In Iran, Issues of Wealth and Poverty Matter but also Perceptions

Gareth Smyth

A coffee-table book published in London last year by I.B. Tauris spotlighted Molla Nasreddin, a satirical Azeri magazine published from 1906-31 in Tbilisi, Tabriz and Baku. Molla Nasreddin highlighted the gap between rich and poor and satirised rulers and clerics in the Russian and Iranian empires.
The more things change, the more they stay the same.
Recent protests-cum-riots in Iran produced a welter of social media comments and videos of people criticising rising prices. In several clips, veterans of the 1980- 88 Iran-Iraq war said their needs were ignored while the better-off buy new cars, jewellery and luxury apartments.
Some of the videos ware produced by principlists (or fundamentalists) trying to establish that Iranian President Hassan Rohani cares only for the wealthy and has abandoned the egalitarian ideals of the 1979 Islamic Revolution and the solidarity of the 1980-88 war.
The protests, in which cars and shops were torched and at least 21 people killed, surprised many outside experts who reduce Iranian politics to principlists versus reformists or people versus regime. In fact, the economy has dominated Iranian elections for decades: In 2005, Mahmoud Ahmadinejad won a presidential landslide with a simple slogan of putting the oil money on the sofreh, a dining mat used by poorer Iranians.
A social media furore developed in 2015 after two young Tehranis were killed when they crashed a canary-yellow Porsche. Overnight, the Instagram page of glamorous 20-year-old Parivash Akbarzadeh had 40,000 followers, some savouring pictures of her glitzy lifestyle while mourning her loss and others expressing disgust at Tehran’s rich kids.
Her passenger’s identity added to the tumult. Mohammad Hossein Rabbani-Shirazi, the Porsche owner, was the grandson of the late Ayatollah Rabbani-Shirazi, once an aide to Ayatollah Ruhollah Khomeini, the 1979 revolution leader. Such was the outrage that Iranian Supreme Leader Ayatollah Ali Khamenei lamented the “emotional insecurity” of rich young Tehranis “intoxicated by pride in wealth.”
None of this is simply a matter of numbers. Djavad Salehi-Isfahani, professor of economics at Virginia Tech, who has long studied inequality in Iran, said there is a “generally low rate of poverty, 4.7% for the country as a whole in 2016-17.” Many changes since the 1979 revolution, especially in health services, have improved conditions for most Iranians.
Perceptions matter, however. Faced with tightening international sanctions, Ahmadinejad reduced expensive state subsidies on items such as fuel, bread and electricity and touched a raw nerve. Petrol rationing and a price hike to 11 cents a litre in 2007 led angry motorists to set petrol stations on fire.
Such subsidies were, in economists’ terms, “regressive.” While the less well-off no doubt liked cheap petrol and electricity, the rich benefited the most. Affluent Tehranis had no worries leaving their gadgets charging while they headed to their Caspian villas in petrol-guzzling Porsches.
To cushion the blow of phasing out these subsidies, Ahmadinejad in 2010 introduced cash handouts. Though these were not so targeted as originally planned, they did benefit the poor overall. Wary of upsetting voters, however, Ahmadinejad and representatives in the Majles, or parliament, put off unpopular decisions. This led to a messy, opaque situation in which Iran has some subsidies and some cash payments.
Rohani, elected in 2013 and re-elected last year, is trying to phase out both. In line with international orthodoxy led by the International Monetary Fund, he sees future economic growth based on a robust private sector and a streamlined state. Rohani would like rising oil revenue to go into productive investment, helping reduce youth unemployment of 25%, rather than into handouts or subsidies.
That’s the medium or long term. In the short term, argued Salehi- Isfahani, Rohani’s reduction of cash subsidies has led to “increasing poverty rates for urban areas” and “a sharp increase” in rural poverty.
This means Iran’s improving economy under Rohani’s policies and eased sanctions after the 2015 nuclear deal, going from recession to 7.4% GDP growth in the first half of 2016-17, has been scant benefit to many outside Tehran.
“The good news,” Salehi-Isfahani wrote, “is that the economy has continued to grow in the first six months of 2017-18… but we do not yet know if this growth has started to reach down more widely to the poor in smaller urban areas.”
Perceptions feed people’s expectations. Political rivalries have encouraged corruption accusations that have fed public anger. December saw bitter allegations traded between Ahmadinejad and the Larijani brothers, Ali Larijani, parliamentary speaker, and Sadegh Larijani, judiciary chief.
Time will tell if the protests lead politicians to tone down the discourse, at least until the fruits of renewed growth spread more widely. “President Rohani is not the only player in this game, as the Majles will take up the issue shortly,” Farideh Farhi of the University of Hawaii said. “Some parliamentarians are even talking about bringing back rations, which Rohani’s economic team is trying very hard to resist.”

Gareth Smyth
has covered Middle Eastern affairs for 20 years and was chief correspondent for The Financial Times in Iran.
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