 days, with less than ten petrol stations attacked. Try being in Iran during Chaharshanbeh Suri if you actually want to see a large scale rebellion…

There is an ongoing debate inside the country about whether a nearly universal program that pays $40-45 a month per individual is sustainable. Some majles MPs say the government is already pilfering from other parts of the budget to pay for ongoing transfers. There are rumors, often suggested and then denied in the press, that the top income deciles will be cut out of future payments, perhaps in the 2nd year of the plan. Of course the reason the payments are universal in the first place is that the government couldn’t actually figure out who was making what in a trustworthy manner, so they scrapped the idea of income “clusters” and just paid out to everyone! As with a lot of the Iranian press, then (and the opposition and diaspora press to boot), we usually only hear the salacious or threatening rumor, and then we never see the follow-up article on page fourteen which often shows how such-and-such policy (or threat) was never actually implemented.

So, in the apocryphal words of Zhou Enlai, it is too soon to tell the overall impact of the newest market-friendly paradigm in Iran. Now is not a time to speculate, but to analyze.

Let’s try to go beyond the usual rumor-centered talk. And let’s assume that, not only will these payments remain basically universal, but they will remain indexed to inflation, so that their value does not whittle away as prices go up further. It’s an assumption, yes, but let’s hold our tongues for now.

One considerable transformation is that poor households in Iran are, for the most part, receiving a big income payment every month. This is not completely unprecedented. In fact, one of the points most Iran analysts forget to mention when they describe the new subsidy payments is that many poor families have already been getting cash payments for years. Much of the elderly poor, families without a male breadwinner, and families with disabled members have been getting both cash and in-kind aid from one of the biggest welfare organizations in Iran - the Imam Khomeini Relief Committee. Say what you want about this organization, but it has transformed a lot of communities in the country (a related organization is mentioned in the beloved Dariush Mehrjui movie, Mum’s Guest).

So, for poor families already getting aid from the state, this simply adds onto the welfare system they already benefit from. But, of course, many middle-class Iranians benefit from the country’s welfare system as well, whether from public education, generous state pensions, or low health care costs. However, due to rising prices for almost everything else, it seems like everyone is losing their purchasing power in Iran, yet again. But if subsidy payments remain inflation-indexed, then this will contribute to a major redistribution of wealth in the country. According to Alef’s website, this is already happening:

If you don’t understand Persian, read the chart from left to right. It shows the Gini index of income inequality over the past several years according to one particular Statistical Center of Iran survey of household expenditures (1390 began in March 2011 so the most recent number is obviously a projection). Lower numbers mean less inequality. While I am not certain of the accuracy of the exact number they are now reporting, I’m not surprised income inequality in Iran is generally lower, simply because poorer families are getting more cash income all of a sudden, and the survey is picking up on the fact they are spending the money. Previously they may have been making ends meet with different means of non-income livelihood strategies, of which there are many across the global South.

Lower levels of income inequality, whichever the country, are usually better for a whole set of reasons. They are even better for the rich who live in those countries. And Iran has not had Gini index levels as low as .35 since the 1980s, when there was a war on, and lowered inequality mostly stemmed from everyone getting poorer together, not from getting checks in their bank accounts. Part of this more recent decline in Gini is from the economic recession in Iran, since recessions usually reduce overall inequality inside a country (not the current one in the US, perhaps!). But if there is any credence to this trend in Iran, which at least seems to partly be true, then some of it is from the substantial subsidy payments.

Looking beyond Iran, in addition to the Imam Khomeini Relief Committee’s long standing program of cash payments for a variety of so-called “disadvantaged” groups, the even larger and more universal payments from subsidy changes look very much like the newest fad in development theory: “Just Give Money to the Poor.” This is the title of a popular development book by Joseph Hanlon, Armando Barrientos, and David Hulme.

The idea here, like most successful academic ideas, is a simple yet insightful one. Instead of large-scale top-down development programs run by “inefficient” Third World governments, which direct money through institutions which may not be sufficiently prepared or interested in the direct well-being of the masses (i.e. the aid-industrial complex), poor people do not waste money given directly to them. Instead, with “nudges” and incentives, they take care of their money and use it for their most pressing needs, including educating their kids, investing in their businesses, and supporting their households. Again, this is not news in Iran, just in the aid community, but it is an interesting overlap between “the strange world” of Iran and “normal” Third World politics. But is it enough?

There was an interesting exchange of articles in the Indian economic magazine Economic & Political Weekly in May 2011 about the effectiveness of conditional cash transfer (CCT) programs in poorer countries. Both Brazil and Mexico have adopted these programs over the past decade, and India is about to introduce the largest such program in existence. Unlike Iran, these programs set conditions on the delivery of payments, usually tied to education of household children, health program enrollments, and participation in a variety of “behavior modification” efforts. I’m not passing judgement on such endeavors in vacuo here, although both anthropologists and development economists are having their respective field days on these types of programs in the literature currently.

Nevertheless, we can learn from these new critical reflections on CCT programs when looking towards Iran. There are two major insights in the EPW issue. First, money directly in the hands of poor people is mostly a good idea, but if the welfare institutions upon which they rely are still plagued by inefficiencies or poor accessibility, then such monetary “empowerment” is generally useless. Second, cash transfers for the poor work best when they are accompanied with state-led infrastructural development in these communities’ surroundings (i.e. schools, roads, water wells, health clinics, etc). In effect, the concept of the cash transfer as a path for moving away from, or even evading, the state’s historical commitments to welfare and development, is not a viable route.

Curiously, this is reminiscent of the debate about social welfare in the Islamic Republic of Iran since its founding in 1979. Should welfare in the country be run by a development-geared middle-income state or by local private charities according to particular understandings of zakat? The Imam Khomeini Relief Committee, for example, which gets the majority of its budget from the state, is far removed from the ideal charity organizations of Islamic myth. Who is responsible for the social reproduction of poor households and individuals? It is not obvious that the private sector will ever be able to do such a thing by itself in the global South, not to mention the more conspicuous discussions over these issues in the US and Europe. The EPW debate shows that, whether one likes it or not, the state will inevitably be involved in deciding the boundaries of development, needy v. undeserving, and prioritizing social interventions whether it is couched in the language of international development or of contemporary notions of Islam.

The fact that the subsidy payment program is, for the time being, universal for the whole population makes it much harder to politically undo. And it certainly introduces thousands of new opportunities for corruption, since there is now a massive commodified market in fuels and energy worth tens of billions of dollars, whereas before such goods were uncommodified and run through bureaucratic mechanisms. Yet the upside is that, whether they realize it or not, Iran just created a de facto universal basic income grant, which is often touted as a radical reform by the European left. Economists may decry such a grant because it supposedly removes incentives for work and raises the cost of labor, but in a country with large unemployment figures as in Iran it is not a bad idea.

Iranian Sociology, Global Sociology, Peripheral Sociology

Fri, 17 Jun 2011 02:34:00 +0430

I just returned from a short trip to Tehran, where I attended the first day of a conference hosted by the Iranian Sociological Association. The opening keynote was delivered by Professor Michael Burawoy from U of C Berkeley:

Burawoy and others spoke about a simple but often unmentioned fact in the global field of knowledge production. Social science theories are typically produced in a few rich countries and then consumed by everyone else, no matter how useful or correct they tend to be. Sociologists in the global South can usually gain prestige within their own educational institutions only by publishing in a few “international” journals in the global North, usually in English. The accreditation and prestige rankings of journals tends to overlap onto the global hierarchy of wealth in the world economy.

For example, as Professor Tina Uys pointed out, the South African Journal of Sociology is not given the coveted ISI ranking as an international journal, even though it is peer-reviewed and rigorous, but the British Journal of Sociology is ranked highly by ISI.

Concepts tend to be produced in the elite centers of scholarship in the North, and then applied uncritically to countries in the South. Take a concept like “social capital” - it emerged from very specific studies of French class structure by Pierre Bourdieu, or education institutions of the US by James Coleman. It was meant to be a highly context-specific understanding of the relationships and networks that individuals are embedded in, and how they use these social relations to achieve coveted socio-economic positions or exclude others from those positions, often by participating in communal group activities.

Today, in Iran, many sociology students are obsessed with the idea of social capital, but not as a context-specific lubricant of social life. Instead, social capital is what Iran “lacks,” because the concept has become so abstracted from its origins that it is used as a remainder to explain the absence of what countries in the global North supposedly possess: democracy, capitalism, women’s rights, happiness, etc.

This is not just in Iran. Social science in much of the former Third World, because it is already in a precarious situation, uses the most mainstream concepts from social science and applies them towards their own areas. Writing tends to remain in the abstract, presents “Western” social science as a monolithic entity devoid of controversy, and elides the use of local case studies and deep ethnography which may question the validity of such concepts. Quantitative methods with a sheen of “science” are preferred over qualitative analysis.

Just for example, from a different viewpoint, it is almost impossible to look anywhere in Iranian society and not see “social capital” in operation. Everyone’s livelihood depends, to a large extent, on their negotiation and maintenance of multiple social networks. Mosque networks, women’s clubs, sports leagues, cultural centers, underground DJ nights, basiji volunteer groups - what are all of these but avenues for different Iranians to cultivate and expand their access to certain exclusionary social positions?

Personally, I rarely use the term “social capital” at all, because it is a buzzword stolen from social science and used by management gurus and insta-pundits. Yet I still have to deal with it because my own students in the US use the concept the same way as Iranians.

