Thursday, August 17, 2006

Another force pushing Iran towards war: `It's the economy, stupid!'


There's an old saying about sharks. If you see one that's standing still for any length of time, it's likely dead.

One of the unseen forces pushing Iran towards war, aside from the apocalyptic vision of the 12th Imam's return is economic.

As an Islamic theocracy, Iran, like many other Muslim nations is extremely backward economically due to religious proscriptions on loans, credit and interest income as a reward to investors for risk - the sort of economic activity that we take for granted as a building block of economic activity. If it weren't for oil and gas revenues, Iran, like most of the Muslim world, would be destitute. Since Iran's industry is nationalized, the revenues go directly to the Mullahs and the State. Unfortunately for the average Iranian, that money tends not to trickle down, except in the form of patronage for the well connected.

Iran's President Mahmoud Ahmadinejad's popular support comes from his appeals to social justice and Iranian nationalism.

Ahmadinejad was appointed elected president in June 2005. He has portrayed himself as the populist champion of economically disadvantaged Iranians, and promised to use the country's oil revenues to make their lives easier. Unfortunately, the economic news since he took over has been mostly bad - ree-aal bad.

In March, Iran's parliament, the Majlis, approved a budget for 2006-07, which saw a 25% increase in government expenditures. Those increases in government spending will ensure that inflation continues to hover in the high double-digits. Underprivileged Iranians have become increasingly disillusioned by the disparity between their income and rising consumer prices.

In this atmospere, the massive spending Iran has undertaken on its nuclear weapons program, its huge defense buildup and the millions spent on Hamas and Hezbollah are a major strain on Iran's budget.

Unemployment is still rampant, with Iran's `official' figure at 12.3%..and unemployment in the biggest growing segment of Iran's population, the 15-29 age group is a staggering 34%. Remember that figure..it corresponds with the cannon fodder age bracket.

Iran's internal infrastructure is in desperate conditions, especially in the oil and gas industry. Most of the pipelines and machinery are antiquated and breakdowns are frequent, cutting production. Refinery capacity is so low that gasoline, while low in price when available, is actually rationed in Iran.

Because business credit and loans are limited if available at all, private manufacturing is is curtailed except to those well connected companies that can sell directly to the government. This puts Iran economically in the classic `colony' position - exporting raw materials to more developed nations at relatively low prices and buying back `value added' manufactured goods at high prices.

Supreme Leader Ali Khamenei made an announcement in July that some of the state-owned companies would be privatized, but that has been a non-starter as investor confidence is low and there's not much actual profit or dividends to be had.

To make a long story short, Iran combines the inefficiency of a managed economy with the backwardness, cronyism and corruption of a third world economy.

While Ahmadinejad and his mullah bosses are able to distract the Iranian masses for now with religious imagery and nationalistic posing, there's a limit to how far they may be able to carry this off in current circumstances...and eventually, they're going to need a way to keep all those 15-29 year olds with time on their hands occupied.

Ahmadinejad has attempted to address this in exactly the same way Hitler did..by increasing the govenment bureacracy and especially the military and `security' forces. But, as Hitler found out, you can't keep dipping into the public till indefinitely to keep expanding the military/security sector. ..and once you create that kind of military structure in a totalitarian environment you have to do something with it to keep it from turning on you.

Iran is a shark who Ahmadinejad and the mullahs are likely going to have to keep moving and provide new prey for in order to keep it from imploding on them.

3 comments:

louielouie said...

take out the references to religion/religious and what have you got............venezuela.

nazar said...

Scary stuff. I guess we can only hope that these so-called 70% of Iranians that are sooooo pro-American are pro-American enough that they will realize what is going on.

And feel smug about our capitalism :)

BTW, an excellent analysis as always, ff.

Freedom Fighter said...

Thanks for the kind words, guys.

As for capitalism...like democracy, Islam and tribalism trumps it every time.

Are there dissident factors in Iran? Sure there are. Are they likely to take over anytime soon? I wouldn't bet on it in the slightest.

BTW, Iran's situation has a lot in common with the economy of the Muslim world in general historically, and was a big reason for the surge of conquest in the 7th and 8th centuries.

Without fresh conquest, slaves and booty and faced with an ever rising birthrate because of the polygamy and the general attitudes towards women, any Islamic economy soon becomes a dead shark.

Mohammed recognized the importance of this, which is why there is an ENTIRE sura(chapter) in the Qu'ran on how to divvy up slaves and booty, as well as numerous references in the Qu'ran and Hadiths.

ff