Ahmadinejad’s sense of economy

It was the beginning of August 2012 in Iran. Mahmoud Ahmadinejad was president. The national Tv stations were urged not to broadcast any images of people eating chicken. The government was distressed because of food prices – chicken in particular – which had tripled since 2011.

Iranian President Mahmoud Ahmadinejad smiles as he meets with United Nations Secretary-General Ban Ki-moon at the United Nations in New York September 24, 2007. REUTERS/Eric Thayer/File Photo
Iranian President Mahmoud Ahmadinejad smiles as he meets with United Nations Secretary-General Ban Ki-moon at the United Nations in New York September 24, 2007. REUTERS/Eric Thayer/File Photo

Many Iranians started blaming president’s policies and his subsidy-reform project, deemed to be the main source of inflation in the country. International isolation merged with an escalation of economic sanctions against the Iranian nuclear program and an enormous reduction of oil revenues from the European union. A few months later, the rial was plummeting against the dollar, the banking system was on the brink of bankruptcy, recession was biting. 

It is now April 2017, Ahmadinejad is back. His legacy is still very heavy to carry for the Islamic Republic and the people of Iran. Nevertheless, the former president, a populist conservative figure, who run the country in controversy since his election in 2005, registered as presidential candidate. Elections are scheduled to be held on May 19. Yet, before that date the Guardian Council has to approve a final list of candidates by April 27. As American president Donald Trump is threatening the Iran’s nuclear deal, this move seems to be a strong reaction from the hardliners front.

How would a third Ahmadinejad’s presidency be? During his two four-year terms (from 2005 to 2013), Iran’s economy experienced a long distressing decline.When his successor, Hassan Rouhani, took office in 2013 he said that inflation rate reached 42 percent with Ahmadinejad’s administration.

For this reason, it is worth brushing up our memory.

A populist agenda for a populist president

Before getting elected, Ahmadinejad campaigned to eradicate what he called the “oil mafia”. He pledged to proceed with a huge distribution of state resources and oil revenues. He presented an anti-corruption agenda, attacking the economic elites. He also promoted a massive housing project to build 600,000 low-income units across the country. In order to finance this plan, the Central Bank of Iran lend funds to commercial banks: liquidity arose sharply, followed by a process of inflation soaring. Eventually, Ahmadinejad attempted to amend labor law, but he faced a strong opposition. In 2010, his government decided to carry out a relevant reform to price subsidies for energy. All the money collected from these cuts was then distributed to the population. This mechanism boosted the money supply and inflation.

Ideology first

“We must move toward Iranian and Islamic theories. Economic theories must be based on justice, on eliminating deprivation, on helping to encourage our people’s talents to blossom and on securing the comprehensive progress of our dear Iran”. Ahmadinejadpronounced these words on May 2008 and the Islamic Republic News Network broadcasted his speech. According to his view,ideology had to orient both trade and diplomacy. Therefore, considerable effort was devoted to portray a dark image of Western countries, blamed to plot by “creating a false mood” against Iran’s nuclear program.

His supporters and his opponents

The Revolutionary Guards strongly supported Ahmadinejad’s conduct. Their involvement deeply extended during his eight-year presidency. As Nader Habibi explained: “He appointed many former IRGC officers to key government positions in the ministries of defense, oil, and energy, and in various state-owned banks. Many large government contracts were also awarded to construction and engineering firms affiliated with the IRGC”.

Ahmadinejad also faced a strong opposition even within his government. Since he took office in 2005, at least six ministers resigned or were fired. In 2008, Davoud Danesh-Jafari, responsible for Financial Affairs of the Islamic Republic, openly criticized the president’s economic policies: "During my time, there was no positive attitude towards previous experiences or experienced people and there was no plan for the future. Peripheral issues which were not of dire importance to the nation were given priority." Furthermore, in 2006, 2007, 2008 and 2013 a group of Iranian economists wrote four open letters to the president, attacking his economic mismanagement.

Is in Iran on its way to replicate this political format? In 2009, while asked about his conduct, Ahmadinejad was reported to say: “I pray to God that I will never know about economics”.

We will see how the story will end, especially if he will be approved as a formal candidate.

 @transit_star

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