Two hopeful points to end on, though. First, plenty of the best and most innovative social science of the 20th century came from the global South, not the North. Much of radical development theory came from Latin America in the 1950s and 1960s. World-systems analysis is Africanist in its origins (Immanuel Wallerstein, Samir Amin, and Giovanni Arrighi all studied in Africa in the 1950s and 1960s). The post-colonial paradigm, while certainly full of abstruse French post-structuralism, comes from the Indian subcontinent’s re-thinking of their own history in the 1980s and 1990s. Lastly, the Chinese experience of peasant revolution and market development presents a challenge to mainstream understandings of capitalism and modernity for the 19th century Western social thought which bore the core theories of contemporary sociology. The current structure of global knowledge production, however, means that much of the insights that these areas hold for our understandings of the world first have to come to the North, get re-packaged, and then exported again to the global South.

Second, I met a few sociology students on this trip who, unlike their colleagues, were genuinely interested in local ethnography. They discussed using detailed case studies to critically utilize the sociological toolkit to better understand Iranian social life. This is quite different from the oft-heard Iranian dismissal of all social science as “western,” which is equally misguided as the uncritical use of sociology in an “one size fits all” version. Those two positions do not actually understand the sociological project. To wit, not a few sociologists in the Middle East hold that Ibn Khaldun’s political sociology of state formation and collapse is a precursor of later social science, which is correct. But Khaldun’s theories of city vs. tribe are embedded in the politics of the Maghreb during the 14th century, and should not be universalized as a unique theory of “muslim societies,” as Ernest Gellner once argued.

Every time I travel back to Iran, I am always surprised by what is being translated into Persian. On this trip, I noticed new and beautiful translations of Pierre Bourdieu’s Distinction and Perry Anderson’s Lineages of the Absolutist State. Here’s to the translators, publishers, and scholars in Iran who exemplify the critical, reflexive, and innovative traditions in global sociology.

Thinking about Social Inequality and Waves of Unrest

Fri, 18 Feb 2011 00:24:00 +0330

This morning I published a short piece on the structure and politics of labor in Iran at the USIP blog. There is a small section in the article about absolute vs relative poverty in Iran vis-a-vis Egypt. I want to expand on that here, because while absolute poverty is something that economists take seriously, relative poverty, or, more aptly phrased, social inequality, is something that sociologists take seriously. And so should you.

As a region in the global South, the Middle East and North Africa (MENA) is not the poorest in terms of absolute poverty - the percentage of a population under an absolute line of consumption expenditures. East Asia (EA) and Sub-Saharan Africa (SSA) contain larger segments of their population under the World Bank’s oft-used “$2 a day” line. Of course the boundaries of the “Middle East” - a totally useless unit if you take geography seriously - can sometimes lump in poorer states and richer states that have very different political economies and relations to the outside world. But I’ll let that slide here.

According to the World Bank, for 2005,

MENA states had 16.9% of their population living under $2 a day on average
EA was at 38.9%
SSA was at an alarming 72.9%
India’s poverty level, 75.6%, is similar to Africa’s
Latin America’s poverty level, 17.1%, is very close to the Middle East’s.
Iran’s absolute poverty level at $2/day in 2005 stood at 8% (if you use higher poverty lines, you get higher poverty rates in Iran, or anywhere - but I am trying to compare countries and regions here and the World Bank only gives us this line to use).

Since I tend to look at development issues in world-historical terms, I would wager that regional variations in poverty within the global South cannot just be explained by individual states either caring or not caring about poverty, or by class relations and capitalist development within individual countries. Those two aspects matter, but what also matters is how regional political economies relate to and integrate with the world economy.

Latin America has a long history of state formation because of its colonial and post-independence history, longer than the rest of the post-colonial global South, and that might play a role in its ability to expend resources on the poorest over the 20th century. The Middle East, in many countries, does not have a long history of post-colonial state formation, but in the 20th century it did possess a history of high-capacity (powerful) states compared to other regions. And, as in Eastern Europe and Russia in the 20th century, another distinct “region” that I would include in or near the global South, strong state capacity can be used to rapidly lower poverty levels through egalitarian social policies. These sort of polices were implemented widely in the 1960s after formal independence in the MENA region, and that includes Iran once you take into account the Shah’s White Revolution (a milder form of egalitarianism, yes, but still a change in policy). The point is that each region did not proceed along the same path, nor were these paths irreversible. One cannot explain the high poverty rates in Africa, for example, simply because of state failure, but also because the area’s comparative economic advantages in the 1960s in the world economy disappeared when East Asia rapidly industrialized.

This is all a precursor to my actual point, which is: if MENA is relatively less poor than other regions, why is everyone reporting on high poverty levels as one of the cause of the grievances that is driving the ongoing wave of rebellion and unrest in MENA states? They are confusing absolute poverty, which is not the biggest problem in the MENA region, with relative poverty, or, as I prefer to call it, inequality.

Inequality is measured a lot of different ways, but the most common method is the Gini coefficient, which scales a country’s income inequality from 1 (totally equal) to 100 (totally unequal). Gini levels of 60 are very unequal in the real world, only a few countries like South Africa or Brazil have been up there. The United States is currently at a Gini level of 43, which is quite high for wealthy countries, and is a return to the high inequality of the US in the days of H.L. Mencken and Mark Twain.

Just as with absolute levels of poverty, world regions also exhibit clustering around particular levels of inequality that persist for long periods of history. And, again, I would argue that this is because of particular differences in the ways and times that different regions were integrated into the world economy, as well as the subsequent changes in this “region <—> world” relationship. So there is an under-theorized link between levels of inequality within countries, regional political economies and their average inequality, and global processes of economic expansion and geopolitical formation.

That’s just a caveat against the usual story where states and national economies are seen as totally enclosed social units and all their problems can be explained away by looking at government policies - sometimes called “methodological statism.”

Back to our story, though. Looking at regional levels of inequality, a different variation emerges. The Gini coefficients shown below is the index divided by 100, that’s why it has a decimal point. (Note, I don’t agree with the methodology of this table from The Economist because it uses PPP data, but it suffices for this post):

Here, LA and MENA are not the same at all. LA contains much more inequality than MENA, and looks most similar to Africa. So, there’s an interesting puzzle here:

Latin America is a low poverty, high inequality region.
South Asia is a high poverty, low inequality region.
(Sub-Saharan) Africa is a high poverty, high inequality region.
And the MENA “region” - again, I am not totally comfortable with this particular division of the world - is a low poverty, low inequality region.

The Gini index in Egypt in 2005 was 32. In Iran, it was 38. In the USA, 43. In Latin America, 53. Shouldn’t Egyptians just settle and be happy?

Well, this is where sociology becomes perhaps more useful than economics. There are many points of comparison from which people can perceive inequality. People almost always compare their own livelihoods, status, and income to their neighbors. They also compare themselves to their community (village, city). With a strong sense of nationalism, they compare themselves to everyone in their country. And, now that we have a fairly global media and cultural system, they compare themselves to lifestyles in wealthy Northern countries.

The largest Gini inequality of them all, by the way, cannot be found inside any country. The highest inequality in the world is the inequality between countries - i.e. the wealth gap between North and South. Using exchange-rate based income data, in 2007 the “global Gini” stood at 75.5!

So, inequality can be perceived as quite stark in a social sense, even when the data shows that it is relatively less than in other regions. If you’ve ever been to Egypt or Iran, you can tell class differences between individuals almost immediately, whether as marked in geography, in fashion, in cultural consumption, etc. No one goes around wearing a Gini on their shirt. They wear Gucci. Well, those that can afford it. Or those who can afford a Gucci knockoff, which in itself is a symptom of global inequalities of wealth and consumption.

Sociologists have long known that various forms of inequality, or call it relative poverty or relative deprivation, generate deep social grievances. But if grievances always led to rebellions, then why aren’t there more Tunisias and Egypts (and ____ … to be continued) every year? Why is 2011 becoming a world-historical turning point?

Well, this question is the subject of a large literature on the sociology of contentious politics, social movements, revolutions, etc. It’s complex. Grievances in individuals rarely developing into mobilized movements among groups. This is true even when, from the outside, or on TV, it looks like these movements are totally spontaneous. They are not mobs, even if that’s what one sees on You Tube. Mobilization needs some combination of independent resources, organizational prowess, networks of communication, common frames of grievances that resonate emotionally, and usually a few charismatic leaders.

But that also means that the current consensus, that all of this protest is coming because everyone in the Middle East is poor, is wrong. In fact, it might just be the opposite. All of this protest might be emerging partly because MENA is not that poor at all, absolutely. The absolutely poor are usually not the ones that revolt. It takes resources to revolt. Students and workers, those who feel excluded and unequal from others in their country, their surrounding countries, and the wealthy world - those are the social actors in the MENA streets.

In other words, relative poverty - inequality - becomes more important for politics as absolute poverty goes down. Well, if I say it that way it just sounds true. Why did it take all of this post to get here?

Upcoming Appearances - Bonus for German Readers

Wed, 26 Jan 2011 22:52:00 +0330

I’ll be speaking at two events in February related to the release of The Iran Primer:

2/10 in NYC at The Asia Society, 6 pm (tickets required, sorry)
2/18 in Washington DC at The Woodrow Wilson Center, noon (free and webcast)

I plan to talk about the political economy of Iran within a comparative framework, touching on issues of labor politics, the bazaar, the informal sector, and the privatization of state-owned enterprises. If you have any specific questions you want answered, send em my way. I’ll try to work them in and it will be our secret.

postscript: To all my German comrades, I am pleased that Prokla, a left-leaning journal in Germany, has published a short article of mine on the politics of the Green Movement in their most recent issue. On newsstands now! What, your local Wal-Mart doesn’t carry Prokla? Well, I’m sure they will if you ask them nicely.

