Iran’s Election: It’s The Economy, Basiji (Or Is It The Sanctions?)

June 12, 2013

Iran’s economic crisis ranks at the top of the agenda for voters in this Friday’s presidential election. And yet the debate on this issue has been, for the most part, incredibly vacuous. The candidates have spent much of the campaign discussing issues such as inflation and unemployment, and have offered soaring hopes for a better future. However, the simple, unavoidable reality is that Iran cannot overcome its dire economic challenges without first remedying the country’s debilitating animosities with the international community. The fallacy of trying to campaign on the economy without tackling the underlying obstacle of sanctions ultimately produced the unexpected eruption of debate around the nuclear issue over the course of the election’s final week.

The focus on the economy in Iran’s presidential campaign is no real surprise. After all, voters in nearly every society are typically most concerned about the bread-and-butter issues that have the greatest impact on their daily lives. And Iranians have much more acute economic concerns at stake today than at any point in recent memory— the value of their currency has plunged by 80 percent within the past two years; the prices of basic commodities have escalated wildly thanks to sanctions and uncontrolled government spending; and dismal job growth during an era of epic oil revenues has compounded long-term problems of unemployment.

In such an environment, all of the candidates have talked the talk, with the economy featuring prominently in their speeches, slogans, and debate discourse. Former foreign minister Ali Akbar Velayati promised to fix the economy ‘once and for all;’ former Revolutionary Guards commander Mohsen Rezaie offers diversification as a means of ending the country’s reliance on volatile resource revenues; nuclear negotiator Saeed Jalili has advocated a ‘youth economy’ and has argued that the state can fix Iran’s economic woes; Tehran mayor Mohammad Baqr Qalibaf has insisted that he will have the economy fixed in a mere two years; and Mohammad Reza Aref— the one candidate who boasted serious technocratic credentials as the former head of Iran’s prestigious economic planning organization— quit the race earlier this week after struggling to rally a skeptical reformist base behind him.

However, beyond these mostly vague ambitions, none of the candidates has offered a serious agenda that is likely to generate meaningful improvements in the daily lives of the voters. Instead, they have sought to pin the blame for the country’s hardships on a most convenient target— outgoing president Mahmoud Ahmadinejad. Ahmadinejad is the author of many of Iran’s woes, and his odd combination of assertiveness, ignorance, and populism created a perfect storm of irresponsible management for Iran’s economy at the worst possible moment.  

And yet his greatest damage to Iran’s economy was not his proclivity for unrestrained spending, or his repeated interventions in the determination of bank interest rates, or his disempowerment of the government institution that had framed Iranian economic policy for half a century. Rather, Ahmadinejad’s most devastating impact has been his central role in facilitating the dramatic intensification of international sanctions on Iran. These measures have resulted in Iran’s unprecedented isolation from the global economy and the sharp attrition of its revenues and market share. The sanctions were imposed as a result of Iran’s refusal to accede to international demands on its nuclear program, which is first and foremost the prerogative of Iran’s supreme leader rather than its president. However, the international consensus behind the sanctions did not exist prior to Ahmadinejad, and it would not have been nearly as robust or determined in the absence of the president’s penchant for reprehensible rhetoric and messianic musings.

I tend to agree with others that Iran can survive even these incredibly draconian sanctions; the government has the financial wherewithal, the experience in evasion and smuggling, and probably even the political will to muddle through this crisis for an indefinite period of months of even years. But such endurance comes only at great cost— and the burden falls most heavily on the population, ordinary Iranians who are least able to insulate themselves from mounting costs of food and basic goods. Much can be done by the next president to address the longstanding underlying distortions that have inhibited growth and competitiveness in Iran since the revolution; indeed, the consistently terrific Iranian periodical Donya-ye Eqtesad recently offered a compendium of recommendations from highly trained Iranian economists here, including measures to address the currency and monetary policy, anti-corruption efforts, readjusting the subsidy reform program and others.

However, without tackling the sanctions, all this is simply fiddling around the edges while the country’s economy craters. Voters have made this clear that they aren’t interested in more symbolism and empty slogans. “We need to fix our economy,” a garage owner outside Qom told a New York Times reporter last month. “I love Islam, but how do we fix 100 percent inflation? I’ll vote for anybody with a good plan, but until now I haven’t seen any candidate with clear ideas for the future.” Iranians are tired of deprivation and “resistance;” instead, they want modernity and opportunity. “I don’t want a president who survives on bread and cheese and wants the same for us,” a 30-year-old Tehrani told an Agence France Presse reporter earlier this week. “I want a president who eats pizza and wants to improve the economy.”

The contenders for the Iranian presidency appear to have absorbed this. That is why most of the candidates have promised to improve Iran’s relationships with the world, and it also explains the suddenly frank exchange of views on Tehran’s nuclear diplomacy that erupted during last Friday’s spirited televised debate on foreign policy.  Even the much-maligned (and now resigned) hard-line candidate Gholamali Haddad Adel felt compelled to cut through the campaign bombast on the economy during the debate. Haddad Adel argued that he did not believe that better management, a change in the president or the government, or “smiles” at Iran’s adversaries would solve the country’s economic problems. The mantra of the Iranian presidential campaign, to borrow from the now-cliche refrain from the first Clinton campaign, is that it’s the sanctions, stupid. And even an unrepentant revolutionary such as Haddad Adel had to acknowledge that the only durable mechanism for mitigating their impact is the rehabilitation of Iran’s place in the world. Of the eight candidates on stage on Friday, only Jalili sought to evade the obvious interconnection between the challenges facing Iran’s next president and the need to alter Iran’s approach to the nuclear standoff.

Ironically, the across-the-board embrace of the importance of Iran’s international standing for stabilizing its economy represents an implicit vindication of the reform-era policies and the strategy advocated by former president Mohammad Khatami. Khatami campaigned around an agenda that was long on sociocultural issues and relatively reticent on economic issues, consistent with the left-wing roots of his candidacy and movement. However, he took office as Asia’s economies stumbled, and a sharp decline in world demand slashed oil prices to $10 per barrel. Over the course of his two terms in office, he pursued an incrementalist approach that posited strengthening the rule of law at home and improving Iran’s image in the world would pay dividends for the economy in the form of increasing foreign investment and trade opportunities. It was a triad, but ultimately his failure to achieve sufficient progress in any single arena eroded his popular mandate and opened the door to the populist blandishments of Ahmadinejad just as oil prices skyrocketed. Still, the holistic approach of the reformists represents the most effective path out of Iran’s interlocking crises within the constraints of the existing political system. Whoever succeeds Ahmadinejad would do well to study Khatami’s playbook.