Iranian Economists Speak, But Will Politicians Listen?

As oil prices remain high, you’d think that in an oil rich country there would be few problems.  Enjoy the high demand for your resources, take the extra cash, and invest it in the broader economic development of the country.  It can be so easy to keep everyone happy and government coffers full.  But governments rarely think and act this way.  At least not the one in Iran.

Last week, a group of Iranian economists openly critcized their government for the economic policies that are being implemented in the country.

In an open letter to the media, the economists warned that the government of Mr Ahmadinejad had been making hasty and unscientific decisions, and that if this continued Iran would be pushed into a complex economic crisis. They say instead of analysing the situation, the government just argues official statistics are wrong, and presents its own questionable figures to say the economy is prospering.

It sounds like, despite high oil prices the Iranian economy is not doing so well.  An example?  Consider this – Iran, one of the biggest exporters of oil in the world, is beginning to ration fuel consumption.  How is this possible?  Bad economic policies – underinvestment in refining capacity and wasteful subsidies among other things.

What can be done?  Well, for once, the government can start listening to domestic experts, who know what the Iranian economy is and what it is not.  But it seems that instead, it is only tightening the screws and limiting open debate on policy issues.

There is little doubt that oil prices will remain high for years to come, as the demand for energy continues to rise.  Yet, this does not guarantee that the Iranian economy will stay afloat.  Interestingly, the Wall Street Journal reported a few weeks ago that Iran is looking to replicate China’s model for generating high economic growth.

It will be interesting to follow the results of this economic experiment.  We all should know by now just how difficult it is to simply copy other countries’ economic successes, especially in an environment where domestic voices on reform continue to be sidelined.