Iran's Subsidy Reductions - Who Gets Targeted and Who Eats It?

Mon, 20 Dec 2010 21:29:00 +0330

The long awaited liberalization of energy commodities in Iran has finally begun. Over the past weekend, President Ahmadinejad stated, “At this stage, we don’t want to free prices, rather we are going to regulate and reform them.” How regulated will this new system be?

Iranians with private cars get a monthly ration of about one full Iranian tank of gas (in the newer stylish Peugeots) at around $1.50/gallon, then the price goes up to $2.60/gallon. The price is not floating - it is still set. Additionally, and what is not being covered in the Western media, is that all sorts of bonuses and extensions of monthly ration limits are being granted for now - essentially this is a way of cushioning the shift to higher prices.

For instance, licensed taxis get a monthly ration on their “smart card” of 130 gallons a month, and a bonus of more than 100 gallons has been announced - that’s a hefty increase and it may placate the perennially grumbling taxi drivers for now. Private drivers (including many who moonlight as gypsy cabs) get a bonus of 13 gallons - not even a full tank of gas for Iranian cars, I am told (I never developed the fortitude to drive in Tehran, I must confess, and thus never owned a smartcard).

But let’s face the facts - Iranians who have long priced in cheap gasoline and other energy sources for their budgets are now confronted with a huge shift in costs. Some will cope, others will be hurt. The government is giving around $40 a month to every individual via personalized bank accounts, which can now be withdrawn by Iranians from the very handy ATMs that are available near most city streets. It is stated that around 80% of the country is getting these payments - we will see how accurate that number is as time goes on. Comments on the blogosphere are interesting - some Iranians writing, “this oil is the nation’s,” which they take to mean that subsidized gasoline is a citizenship right. US citizens also expect cheap gas as a (god-given?) right - the question is not whether this is true or not but how particular citizenship rights are construed. Rights are a matter of politics, not providence.

Will this lead to inflation? Most certainly - the question is how much and where it is concentrated. One worry I have is that the cash payments are not indexed to inflation currently, though the government could make changes to this in the future. But at its present levels the purchasing power of $40 a month (in tomans) will be inflated away over the next 4-5 years. The government has promised to spend a portion of its freed revenue in the health system - let’s hope some in the majles remember they promised that and holds them to it.

Because here’s the rub. When the government pays the different between the actual cost of the good and the subsidized price, this is a de-commodification of a lot of the burdens of daily life in Iran. What is happening now is a re-commodification of life, and as we know from Karl Polanyi, the attempt to embed daily life in the market can lead to a “double movement” - a reaction against the marketization of previously uncommodified social practices. What Polanyi never analyzed very well is the share of burdens of commodification of daily life - upon whom will the costs fall? The answer to that question is not a given - it depends on the distribution of power in society.

According to witness accounts, people are going about their business. I would discount general or intermittent media reports of unrest, because 1. griping is an Iranian art form and 2. the outside media is operating in a particularly inane manner here. Just today, for instance, a BBC reporter in London phoned in a report to NPR about Iranian woes on subsidy reductions, and got two of his major facts wrong. One, he said that subsidies in Iran started in 1980, when in fact a subsidy of at least a few basic but important goods goes back to the Shah’s time. The Shah was most likely emulating the more populist regimes of Egypt and Syria in the 1960s/70s, who had rather generous subsidies for bread (ah, the good old days in the Arab world). Second, the current subsidies regime was a policy implemented as a reform to the time of strict rations and black-market corollaries of the 1980s war era with Iraq. So this is not a policy the government has wanted to enact since 1980, but rather since 1989 once the era of reconstruction commenced. For a Brit whose welfare system is basically a legacy of World War II, I would have hoped that one might see the similarities between his country’s experiences under duress and the social policies that resulted in Iran as a result of the Iran-Iraq war and its legacies.

But, back to the present, I am concerned that the subsidy reductions as demarcated will lead to increased inequality in an already polarized middle-income country. The bottom line is this: if the point of this plan is to get people to consume less of these goods, then they will achieve their goal. Economist Said Laylaz is telling the Los Angeles Times that traffic will be less congested in Tehran - the silver lining for sure, and something that also occurred after summer of 2007 when gas rationing and price tiering was first introduced. But if this point of this plan is to “get the prices right” and kindle economic growth, the government will be sorely disappointed. Furthermore, the fact that everyone in Iran is together experiencing this seemingly arbitrary act by the state could form a powerful grievance if anything goes wrong in its implementation. Unfortunately, our analysis on the state capacity of Iran is dominated by hearsay and axe-grinding, not sober empiricism, so don’t expect much from the experts.

5th Development Plan in Iran Further Privatizes Health and Education Sectors

Thu, 11 Nov 2010 22:55:00 +0330

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.

Three Easy Pieces

Tue, 26 Oct 2010 19:55:51 +0330

Why write on a blog when people will publish your work elsewhere? That’s not the only driving force behind my quietude here, since I am immersed in academic mill grinding, but it is a factor. Nevertheless, here are a few pieces that, while written at various times in the past year, all came out in the last several weeks.

First, a very condensed version of a paper I presented at Cambridge University this summer on pseudo-privatization in Iran’s economy is out in the new Muftah web magazine. The nut of it: Iran has been shifting its state-owned economy to a host of economic players still linked to the state, but this is not the same thing as a takeover of the economy by any single actor (i.e. the Revolutionary Guards). So far, feedback on the piece has been favorable. The actual paper will be published in 2011 in an edited volume on Routledge.

Second, I was asked to write a policy “briefer” on the Iranian bazaars for journalist Robin Wright’s new Iran Primer. The whole book is a repository of the accumulated common sense on Iran shared by the more vocal and well-placed US crew of experts that work on the country. Whether that represents an accurate picture of the country or not, I reserve my judgment. I immediately asked that Arang Keshavarzian write the briefer on the bazaar, since he is the actual expert on it (he did honest-to-god field work in the bazaar in the early 2000s). But he was grinding his own academic mill, so the task was up to me. Given the uninformed suppositions about the power of the bazaar, and the stale thesis of the “mosque-bazaar alliance” that still floats around the aforementioned crew of experts, I took on the job. Most of the piece would not have been possible, however, without Arang’s excellent work. Here is my piece via the USIP site and reprinted on Tehran Bureau.

Lastly, and hopefully not the least of these efforts, I have published a review of Mehran Kamrava’s 2008 book Iran’s Intellectual Revolution in the current issue of New Left Review. I wrote this review in six hours sitting in a hotel lobby in the Iranian city of Ahvaz. The original solicitor of the piece turned it down, and by luck it was circulated to the desk of the editors of NLR, who asked me to expand it for a non-Iranian audience. It is not just a review of Kamrava’s book, but an initial attempt to critically analyze many of the social and political frames in which Iran is situated, in this case by the country’s own intellectual strata. Unfortunately, the entire piece is available subscription only, but you can probably read it in about 20 minutes over a coffee at your local Borders. Or at a library, if you still have one of those things in your town.

A lot has been happening in the Iranian economy recently - subsidy reform, currency moves, bullish stock market runs - and the current coverage in the news is pretty inadequate. I’ll follow up with a post putting some of these events in context, but for now, back to the mill.

Iranian Sociology and its Discontents

Thu, 22 Jul 2010 20:19:00 +0430

I recently returned from Gothenburg, Sweden and the quadrennial International Sociology Association’s World Congress. It’s kind of like the World Cup of sociology. There I sat in on a session organized by the Iranian Sociology Association, where a few presenters, including its president Hossein Serajzadeh, discussed the state of social science in Iran. I have visited many sociology departments in Iran, both in Tehran and elsewhere, over the past few years, and the comments I heard echoed my earlier experiences. Sociologists feel that most of the problems of social science institutionalization in Iran stem from the state’s politicized relationship vis-a-vis the disciplines.

With the recent intensification of state pressure on Iranian social scientists, including “early retirements” for some of the professors in the most prestigious faculties in the country, no one should dismiss the constrained atmosphere in which Iranian social scientists and students operate. But is that the only problem with Iranian sociology?

Two of the presentations focused almost exclusively on institutional aspects of Iranian social science - enrollments, programs, number of students, and its history. This is par for the course - I often find that discussion of social relations in Iran takes the form of “just the facts,” usually with a comparison between Iran and wealthy countries thrown in for good measure. This time, Iran’s undergraduate and Ph.D. enrollments in the social sciences were stacked next to OECD countries, like the US and France, as well as Turkey and South Korea - the perennial “model states” that Iranians compare themselves to. Frankly, Iran didn’t look too bad. But this type of comparison - deeply rooted in an exceptionalism that pervades both mass and elite society in Iran - displayed a lack of reflection itself. Sociologists should try to question the standard frameworks and categories that others apply. If you put Iran up against Brazil, Egypt, Indonesia, China, India, Mexico, etc, - in other words, the large Third World countries that are more reasonable to compare Iran with given their common histories - what would we find? I wager that many of the “backward” statistics Iranians often point to - not just on social science institutionalization but also in almost every other category - would fall neatly in the middle of the range that is observable in the former Third World.

