Iran’s Economy: The Barren Years

From the very outset, the Islamic Republic, in total disregard of the post-World War II experience of socialist and developing countries, opted for an economic model that rejected privatization and distanced Iran form an increasingly interconnected global economy. Thus in a failed pursuit of the outdated goal of economic self-sufficiency, it deprived the country of the inflow of both capital and technology. It was only in the second decade of its existence, and faced with the virtual collapse of Iran’s once robust economy, that the regime was forced to embark on a series of economic reforms in order to bring Iran into the fold of the fast moving global economy. However, deep flaws in Iran’s political structure and legal institutions stymied these reforms and kept Iran in the outer fringes of the world economy.

In fact, Iran’s experience in the last decade has demonstrated that economic reforms by themselves are not likely to produce the intended results. In order to create an appropriate climate for economic restructuring and particularly for domestic and foreign investment, Iran’s political structure, foreign policy priorities and legal system must also undergo substantial changes. The election of Mohammad Khatami to the presidency of the Islamic Republic has not so far brought any changes in Iran’s economic landscape. He has been relatively clear on the importance of the expansion of civil society in Iran and the necessity of "dialogue between civilizations." However, his economic objectives and strategy are shrouded in mystery.

Fereydoon Khavand
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