… dictators are lousy economists
Case in point: Mahmoud Ahmadinejad. In an interview a few weeks ago with the New York Times, he assured the interviwer, Neil MacFarqhar that Iran’s economy was in fine shape.
NYT: I’ve been to Iran a lot, and I know people work two jobs to survive and they really are angry about the economy. When you talk to Iranians it is the one thing that they really criticize the government for all the time.
President Ahmadinejad: Let’s wait a few months and see how people will vote in the elections. We are always constantly in touch with the people, we live together side by side. I invite you to make the trip with me to Iran, to visit Iran so you can hear what people say. There is a lot of freedom in Iran. They express themselves, they participate in elections, they hold rallies and gatherings. We are not too concerned, and neither should you be concerned.
And then there was this exchange:
NYT: The other economic point is the question of gasoline. We know that Iran is one of the largest oil-producing countries in the world, and yet it imports 40 percent of its gasoline. That is another thing that people get upset about. Why is it so high, and why don’t you invest more money in refineries, for example?
President Ahmadinejad: Are people really angry over this?
NYT: Yes, occasionally they riot and burn gas stations.
President Ahmadinejad: That is not the reason why they put those on fire. We are actually about to build seven additional refineries. Of course gasoline is used at very high rates in Iran because it is extremely cheap. The government pays a lot of money to afford that.
People buy lots of gasoline because the government subsidizes it. Good sound economics there!
Anyway, the Times is reporting that all is not well with the Iranian economy.
In the latest sign of discontent with Mr. Ahmadinejad’s economic policies, the merchants went on strike to protest being included in the country’s first value-added tax, a 3 percent charge on all products except basic commodities like dairy products and bread.
In an effort to persuade the traders to end their strike, Mr. Ahmadinejad said last week that the new tax law would be suspended for two months. But the newspaper Sarmayeh reported on Sunday that the traders had demanded that the law be permanently revoked.
Further:
Last year, Parliament approved the tax in an effort to increase the government’s revenue and make the traditional trade more transparent. The government began enforcing the law in late September, at a time when the annual inflation rate was hitting 30 percent and traders were frustrated by a decline in sales. International sanctions were also taking their toll.
“Merchants do not want to pay sales tax,†said the carpet seller who declined to be quoted by name. “There has been little trade in the bazaar since March because of the inflation. We cannot import or export anything because of bad relations with most countries and economic sanctions. And the government is increasing the pressure by enforcing new regulations every day.â€
The United Nations Security Council has imposed economic sanctions on Iran for refusing to halt its nuclear program. As a result, businesses must pay more for imports and cannot move money at major international banks.
So sanctions may not be stopping the Iranian nuclear program. But they seem to be fueling discontent with the regime. Not ideal, but at least a start.
Crossposted on Soccer Dad.