Better yet - Iranian sociologists should be asking a question one level removed: Why does this latter sort of comparison never occur? Confronting - and theorizing - that conundrum would call into question some of the most deeply held myths present in Iran today, no matter where one stands on the political spectrum. But that is the job of social scientists, because few other intellectuals are interested in myth-busting, especially when nationalism is involved.

To be fair, none of these characteristics are exceptional to Iranian intellectuals at all. Exceptionalism is part of nationalist rhetoric from Poland to China to Madagascar, thus it is the least exceptional thing about Iran. Intellectuals, historically, have been one of the main conduits for such exceptionalism, in as much as they see themselves agents of the nationalist cause. This has produced some great work over the 20th century - Eric Williams’ Capitalism and Slavery comes to mind. Part of the job of successive generations of intellectuals, of course, is to take apart the bundle of myths that previous scholars embed in their analyses. In Iran, this can be seen in the critique (or, sometimes, wholesale dismissal) of Ali Shariati which became prevalent in the 1990s. I rarely, however, see Iranian social scientists reflect on what myths or assumptions are the most prevalent ones among Iranian intellectuals today.

One refreshing exception to this was the last presentation at the panel, by Shirin Ahmad-Nia. She and her colleagues hinted that Iranian social science cannot recognize a range of social problems in Iran because it still relies on frameworks of understanding Iranian society through the antiquated paradigm of modernization theory. Indeed, the large majority of Iran’s reformist intellectuals in the 1990s portrayed Iran’s problems as stemming from its trapped position “between tradition and modernity.” It still forms the basis of rhetoric among many Iranian elites (and has done so, on and off, for the past 150 years). Yet this too, is nothing exceptional - China’s social scientists are obsessed with modernization theory, for example. So, I would encourage Professor Ahmad-Nia and her colleagues to reflect further on why Iranian intellectuals utilize modernization theory so, well, religiously. We need, in other words, a sociology of Iranian intellectuals of the kind that Pierre Bourdieu did so well on the subject of French intellectuals.

In sum, many of the problems that Iranian sociologists noted about the state of their discipline in the country - a reliance on quantification of basic indicators instead of qualitative and critical analysis, a faddish and uncritical importation of the Western social science of the day, and an under-institutionalized training system - are not Iranian problems per se. They are large structural problems within knowledge production in the global South. Iranian sociology would mature greatly if they took this context as a starting point for their considerations.

Lawrence on Collier and Mintz on Haiti

Fri, 04 Jun 2010 21:04:00 +0430

The field of economic development has more popular books in print than was the case ten or twenty years ago. In fact, the last decade where such a volume of print existed on poorer countries and their prospects was the 1970s. That previous era, however, generated a more critical perspective on the promises of “catching up” to the wealthy Northern states. Now, within the popular debate between, say, Jeffrey Sachs and Bill Easterly, there are huge assumptions underpinning both “sides” that are left unspoken.

Peter Lawrence, a geographer, takes on such assumptions in the latest development fad to hit your airport bookshelves: Paul Collier and his solutions for the “Bottom Billion.” This short piece from New Left Review is one of the most trenchant critiques of the current development field that I have read. Obviously the methodological criticisms are the easy ones - the application of econometrics to problems of political sociology is economic imperialism of the highest order. But more substantively, the unmasking of Collier’s theoretical assumptions is what makes this review great. The task left wanting by Collier’s work is that we still need to explain the “independent” variables that Collier uses for his explanations of endemic poverty and war - GDP levels, “bad governance,” etc.

What Lawrence does not touch on in this piece, and something I would add, is that using PPP-adjusted growth rates as a correlative measure for any social outcome is highly suspect, given that they are doubly distorted. They are distorted the first time when the World Bank issues them (and continually changes the historical record of GDP levels without telling anyone or explaining why). The second order of distortion comes from using PPP-adjusted income levels on top of that. To say something like, “For every 1% increase in GDP growth rates, one would expect 0.5% better governance” is a ludicrous statement on so many levels. If you don’t believe me on the World Bank’s changes in its historical GDP data, go take a look at how the GDP for large Southern states such as China and India for the year 1960, say, keeps changing over time. This is their GDP at foreign exchange levels, before they are even adjusted for Purchasing Power Parity.

Lesson to Iranians who often use indexes of business freedom and transparency when discussing their country: these scales are not very useful in understanding why countries are richer or poorer.

On a different note, the anthropologist Sidney Mintz has a wonderful essay in the Boston Review on his field work in Haiti from the 1950s. In it, we get a sense of the importance of markets to subsistence production by the rural sector in an impoverished country like Haiti. Mintz recounts the strategies of income pooling by women market sellers and the sophistication of the networks that existed. It reminded me of something Giovanni Arrighi once told me, which was that peasant/rural life requires far more “skills” than urban life. Put any of us in their position and we would starve shortly thereafter.

Implications for Iran from this piece: rural-urban linkages and peasant production are a source of vibrant social activity, not a traditional backwater. Individuals who take part in such economic activities are likely more savvy than anyone (including the state) gives them credit for. Notions that the rural areas are bought off by the state, or duped, are therefore suspect.

Yes, We Take Dollars

Tue, 11 May 2010 19:57:00 +0430

If you recall, a few years ago a lot of stink was made about Iran moving the currency used in its oil transactions from the dollar to the euro. This fit neatly into the swirling conspiracies of the day. For US hawks, this was a sign that Iran was an “ideological” actor hellbent on undermining US hegemony in the global economy. For some on the political left, who also seem to equate currency exchange rates as the only measure of international power, this ensured that the US would subsequently go to war with Iran in (insert very small number) months. When I was in Iran during the summer of 2006, and Iranians were quite scared of the threat of war, this kind of talk only made it worse.

Last Thursday (May 6th) in the newly re-opened Shargh newspaper (unfortunately, not available online at all), it was reported that the The Central Bank of Iran announced that it would not be replacing the remaining dollars in its foreign exchange currency basket with euros. Furthermore, industrial units that held debts to the banking system could still pay them in dollars. This is because state loans to large industrial concerns in Iran often use hard foreign currency in order to allow them to make international purchasing easier and reduce the inflationary costs on domestic business.

The article features responses by several high ranking Maljes members, all of whom make sure to state that this is not a “retreat” away from the euro. Indeed, the government bragged last year that it had made $2 billion by converting foreign exchange reserves to the euro over the past several years, due to the dollar’s relative decline. That was certainly announced with a lot of sound and fury.

However, note what Musa Servati, member of the Majles Budget and Planning Commission, had to say: “When the dollar’s rate is up, it is better to use the euro, but when the euro’s rate is up, it is better to use dollars in transactions. …Hence, we cannot say that the Central Bank’s policy was necessarily to move from the euro to the dollar, but it is a form of policy on money that we should use in order to have a varied currency basket.”

In other words, the Iranians play the international currency markets like everyone else, and the deep (and unresolved) crisis of the world economy is temporarily sending everyone back into dollars. Provided the European currency survives this year, I am sure none of this will be mentioned the next time Iran moves into euros again.

Appearance at the Carnegie Endowment for International Peace

Sun, 02 May 2010 19:34:00 +0430

Appearance at the Carnegie Endowment for International Peace:

Last week I appeared on a panel on Iran’s economy at the Carnegie Endowment in DC which is now available to watch online. At least, it was supposed to be on Iran’s economy. But like many events in the beltway, it ended up becoming focused on US policy instead of actual events inside Iran. Still, some discussion is better than no discussion - I see that after my MERIP piece on Iran’s subsidy reform (download it via this link if you are behind a Persian firewall), a few articles have come out on Iranian economy in major US outlets.

Are the Iranian Poor a Bunch of Welfare Queens?

Fri, 19 Mar 2010 15:03:00 +0330

The picture we usually get of the Iranian poor in the media is one of two extremes: the wretched of the earth, or the equivalent of Ronald Reagan’s “welfare queens.” (If you remember, Reagan attacked the meager US welfare system by inventing a group of people that did not even exist: pink-Cadillac driving, children producing, unwilling to work black women.)

One hears similar things about Iran, in an exaggerated caricature of the truth. Rural villagers are handed money and told to vote for conservatives. The religious poor are recruited into the basij and indoctrinated. War veterans get the plum jobs and their kids get into the universities. The middle classes get nothing and, due to the favorable treatment of the poor, end up resentful and rebellious against the lower class. This is usually called “populism,” a pejorative word that has almost no analytic value in its current practice.

At the same time, one also hears that the Iranian poor are the extreme lumpenproletariat with nothing to lose except their chains. They are taken advantage of by a state where connections mean everything, exploited by a capitalist sector that laughs at the de jure wage laws, and get shamed by the middle classes because they cannot compete in the conspicuous consumption race (without a finish line). In some versions of this story, they are also the most revolutionary, imminently about to rise up.

When anyone hears either one of these extremes, one should first realize they are encountering a highly politicized debate. This involves domestic Iranian political factions from right to left, diaspora Iranians and their various political lineages, western-trained Iranian academics who import the latest fads in social science, and, finally, the plodding accumulation of “common sense” among journalists who do not know much about Iran.

In this debate, you would not hear that the largest welfare program in Iran is the Social Security Organization (sazman-e ta’min-e ejtema’i), which covers 27 million Iranians to some degree. This organization provides various forms of health coverage, old age pensions, and unemployment insurance to mostly formal workers in the labor market. It also is attempting to extend coverage to Iran’s self-employed (the large informal sector or the petty bourgeoisie), agricultural workers, carpet weavers, seminary students, and even nomads. It has not been very successful at getting the more vulnerable social groups covered since these new policies were only recently implemented in the Khatami era, but could be expanded if it was more of a priority. A smaller, more “revolutionary” welfare organization, the Imam Khomeini Relief Committee, gives regular aid to no more than 5-6 million Iranians, who are usually the poorest.

