Ahmadinejad is about to cut economic subsidies
By Layla Tadjpour at Mar 12, 2010
In 2005, Ahmadinejad defeated former president Rafsanjani in part due to the support of the section of the Iranian society that had been hit hard by the ne-oliberal policies of former presidents Rafsanjani and Khatami. With the oil price peaked to 140$ in his first years in office, he had unprecedented opportunity to improve the living standard of the lower economic class, or in his own term “bring the oil revenue to the people’s table”.
However, his policies have led to increase in lay offs, unemployment, inflation. Although, he made limited distributions to the poor which led some observers to believe that he follows progressive economic policies, they have been ineffective in offsetting the inflation and improving the living conditions of the lower class.
However, his policies does not closely follow the neoliberal doctrines either.
As one astute Iranian leftist economist noted, Ahmadinejad has “determinate goals but indeterminate economic plans. His specific goal is to elevate those loyal and committed to the government, who were in the middle layers of the power and wealth pyramid and particularly those mid-level mangers who used to be associated with the revolutionary guards. The economic decisions he implemented some times resemble leftist, and some other times follows pro market, rightist policies but all serve the interest of the small sectors of the ruling political class. For example right after he was elected to the office in 2005, he displaced a large number of the technocrats associated with reformist parties and replaced them with newly emerging classes and sectors dependent on his own government. He precipitated the privatization process that had been going on since the early 90’s during the presidency of Hashemi Rafsanjani and Mohammad Khatami and handed over major public enterprises to this small sectors of new ruling class mostly associated with the Revolutionary Gaurds. The low-interest rate loan policy that he pursued also made it easier for this new emerging bourgeois class to advance their economic ambitions. Also, His monetary distributions has only included the sectors that were anticipated to vote for and support this government.
But with the fall of the oil price from $140 to $60-$70 , the government has run out of the money it desperately needs to continue with enriching his allies, and also to spend on the security apparatus of the regime. For this reason, he is about to remove general subsidies beginning of the new Iranian year.
That’s why toward the end of his first term, Ahmadinejad started talking about his plan to transform Iran’s economy. according to him, the so-called “Economic Transformation Plan” is a much-needed, revolutionary plan for Iran’s economy and no other government since the Islamic Revolution’s inception had the audacity to implement it.
But, in fact, the plan is nothing but to cut general subsidies.At first, it was said that the so-called “targeted subsidy reform” bill would remove only energy subsidies and half of the revenue
it would raise was to be distributed back to the poorer half of the population. However, later the
the government and the parliament hammered out a bill that removes other subsidies; (including food, water, power, medicine) for everyone. It is not even clear which groups of people are receiving the cash payments resulted from removing subsidies since the government has announced several contradictory measures so far only to be and all have been retracted.
It is really interesting that despite his anti-capitaist, anti-imperialist rhetorics, Ahmadinejad has adopted economic policies that is so to the right that none of his predecessor governments dared to take lest it would lead to widespread social uprising.
It has yet to be seen if he will be able to completely carry out the plan while post-election unrests has put the regime in a fragile position and Iran’s economy is in deep recession.