How the Economy Plays into Iran’s Turmoil

Djavad Salehi Isfahani
Djavad Salehi Isfahani
Djavad Salehi Isfahani Professor of Economics - Virginia Tech

June 24, 2009

Editor’s Note: Djavad Salehi-Isfahani speaks from Tehran to Kai Ryssdal on National Public Radio’s “Marketplace” about the economic issues underpinning the current political crisis in Iran.

Kai Ryssdal: Street protests continued in Iran today. There are reports of confrontations between riot police and protesters near the parliament building in Tehran. There are no signs of political compromise coming, so we turn now to how the Iranian economy might recover. Djavad Salehi-Isfahani is on the line from Tehran. He’s a professor of economics at Virginia Tech. As I said, he’s in Tehran right now. Good to have you with us professor.

Djavad Salehi-Isfahani: Good to be with you.

Ryssdal: Obviously these protests that are happening in the streets of Tehran and across the country are intensely political and social in nature, but once things calm down, there will be an economic context in which Iran has to function. Could you frame that context for us? What is happening there in the Iranian economy?

Salehi-Isfahani: There are two issues that come to mind. One is the fact that oil prices are lower. And even without any disturbance, the new government would face huge problems in terms of limiting demand so the budget deficit would be manageable and the trade deficit would be manageable. The second issue that is really important now is that the technical elite, and I’m thinking of doctors, engineers, lawyers, teachers, are quite disheartened by this turn of events, and it’s going to be difficult to get them back to work with the same full purpose as before.

Ryssdal: So what will President Ahmadinejad or whoever winds up running the new administration in Iran, how will they get the middle class, the backbone of a growing economy, to buy in and to participate then?

Salehi-Isfahani: That’s a big challenge for them. I suspect very strongly that President Ahmadinejad is going to continue. Very few people bet that he’s going to be out of government, so I hope that they are thinking hard about finding a way to deal with the crisis in a more peaceful way. This is a complex economy. It’s been doing relatively well. And it’s been providing basic services to people: health, education. So things are working in some way, and to throw that away to win political hegemony. I think that would be very unproductive. 
Access the full interview and show on the Marketplace website »