Health care in Iran can be disastrous if you have a catastrophic disease, and the various public health insurances that exist often cover no more than 30% of out of pocket costs. However, almost all health services in Iran are subsidized by the state and the costs are kept well below market prices. Many Arabs, Russians, Turks, Pakistanis, and Iranians from Los Angeles travel to Iran each year to obtain cheap, professional medical care. I spoke to a dentist in Tabriz two weeks ago who informed me that, although there is almost no dental insurance in the country, I could get a root canal for around $75-100. He actually looked at my own teeth and said that my gold fillings, which I had gotten in a Chicago dentist’s office on the cheap because I had no insurance and could not afford the more expensive composite fillings, were of shoddy quality. He could replace them all for around $250-300. Pharmaceuticals in Iran are incredibly cheap, and 97% of them are made domestically.

More good news is that, in the upcoming subsidy reforms that may be finally enacted this year, health services and pharmaceuticals will not be touched. They were removed from the subsidy reform bill in its early stages in the Majles. The only health services that are not subsidized in Iran are cosmetic surgeries – the ubiquitous nose jobs being the known example. My dentist friend said that services like teeth whitening, orthodontics, and “smile therapy” are the equivalent in his profession.

Furthermore, if you are part of the 30% of the population who lives in a village, or you can at least claim residence in a village, you have access to Iran’s village insurance system and get free basic healthcare along with free medicine, family planning, check ups, vaccinations, and birth control. On a recent trip to a village clinic – a “health house” or khaney behdasht – the health workers told me that the biggest diseases in the village were diabetes, hypertension, and depression. These are diseases which many middle-income countries would love to have, because they usually only manifest themselves if your population survives to old age.

I could go on, but the overall point is that Iran’s welfare system, while it is confusing, is primarily targeted towards the middle strata of the population. Universal programs such as subsidies, or welfare programs stemming from the “German model” such as formal sector pensions, are both the norm and the most expensive part of the system. As we also know from the US welfare system, universal programs usually end up benefiting the middle classes rather than the poor, and they are politically quite popular. The Iranian elites are all in favor of removing subsidies for gasoline, but look how scared they are of actually implementing it – it now seems that subsidy reform will not happen in March as was planned, and will be pushed back to September if not further.

Why does none of the coverage – sadly, I am not exaggerating here – discuss social welfare in Iran in these terms? One reason is that certain state policies – subsidies, pensions, control of health costs – are seen as entitlements or social rights, while other policies – preferential hiring of veterans, dividend paying “justice” shares – are seen as charity or means-tested. This dual caricature exists in any welfare system, and activists have long known that if you want a policy to last beyond its implementation, it is best if it acquires a universal flavor. Otherwise it leaves the policy more open to political jockeying.

Second, however, is that this rather normal political conversation is encased in the electrified fence of Iran media coverage, where someone can be accused of being a regime apologist if they say that the tap water in Tehran is potable. This is not likely to go away, but one can hope that basic media literacy - that is, don’t trust everything you read - will expand enough so that the “common sense” on Iran becomes less common.

I have listened to middle class Iranian students, not rich by any means, fulminate about the preferential treatment of the poor. I then usually asked the students if they themselves received free health care at the state university they were attending, to which they replied, “of course.” I then usually enjoyed the look on their face when I told them that in the US, public university students are bankrupted by health care and loans before they even enter the job market.

My Recent Piece in Inside Iran

Wed, 16 Dec 2009 10:54:00 +0330

I have a new piece on the debate over poverty in the online analysis site Inside Iran - read it here. Most discussions of Iran’s economy make it sound like the place is falling apart. I’ve never seen a good comparison of Iran with other middle income states on basic indicators of welfare, industry, education, etc. Instead we hear a lot of catastrophic language. Critique is fine, and should be encouraged, but it has to be grounded in an understanding of the constraints and challenges that middle income states have faced over the last sixty years. Iran falls in the middle range of middle income country performance on a lot of indicators, including inequality. Yet I have a sinking feeling that people who want to discuss Iran only like to say that everything is going horribly, or everything is going great. Thus, one needs to clear some ideological brush before building a new comparative understanding of Iran in the world economy.

Does Iran's Urban Working Class Have a Rural Subsidy?

Sun, 25 Oct 2009 19:51:00 +0330

There has been increased labor unrest in Iran during the past few years, and just in the past few weeks organized protests by workers have occurred in Ahvaz and Shiraz. Much less attention is paid to these types of protests compared to the recent student unrest within universities, yet Iran has a long history of labor activism. The Abadan oil strike of 1945 was the largest coordinated labor strike in the Middle East probably until the general strikes of 1979, where workers played a major role in ending the Pahlavi monarchy.

Yet one should not overestimate the homogeneous nature of the Iranian working class, and draw from that unrealistic assessments of its solidarity or predictions of a nascent “shop floor” revolution.

Iran, like many middle-income countries, has a small formal labor force, often located within nationalized (or formerly nationalized) industry. This section of the working class benefits from its position as “formal” labor, meaning that these workers have been able to extract better pay and benefits, working conditions, and legal contracts from their employer, who is often the state. But Iran, like many middle-income countries with large-scale industrial projects, never transformed most of its population into the industrial proletariat that was expected by theories of liberal and Marxist economic development.

Instead, what did occur in most of the world was the creation of pockets of formal labor, but mostly massive depeasantization and deruralization. These former peasants usually traveled to cities and became “informal” labor – a term that exists only in contradistinction to formal labor. This is the largest group of people in the world today, and it is the fastest growing social class. Many of these individuals make their daily living through a variety of economic activities – transient or temporary wage labor, self-employment, dependence on income from small remaining land parcels, and pooling resources within extended families. They have a very different life than formal workers.

Often those countries that carried out radical land reform, such as China and most of East Asia, gave their informal labor a more flexible way of moving back and forth between town and country. Those countries that completely removed the peasantry from the land decades or centuries ago, like much of Latin America and Southern Africa, are now suffering worse conditions as it becomes apparent that the world’s population will not be converted into an industrial proletariat.

The irony here is that, while a country still has a rural sector that can support itself, either by producing goods for subsistence or by selling them on the market, the rural sector can provide a form of subsidy for urban-based capitalist development. This is because migrants who come from rural areas and maintain ties to those areas can depend on those ties to make up part of their own subsistence. This makes it cheaper to use their labor in urban locales, thus increasing the profitability for capitalists who employ them. During the initial formulation of this conception of rural-urban ties in the late 1960s and early 1970s in Southern Africa, it was called the “rural subsidy” thesis.

When the rural sector is decimated through either “accumulation by dispossession,” in David Harvey’s term, or by land reform that is geared towards generating capitalist accumulation in the rural sectors, it undermines the rural subsidy to urban labor, and therefore raises the cost of labor in the urban sector. Rural individuals now begin to depend on ties to urban sectors for their subsistence, which raises the cost of urban labor even more. It is very possible (and often happens) that it is not worthwhile for domestic capitalists for employ urban labor at this cost, especially if they have to compete internationally.

The end result of this is that the chances for capitalist development in poorer countries is actually lowered when they become “more” capitalist - when their labor force resembles the wage-earning proletariat of our understanding of a “developed” country. This seems to have happened in the very country where the “rural subsidy thesis” originated. South Africa now has an official unemployment rate of around 40%.

As far as I know, there is no empirical work on how Iran’s labor force is structured with regards to the changes of urban/rural ties over the last 30 years. But, I wager that, as with most things, Iran is somewhere in the middle and not at the extremes of the spectrum. Its land reform in the 1960s was by no means radical, and the more conservative factions of the Islamic Republic stopped attempts at additional land reform in the 1980s. The result is that some urban-based Iranians who are in the informal labor force can fall back on rural incomes, but not all of them. Other urban-based Iranians provide an “urban subsidy” to their extended families who have remained in the rural sector. That means there are at least three structural groups in the Iranian working class that need to be considered separately: 1. Formal workers in mostly state industries and the public sector; 2. Informal workers who retain beneficial ties to the rural sector, and thus part of their livelihood can come from the rural sector; 3. Informal workers who have no ties to the rural sector, or must provide an urban subsidy due because their ties, and thus all of their livelihood must be found in urban areas.

Note that, thus far, I have not brought in the state to this analysis. The state can exacerbate or ameliorate any of these existing tendencies. In Iran’s case, I would also wager that basic welfare provisions for the poorest Iranians, through a variety of welfare organizations as well as subsidized consumption, have lowered the cost of labor for domestic capitalists. It also may have homogenized the working class to a degree that would not have existed if the state did not subsidize consumption.

However, it would be going too far to say that, when labor unrest occurs in Iran, it is always because of the same grievance. The structural divides of formal and informal labor are very apparent here, and overlap with ethnic cleavages (including migrant labor who ends up as the super-exploited class). The lack of horizontal organizational ties and representation in the government, except for the state-provided “House of Labor,” adds to the standing limitations on labor activism. Yet, even with these strictures, some related and others unrelated to the existing regime, labor unrest continues to pop up in unpredictable ways.

I hope to add more to my ongoing discussion on Iranian labor with a future post on Farhad Nomani and Sohrab Behdad’s recent work.

On the Media, Kapuściński version

Wed, 23 Sep 2009 16:44:44 +0330

Time goes fast when you’re having fun, so it looks like posts here will be few and far between. But, sometimes one has to share a quote.

