Iran Needs a Major Economic Revolution Today!
Part of the economic problems clearly goes back to the Constitution.
When they drafted the Constitution, they did not get help from
leading experts on the day’s economic issues.
Before the revolution to date, we have left behind 12 development plans, but
we still have problems in our economy. Criticizing the nature of programming
in the economy, Dr. Jamshid Pajouyan believes this method of programming
should be abandoned. He believes this outlook about the economy in the world
is obsolete. The faculty member at Allameh Tabatabaei University compares
the method of economic programming in Iran to that of the former Soviet
Union, while disapproving of some of the economic purport of the
Constitution. “Part of the country’s economic problems goes back to the
Constitution. When they were drafting the Constitution, they did not get
help from leading economic experts. The drafting of the Constitution was
more influenced by the groups that were influential at the time, like the
According to the economist, “our Constitution was influenced by certain
dominant points of views at that time, including division of the economy
into three sectors: public, private and cooperative. This is foolish!”
In the following interview, Pajouyan discusses a number of issues such as
the requirement for changes in the economic provisions of the Constitution,
institutionalism in the economy, the need to promote economic liberalism,
the negative impact on the economic trend by the leftists and the need for a
major economic revolution in Iran.
We have already completed six development plans, but we still do not see any
promising prospects in the Iranian economy. What do you think are the
It would be better to say we have formulated 12 development plans, because
we had six plans before the (1979) revolution. However, the texts of these
plans are available. At the end of each plan, the economic situation can be
evaluated in order to see if these five-year development plans have
accomplished even 20-30 percent of their goals.
Economic plans are considered to be unreliable because they cannot foresee.
For example, the current state of affairs demands an increase in production
of certain products that can be exported. Five years ago, this issue was not
predictive; therefore, it was not included in the development plan. That’s
why the development plan is silent and worthless. In my opinion, a great
stride should be taken in the economy. Despite the experience of more than
50 years of planning in Iran’s economy and the near zero result of these
plans, this approach toward the economy must stop and no more development
plans should be written. Instead the economy should be based on a series of
strategies and goals and attempt should be made to achieve the goals through
different tools and formulating a roadmap.
In your opinion, what is the relationship between the economic problems and
Part of the economic problems clearly goes back to the Constitution. When
they drafted the Constitution, they did not get help from leading experts on
the day’s economic issues. The drafting of the Constitution was more
influenced by the groups that at that time had influence, such as the
leftists. Of course later, at least some of the Constitutional sabotage was
corrected by the order of Leadership. Like Article 44 which was based on a
Left and Communist line of thinking. He ordered the start of privatization
and specification of the state and private sectors.
Today the biggest problem of the economy is that we want to
solve our structural problems with macro policies.
This shows that our Constitution was influenced by a number of specific
views that had been imposed at that time. One example is the division of the
economy into three sectors: public, private and cooperative. This is stupid!
Economy has very clear and transparent theories that tell us what activities
the private sector does and what activities are done by the public sector.
Production sector cooperatives went bankrupt wherever they were formed (like
Israel and the Soviet Union). Now these production cooperatives are
generally obsolete. Of course, there are still cooperatives operating in
different sectors (other than manufacturing and industry).
But the scope of these cooperatives is also determined by a roadmap based on
economic theories, not at roundtables or by voting. The activities of these
cooperatives are set by the most knowledgeable economists who design the
roadmap, such as in the United States, UK, Germany and other advanced
countries; of course, we do not have this in our country. We are currently
the owner of an economy that has been in recession for many years.
Businesses are closed one by one. These firms do not even have the ability
to pay their workers’ salaries.
For this reason, we are seeing protests in the country which are
economically motivated but could turn political and security oriented. But
why this is happening? Do we have little resources? Are we not rich? Don’t
we have specialization? Isn’t it true that Iranian businessmen in the US and
in California are so successful that they shut down their workplace on the
occasion of the New Year and for their sake? So, we have enough human wealth
and sufficient resources. But why should the country be in such a state of
affairs? Why should we stand at the bottom of the global list in terms of
general social and economic indicators? That’s because our economic
management is thoroughly erroneous.
Today the biggest problem of the economy is that we want to solve our
structural problems with macro policies. Nowhere in the world is such macro
policies associated with the structural problems of the economy. The problem
of allocating resources, market problems, and so on, cannot be solved by
implementing and applying macro policies. Why should our industry’s return
stand at 6%-7% but our trade return stand at 400%? So, under these
conditions how could we expect investment in the industry?
So instead of changing the rules, we need a major economic revolution in
Yes; of course, we need a major economic revolution in a way that when
someone commits an economic crime he would be sentenced to death. This is
what is called great economic revolution! If two or three corrupt persons in
the field of economy are put on trial many things would be put in order.
When a president is impeached because of the deep recession occurred under
his administration, he knows that he needs to change those around him who
make weak economic decisions in order to solve the problems. They themselves
know that it is possible to solve the structural problems of the economy
through microeconomic policies -- policies that change the allocation of
resources; these policies will save us from economic sinkhole not extension
of 250 million rials to applicants to purchase cars! By doing so, we deepen
the recession. The Parliament has never taken action to question the
officials’ wrong economic policies! Payment of loans not only has not
resulted in production but contributed to further recession. Has anyone been
In order to improve the situation, two ideologies have lined up against each
other today, namely the institutionalists and liberalists. Do you think the
problem of the economy is the choice of economic line of thinking?
You see, this debate is outdated. We sometimes talk about things that belong
to the past, like the same institutionalism in economy. This thought
(institutionalism) dates back about 50-60 years ago when Professor Friedman
raised a new debate in economy, saying that economics was a science that was
predictable like physics and chemistry, and in this respect was different
from other disciplines of the humanities. By looking at the community, you
will witness different ways of thinking, cultures, and ethical behaviors. In
terms of literacy and dealing with different issues of life, members of the
society act differently from each other. But they share the same view when,
for example, the price of an apple goes up they will not buy it. They make
this decision irrespective of ethnicity, color, race, etc. The economy,
therefore, has the potential to predict.
When this issue was raised, sociologists, namely the same institutionalists,
said it must be determined to what institution did the economy belongs,
because institution provided us with special possibilities to examine. In my
opinion, this is absurd! On the other hand, learning mathematical economics
is difficult for some economists! For this reason, these people were
avoiding the new face of the economy. These people were the same
institutionalists. As you see, we can talk for hours about issues in the
field of sociology or the like.
But this is not the case with economics, especially in the mathematical
economics. That’s why people who did not know anything about it took another
direction and became institutionalists. When the Nobel Prize goes to the
economy, nobody can say that the economy is not predictable. Economists
predicted the economic future and were able to build models in this regard,
and institutionalized policies to address future economic challenges. The
question now is what does the institutionalist economy mean?! Obviously, the
institution can also affect some people’s behaviors. Undoubtedly geographic
locations can be effective. Someone in the south of the country is not
thinking about buying heaters and coats. But in Ardebil (in the northwest),
everyone is looking to buy coats and heaters.
But in anyway, this discussion has nothing to do with the debate on
institutions. This makes sense for the same economic goals of individuals.
Because the south is hot and they want to keep themselves cool and the
northwest is cold and they want to keep themselves warm. All of these people
follow the same model; therefore, the debate of institutionalism is now
obsolete. People who cannot analyze mathematical economics and modeling do
not have the ability to predict economic problems and practical solutions;
for the same reason it’s possible for them to still talk about the
institution. But this is not a case for debate in the world today!