The departure of many foreign journalists from Iran after the election, coupled with the intensification of the media spotlight, proved to be an odd experience. I picked up a copy of Ryszard Kapuściński’s The Soccer War while I was in Copenhagen. The old book seller offered me a glass of wine and said, “People either love Kapuściński or hate him.” I love him, if only for the reason that there are few like him around today. And, The Soccer War is his best, since it is not really one book but about ten short books. Plus, it has extremely dry humor. To wit, here is Kapuściński describing a group of foreign journalists who had come to Honduras to report on the four day Soccer War between Honduras and El Salvador:

The major advised us to return to Tegucigalpa, because advancing might mean getting killed without even knowing who had done it. (As if that mattered, I thought.) But the television cameramen said they had to push forward, to the front line, to film soldiers in action, firing, dying. Gregor Straub of NBC said he had to have a close-up of a soldier’s face dripping sweat. Rodolfo Carillo of CBS said he had to catch a despondent commander sitting under a bush and weeping because he had lost a whole unit. A French cameraman wanted a panorama shot with a Salvadorean unit charging a Honduran unit from one side, or vice versa. Somebody else wanted to capture the image of a soldier carrying his dead comrade. The radio reporters sided with the cameramen. One wanted to record the cried of a casualty summoning help, growing weaker and weaker, until he breathed his last breath. Charles Meadows of Radio Canada wanted the voice of a soldier cursing war under a hellish racket of gunfire. Naotake Mochida of Radio Japan wanted the bark of an officer shouting to his commander over the roar of artillery - using a Japanese field telephone.

Should We Use PPP-Adjusted Data to Discuss Global Income Inequalities?

Sat, 08 Aug 2009 17:00:00 +0430

Most economists, even my favorite ones, use Gross Domestic Product adjusted for purchasing power parity (PPP) when they compare the “wealth of nations.” In my last post, I made a short case for why comparing income levels in the world economy should use national income calculated at foreign exchange rates (FX). Given that my assertion falls in the minority position in the world of social science, I would like to expand on that claim.

After my justifications, I will also argue that Gross National Income (GNI – formerly known as Gross National Product/GNP), rather than Gross Domestic Product (GDP), is a better indicator of wealth levels in the world economy. I hope that readers will be able to sift through the econo-speak and get at the substantive issues at hand.

GDP is an overall measure of the flows and stocks of economic activities linked to market processes within a particular political territory. Yearly increases in GDP are the “value added” by the market to any existing and new economic activities over an annual period. When GDP per capita is measured at FX-based prices, this means that the market “value” of the overall set of market-linked economic activities within a certain territory is denominated in the national currency. This can then be converted at the international exchange rate to a common currency (usually US Dollars).

The GDP figure by itself (or when divided by population size to get GDP per capita) does not tell us what portion of the country’s wealth is distributed in labor incomes, property incomes, or entrepreneurial incomes – the “wages, rent, and profit” of classical political economy. Nor does it tell us anything about inequality of income within a country. GDP is simply the total product (hence, gross).

The concept of GDP has a long history of criticisms. Feminist and ecological critiques argue that many economic activities – constructive (e.g. child-rearing) and destructive (e.g. pollution) – are not always assigned “value” in the market. Without a market value, these activities are not recognized as “production” in the accounting of a country’s total wealth. Alternative measurements do exist that attempt to calculate what wealth levels of a country would be like if reproductive labor or ecological destruction were taken into account.

Another critique of FX-based GDP is that international currencies fluctuate in the short term. Therefore calculating a country’s wealth via its exchange rate with the world economy distorts the “real” value of its economy. The World Bank attempts to rectify this with the Atlas method, which adjusts for fluctuations in currencies and also in variations of inflation rates.

The critique of FX-based GDP that resulted in the PPP “project” by the 1960s, however, was that there were observable differences in prices for goods and services between countries. Tradable goods and services, ones that can be bought and sold on the world market, can differ due to the national effects of tariffs, subsidies, and taxes. Non-tradable goods and services, especially the latter, differ widely around the world, with prices for many services usually much lower in poorer countries. The PPP advocates argue that income levels calculated at FX rates do not take into account these differences in price levels. PPP adjustments, in theory, recalculate FX-based national income using estimates of prices for goods and services in that country. As a result, PPP-based GDP is supposed to give a better picture of relative consumption levels in the world economy.

There are lots of methodological problems that still exist in the construction of PPP data: many estimates are not made from direct observation of prices at all but from complex calculations, the quality of various goods and services are often not the same and attempts are made to factor this in, benchmark countries are used to calculate PPP incomes for other countries with not so great accuracy, and the backward historical projections in changes in PPP-based income use growth rates from FX-based data. All of these problems are compounded when calculating PPP-based income for poorer countries. The University of Pennsylvania, who has undertaken a large portion of the PPP project, estimated that in its 5^th set of PPP benchmarks (released in 1991 with analysis of 64 countries), the range of accuracy of its income data for countries with less than a tenth of the US’ income was 60% up or down. As I pointed out in my last post, the most recent 2008 PPP benchmarks (the first to actually contain any systematic price data from China) have once again radically changed our understandings on poverty and consumption for large parts of the global South.

However, even if PPP-based data was entirely problem-free in its collection, and it accurately reflected average consumption levels for each country, a more serious problem exists when using them to understand global inequalities in wealth. With PPP-based data, we attach more importance to domestic economic processes in analyzing the reasons for the relative wealth of nations, and minimize the role of economic processes that take place across borders. If PPP-based income represents the command over economic resources a population has within its territory, FX-based income represents the command a population has over world economic resources. If the latter is more relevant for understanding why countries “catch up” or do not “catch up” with Western wealth levels, then PPP-based incomes underestimate the inequality between states of global income distribution.

It is understandable, then, that most economists like PPP-based data, since their models of growth are based on domestic factors of production (land, labor, capital). The best-known model of growth, and the one implicitly referred to by Hadi-Esfahani and Pesaran in their article, is associated with economist Robert Solow. The Solow theory of economic growth argues that, given population growth is equal to zero, the accumulation of capital is driven by technological progress. Or, as Hadi-Esfahani and Pesaran put it, “new ways of producing more output given [a set amount of] inputs.” Therefore, they write, “…the study of economic growth can be viewed as the analysis of the factors that enhance or hinder the acquisition and use of technology.”

In a wider understanding of “technological innovation,” like the one used by the economist Joseph Schumpeter, “new ways of producing more output given inputs” means something more than simply the invention of new technology or the upgrading of existing technology. It broadly includes the introduction of new methods of production (e.g. the assembly line), new goods and services for the market (e.g. the automobile), new sources of supply for production (e.g. rubber grown in Brazil instead of Malaysia for tires), new trade routes and markets to sell existing goods and services, and new forms of organization that combine the various factors of production (e.g. the vertically-integrated modern corporation). This is why Schumpeter argued that the “entrepreneur” – any person or organization who accomplishes one or more innovations out of these types – is the driving force of capitalism. Recurrent economic growth is based on “creative destruction” in the market: “creation” of new profit-oriented innovations that result in the “destruction” of existing methods of production.

Schumpeter, however, also pointed out that no single technological innovation could permanently guarantee a source of profits. Competition by other economic agents would eventually increase as the innovative methods were emulated, leading to a decline in profits for the original agent. The key to capitalist success, then, was to continually shift the pressures of competition elsewhere, either by generating a continuous stream of innovations within a particular organizational area (e.g. the auto industry in its early stages) or by shifting the area itself in response to other agents’ competition (e.g. moving out of cars circa 1982 and into computers). As Schumpeter portrayed, the most successful economic agents in capitalism are those that “are aggressor by nature and wield the really effective weapon of competition.”

As Giovanni Arrighi pointed out, this “creative destruction” in the market via continued rounds of technological innovation (or, better put, entrepreneurial activity in all its forms) historically clusters the accrual of profits not only over time, but also over space. In other words, those businesses that can continually innovate in world economy tend to be grouped in particular states. This is largely because states have a big effect on how the “weapon of competition” affects their domestic constituencies. States vary in their abilities to control access to the most lucrative niches in the global production of goods and services, provide higher levels of infrastructure to support continual innovations, and create a political climate that most favors capitalist entrepreneurs over other actors. Some states do this more effectively than others because greater economic command, at least over recent world history, can be translated into greater political command.

If there were no states, and the world market was all contained in a single political entity (the dreaded “world state” of the US right), the accumulation of capital would be quite volatile over time, and we would not see such a clustering of wealth in particular areas as exists today. In other words, economic command over world resources by states and their population matters. If we want to understand the sources of capitalist growth over periods of history longer than a few years, such as Iran’s relative position during the 20^th century, it matters more than economic command over domestic resources.

With that lengthy but necessary exposition let’s return to the original question: should we use PPP or FX-based data to understand relative wealth levels? The ability to continually generate technological/entrepreneurial innovations depends in the long run on participation in the world economy. In business school speak, closing the wealth gap between a poor country and the West requires “moving up the value chain” within areas of global production of goods and services, as occurred in South Korea over the second half of the 20^th century. This is easier said than done, as I attempted to show in my last post, but in any case one needs a relational lens to even begin to discuss the reasons. FX-based GDP per capita is a better measure of the concept of economic command over world resources, and therefore the relative ability to sustain the continued innovations required for capitalist growth. PPP-based income data inflates a poorer country’s relative command over world economic resources, and therefore should not be used when looking at the few successes and many failures in “catching up” with the West, or when the words “economic strength and size” are invoked.

After that, though I do not wish to add any more confusion, it is rather easy to explain why per capita Gross National Product/Income (GNI) is better to use than per capita Gross Domestic Product/Income (GDP). GDP calculates the total output of production within the borders of a given political territory, no matter who generates it. GNI calculates the total output produced by all the “nationals” of a given political territory, no matter where that output is produced. Methodologically, GNI includes net income (wages, rents, profits) from foreign production (the current account balance). GNI, then, focuses on the owners of economic production. Usually there is not too much difference between the two figures, but given that sometimes it does matter, when we pick a measure to understand the relative wealth of nations, FX-based GNI per capita is the better indicator.

Economists might respond that they care most about relative standards of living in the world and not relative economic command over world resources. As I said before, there are uses for PPP adjustment as well, even with all of its methodological problems, and consumption levels are a valid use. However, there are also substantive reasons why consumption levels may not be the best indicators for relative standards of living and well-being in the world. That discussion must wait for another post.

You might notice that in the last post I used FX-based GDP per capita to show Iran’s relative wealth levels over the last 50 years. I did this so that it would be easier to discuss the article in question. In a future post I will further discuss Iran’s trajectory with FX-based GNI per capita data, though the overall trends will not be starkly different than the tables I already posted.

Thanks to Roberto Patricio Korzeniewicz for consultation on this post.

Did Iran Lose its Chance of Catching Up With the West?

Fri, 31 Jul 2009 00:02:00 +0430

Does Iran’s economic trajectory over the 20^th century look very different from most other countries in the Third World/South? This is an important question which is rarely asked. While comparisons between time periods within a single country can be useful - say, comparing average growth rates of the Pahlavi monarchy with the Islamic Republic - they can also be highly misleading and misinterpreted.

In a recent and detailed article by Hadi Salehi-Esfahani and Hashem Pesaran, the two authors go beyond the usual comparisons of Iran with itself (Pesaran is a major economist on Iran and his influential publications go back decades). They make the point that the only period of sustained and stable economic growth in Iran’s 20^th century history was between the early 1960s and the mid 1970s - true enough. But, in addition, they state that Iran was catching up with the wealthy Western states by the 1970s. The authors rightly assume that the goal of “development,” as it was argued in the 1950s and afterwards, meant “catching up” to the First World/North, and not simply increasing the absolute size of the economy. Wealth (or its numerical proxy, Gross Domestic Product) is understood and shown as a relative measure.

Using per capita GDP figures adjusted for purchasing power parity (GDPpc PPP), the authors note that at the end of this rapid period of growth in 1976, “per capita income in Iran had reached about 64 percent of the average for 12 Western European countries.” In the figure below, from their article, Iran’s real GDPpc PPP is graphed alongside the wealthy West, the average of all developing countries, and Turkey (probably because Iran often compares itself to Turkey):

From this particular angle, it certainly looks like Iran was catching up by the 1970s, while the rest of the Third World was not. We can see that all countries were growing their economies, but the “North-South gap” was not decreasing (no major convergence has taken place since either, as the figure shows). In the wake of the 1979 Revolution, we see that Iran’s economy shrinks relative to the North (actually, in 1977-8, Iran’s economy experienced a down turn and this can be seen as well). After the 8-year war with Iraq, Iran’s trajectory returns to an average one that is shared by the rest of the South: growing, but not catching up (developing).

But is this an accurate picture of economic history? Was Iran’s trajectory that different from the rest of the global South after all? There are a few problems with the way the Salehi-Esfahani and Pesaran present the data.

First, by using GDP per capita adjusted for purchasing power parity (a measure which most economists use today), wealth levels of Iran, as well as the rest of the South, are inflated. A major reason that economists use PPP, it is argued, is that comparisons of income between states do not take into account the varying costs of consumption of local goods. A haircut in New York costs much more than a haircut in Tehran, so $1 in Iran “goes farther” – it has more purchasing power for certain goods and services.

This seems uncontroversial, and economists mostly all use PPP-adjusted income figures (as well as journalists). However, there are two reasons why PPP data should be used more judiciously. One, PPP adjustments to income released by the World Bank have turned out to be quite erratic, and the “true” figures keep changing. Just in late 2008, new PPP figures (and their levels extending back to 1980) were released after re-calculations were done. As economist Branco Milanovic noted, this drastically changed our conceptions of which countries were poorer than others: Vietnam’s GDPpc PPP for 2005 went down 41%, Bangladesh down 37%, India down 40%, China down 39%, Nigeria up 58%, and Mexico up 9%. All because of changes in calculating how consumption is to be adjusted. I assume that Salehi-Esfahani and Pesaram are using the pre-2008 PPP figures, so maybe their own data will show a large change.

Second, and more importantly, there is a substantive problem with using PPP to compare countries’ relative levels of wealth. PPP is trying to get at consumption levels, and since economists generally assume that consumption is a proxy for an individual’s well-being, they like using PPP adjusted data. But that is a contentious assumption (albeit not in neo-classical economics). For sociologists, people (and states) pursue wealth not just for consumption, but also for all sorts of reasons related to status, prestige, and power.

In fact, the relationship between consumption and well-being (either measured by “happiness surveys” or by welfare indicators like life expectancy and literacy) is not very correlated, especially when we look at countries in the global South with a wide range of per capita incomes. China was one of the poorest countries in the world in 1980, but it had a higher life expectancy and literacy rate than Iran’s in the same year. Which country had a higher average level of well-being? Should we use income-related or non-income related measurements?

Lastly, PPP data does not get at the international inputs that the national pursuit of wealth requires. For a country to be considered developed, it probably needs a large university system that can invest and channel research in high technology fields. Yet a world-class research library cannot be purchased domestically – one needs to pay the international market price for hundreds of thousands of books. That is just one of many examples where PPP is useless.

PPP-adjusted income is really a compromise indicator that economists think is measuring welfare (through consumption) and wealth (through income) at the same time. In reality, it is not a good indicator of either.

(Note: the Human Development Index actually combines PPP per capita income with three other non-income welfare measurements. But by doing so, it further conflates all the problems discussed here: is it trying to measure wealth or well-being or consumption?)

I am not advocating throwing it out – if I want to know how far a dollar “goes” in China, PPP is useful. When I teach students about international poverty lines, the $2/day line is a good way to make them understand some basic facts about poverty in the world economy. But when we want to compare countries’ wealth levels in the context of a world economy, we should look at income per capita at international exchange rates (FX rates). This is the way that everyone used to look at economic development only a few decades ago. The reasons they do not anymore are not wholly scholastic. Let’s try the FX method and see what we get. The following table calculates Iran’s GDP per capita (FX) as a % of the OECD’s (basically, the major wealthy Northern countries) GDP per capita (FX). The OECD is listed as 100% of itself for each year by definition - it is the baseline I am using for what is considered a “developed” state of wealth.

Iran certainly still had its relatively wealthiest years in the 1970s, but it was not at “64%” of the North by any means. After the 1979 Revolution, the years of isolation and war, and a recession in the early 1990s, Iran’s gap was even larger. Only with the recent years of economic growth has Iran reversed the trend and begun to converge with the North. Yet it still has a long way to go. But, let’s go back to our original question on development trends of Iran vs the rest of the South: was Iran breaking away from the “pack” in the 1970s only to rejoin it later?

Here we have the economic performance of individual countries and also whole regions relative to the OECD (North). Unlike Salehi-Esfahani and Pesaran, who use an average line for the entire developing South, I break out the data by region. Each country or region’s “peak” before declining is marked with bold type. Like Iran, Turkey and Egypt, as well as the entire MENA region, peak between the 1970s and 1980s.

Latin America peaked even earlier in the 1960s – Argentina and Mexico lose ground on the OECD well into the 1990s, and Brazil peaks under the dictatorship in the 1970s (although data for the 1950s is not listed, Latin America did grow quite rapidly in the 1960s so the peak is not an artifact of the table beginning with that year). During its period of high growth, Iran’s economy was deemed a “miracle” economy, but let’s not forget that Brazil and Mexico also were ascribed “miracle” status during their own relative wealth peaks.

China and India have been catching up since the 1990s (China even earlier), but still remain at low per capita GDP levels, no matter all the talk about dragons and elephants rising. However, the East Asian region as a whole shows a trajectory very different than either the Latin American or Middle East story, where development efforts peaked in past decades only to experience one or even two “lost decades.” Russia is also included so we can see what the “Second World” looks like in comparison to the OECD these days.

South Korea’s spectacular rise, when compared to other countries, is hard to believe. It was already closer to the OECD in 1975 than Iran. But from this we can see that South Korea is the exceptional case, not the developmental rule. Comparing Iran only to South Korea (something that is done quite often in the Iranian business press) is not very valid if we are being serious. The popular idea that Iran could have “leapt forward” into the club of rich countries (see Iran scholar Abbas Milani’s quote here) needs to be more critically reflected upon.

In sum, Iran’s economic trajectory replicates – though perhaps in more dramatic form - the story of most poorer countries outside of East Asia. Promises of catching up seemed real in the 1950s and 1960s, during what is now called the “golden age” of Keynesian development for the South. Yet all experienced relative declines in the 1970s or 1980s, during what is now called the “lost decades” of Southern development (I’m not even including Sub-Saharan Africa which did even worse). This general decline, since it was so general, cannot be attributed to the internal political or social climate of each and every country. Instead, it had much more to do with the world economic environment of each decade – something that poorer countries usually have little control over. Even the OPEC oil rebellion of the 1970s, a main reason for Iran’s income gains during that decade, ended in the 1980s and the price of oil stayed low for two decades.

This calls into the question the overall impact of the 1979 Revolution on Iran’s economy. We could play some interesting counterfactuals to guess what the contours of Iran’s economy would be like if events had been different. But, judging from the relative economic performance of large swaths of the South over the last 40 years, significant and permanent “catching up” with wealthy Western states, as the Shah liked to boast about, would still have been unlikely.

The Privatization Panacea in Iranian Politics

Tue, 07 Jul 2009 22:00:00 +0430

Some foreign analyses of the post-election events made the argument that the factions and politicians associated with the Mousavi campaign, especially Hashemi Rafsanjani, were planning to rush through a privatization of Iran’s state-owned companies and assets if they had won. The usual epithet of the left – neoliberal – was hurled at Mousavi and his circle.

A quick aside: two words are used quite often in left leaning writing these days: neoliberalism and imperialism. The former often stands in for plain old capitalism, the latter for almost everything else the left does not like – a far distance from Hobson and Lenin. I rarely read anyone claiming himself or herself as a neoliberal or an imperialist. They are ad hominem terms, which make them excellent for politics, but not very helpful for social science.

Back to Iran. Only a few years ago I recall a particular book on Iran that argued the Ahmadinejad administration was the true neoliberal bête noire. Again, the privatization of state assets and their “tunneling” to shadowy figures was the accusation. As usual, the reality is not so simple.

Assuredly, many Iranian economists would love a huge private sector in Iran, since the public sector ranges between 60 and 70% of Iran’s GDP. The quasi-governmental sector, where the state still provides funds, staff, and has either majority or minority control, ranges around 10-20% of GDP.

The word privatization has been uttered in Iranian politics since the late 1980s, when Iran emerged from the war and entered its “reconstruction” phase. The zeitgeist of the time was “shock therapy.” The idea was to rapidly sell off state assets to private hands without much planning, and it was implemented with gusto in many Latin American countries and, most infamously, in Russia. The market would sort it out, and even if the market failed it could not be any worse than state failures in provisions of goods and services.

In Iran, there was a brief but rapid liberalization of the economy under Rafsanjani in 1992-3. Here, just like in Russia, Bolivia, Argentina, and other cases of induced “transition,” there were austerity protests due to the rapid rise in costs of living. Unlike Russia, Bolivia, Argentina, and many other cases, however, Iran backed off of its liberalization plan (to the dismay of many Western-trained economists inside Iran). If Iran was supposed to be run by neoliberals who did not care for the economic consequences of their policies on the population, then they must be still in hiding after Rafsanjani performed a volte-face.

Since then, Iran’s economy has performed in the middle range of developing countries in the world economy (the subject of an upcoming post, I promise). Also, since then, whenever anyone is asked how the sclerotic economy can be made better, all Iranian politicians throw forward the word privatization.

Just recently, Etemaad interviewed Hamid Fooladghar, the head of the Parliament’s Special Commission on the implementation of Article 44 of the Iranian Constitution. Article 44 lays out which sectors of Iran’s economy are to remain in public hands and which should either be in the private or cooperative economic sectors, and it is a buzzword for privatization. He said that the privatization efforts have not been very successful, and that government capital which is theoretically supposed to be moving into the private sector is instead “circulating” within the government itself. There are many reasons why privatization moves so slowly in Iran, which I might discuss in the future, but for now I just want to point to the original text of Article 44.

Here is what is says:

The state sector is to include all large-scale and mother industries, foreign trade, major minerals, banking, insurance, power generation, dams and large-scale irrigation networks, radio and television, post, telegraph and telephone services, aviation, shipping, roads, railroads and the like; all these will be publicly owned and administered by the State.
The cooperative sector is to include co-operative companies and enterprises concerned with production and distribution, in urban and rural areas, in accordance with Islamic criteria.
The private sector consists of those activities concerned with agriculture, animal husbandry, industry, trade, and services that supplement the economic activities of the state and cooperative sectors.

In 2004, while Khatami was still president, Iran amended article 44, part of a long-term project to join the World Trade Organization (the US has continually blocked Iran’s application). As with China’s entry to the WTO in the late 1990s, the regulatory environment of Iran needs to legally conform to the standards set by the WTO to gain entry. Some of the main points of Khamenei’s exective order on the subject are:

The government shall not be allowed to engage in economic activities that fall outside those envisioned in Article 44. Moreover, it is obliged to relinquish any activity, including continuation and operation of previous activities that are covered under Article 44, and cede them (at least 20 percent annually) to the private and cooperative sectors by the end of the Fourth Five-Year Development Plan.

Also, some other goals:

…Increasing the share of the cooperative sector in the national economy to 25 percent by the end of the Fifth Five-Year Development Plan. …Support by the government of the cooperatives, proportionate to the number of members….Establishment of nationwide cooperatives to cover the three lowest deciles of the population with a view to poverty alleviation….Change in the role of government from direct ownership and management of enterprises to policy-making, guidance and overseeing….Economic empowerment of the private and cooperative sectors, and enabling them to enhance competitiveness of their products in international markets….Preparing Iranian enterprises to apply global trading rules intelligently and in a gradual and target-oriented manner.

And, finally, the privatization amendment to article 44:

Eighty percent of the shares of State-owned enterprises, covered under Article 44, shall be ceded to the private sector, joint stock cooperative companies and non-state publicly-held companies as follows:

1. State-owned enterprises engaged in large mining activity, large-scale and mother industries (including large downstream oil and gas industries), except the National Iranian Oil Company and companies involved in extraction and production of oil and gas.

2. State-owned banks, except the Central Bank of Iran, Bank Melli of Iran, Bank Sepah, Bank of Industry and Mines, Bank of Agriculture, Housing Bank (Bank Maskan), and Export Development Bank.

3. State-owned insurance companies, except Bimeh Marakazi and Iran Insurance.

4. Airline and shipping companies, except the Civil Aviation Organization and Ports and Shipping Organization.

5. Power supply companies, except the main electricity transmission grid.

6. Postal and telecommunication companies, except the main telecommunication networks, frequency assignment services and the main and basic postal services.

7. Industries affiliated to the armed forces, except defense and security products and services that are deemed essential by the Commander-in-Chief.

This is supposed to be done by pricing the assets through the stock market, and then holding companies will sell off the shares. Ahmadinejad’s administration got involved when it began to distribute shares of privatized companies to low income families and named them “justice shares” (seham-e edalat). Last year each justice share supposedly paid out around $70 as a dividend (probably not from the actual “profits” of these companies). Note that the amendment says nothing about discriminating for or against foreign capital.

Is this neoliberalism? Certainly not right now. The main problem Fooladghar describes is that the shares of public companies are simply being bought up by other public or semi-public agencies - the Social Security Administration, the various Religious Foundations, the Army, the Revolutionary Guards. This may not be as nefarious as some commentators claim, though. All of these organizations possess built-up pension programs, which contain huge pools of capital that cannot be invested outside the country very easily. This actually resembles the same form of pension financialization that occurred in Brazil, Argentina, and of course, the US (the California Nurses and Health Workers Union, for example). Given that the entire state apparatus is “all on board” for this process, and the result is currently very little 100% privatization of anything, it is doubtful that this is shock therapy round two.

In reality, no faction wants full and rapid privatization of the state sector, nor would that be a very good idea given the failures of rapid privatization in other countries. They all say (Ahmadinejad waffles on it, but Khamene’i brings it up at every opportunity) that privatization will be the key to economic success, but they are not very specific about the process. Fooladghar said that these quasi-public pools of capital easy outcompete private sector capital when obtaining state assets. If anything, Iran’s private sector still needs a “leg-up” from the government.

Instead, Iran’s state-business relations look much more like China’s in the early 1990s rather than Russia’s – a slow and gradual subjection of some state enterprises to market pressures coupled with the use of the national market to lure in foreign investment (including diaspora capital). I am not sure if the government meant to enact such a gradualist industrial policy, but that is what has happened. Given the track record of the Chinese vs. Russian economies over the last 20 years (and the absolute declines in Russian welfare indicators due to its economic collapse), it was probably a preferable path.

In a way, platitudes on privatization are probably leftover from the 1990s and the “magic of the market.” Given the political turn in the global political economy, though, the talk seems rather hollow. That is not to say that privatization of certain state assets could be a positive development in Iran, only that the salvation that economic privatization represents is likely a dying discourse that will hopefully be replaced with sound and historically proven economic and industrial policy.

CUMINet commentary

Mon, 06 Jul 2009 12:49:10 +0430

Last week I reiterated some of my comments here on the excellent Danish blog CUMINet, run by Rasmus Elling. This was partly me testing the e-waters. The only comment I received was understandably disconcerted. Yet I was not implying that the possibilities for a renewal of “people power” were forever gone. I was simply trying to add to a beginning critique of the reformist faction that is long overdue. A few days later, Columbia Professor Hamid Dabashi echoed some of my points in Al-Ahram.

As Ernesto Laclau wrote in his recent book On Populist Reason, one of the problems of analyzing contentious historical moments is “the replacement of analysis with ethical condemnation. …There is nothing wrong [with condemnation]. The problem begins when condemnation replaces explanation, which is what happens when some phenomena are seen as aberrations dispossessed of any rational cause.” He goes on to say that this occurs not just with negatively connotated events, such as genocide, but also “with events that have positive emotional connotations.”