Iran is a country 1,645,000 square kilometers in area, with 70m inhabitants, vast deposits of oil, gas and other minerals, rich soil in most parts, and excellent conditions for building dams for irrigation and for hydroelectric power.

But its economy is state-run and therefore both inefficient and static. The apparent dynamism of this economy is the result of inflation: as inflation rises, GDP increases and per capita income shows growth.

All state-run economies suffer from poor management and vast bureaucratic systems which themselves encourage a vaster bureaucratic system, and consolidate a state-run economy.

Thus, in a state-run economy a large portion of the GDP is spent on “feeding” the everexpanding bureaucratic system, and therefore, the possibility of investment in that economy gradually declines. As a result, the national economy will not be able to create new jobs for the young people who join the workforce. In Iran, where the population is very young the situation is particularly serious as every year hundreds of thousands of young people enter the labor market seeking jobs that are not there.

Yet, in these conditions, the authorities in charge of the economy, rather than finding an effective remedy are thinking of borrowing from abroad, as though they are not aware of what happened in Argentina and do not allow the possibility of the same happening in Iran.

Borrowing can only postpone such an event for a short time. According to the Central Bank of Iran (Economic Indices, No 30, 1^st Quarter of 1381¹) the annual per capita income of Iranians is 8.953 million rials, that is about 1,120 USD. Table 1 below gives the per capita incomes of a number of nations. From this Table it becomes evident that Iran is one of the world’s poorer nations!

Table 1- Per capita income of some nations ($) Germany 25,120 USA 34,100 Australia 20,240 Ireland 22,660 England 24,430 Belgium 24,540 Brazil 3,580 Bosnia & Herzegovina 1,230 Taiwan 14,200 Jamaica 2,610 South Korea 8,910 Thailand 2,100 Egypt 1,490 Guatemala 1,680 Mexico 5,070 Morocco 1,180 Malta 9,120 Iran 1,120

In a world in which per capita incomes of the rich countries range between 25 and 35 thousand dollars per year, 1,120 USD is a shamefully low figure, particularly when one considers the large oil and gas deposits the country possesses, the rich nature of the country, the vast capable human resources, the geopolitical and strategic position of the land… And all this goes to waste in a state-run economy, for poor management and lack of coordination among the managers and decisionmakers.

Again according to CBI the inflation rates in the years 2000-2001, 2001-2002 and 2002-2003 are as givenin Table 2. If we accept these figures as correct we conclude that during the last three years inflation in Iran has totalled 30% while during the same period the dollar has remained more or less stable. While inflation and a stable dollar make Iranians poorer, they reflect higher figures for per capita income!

If we make adjustments for inflation in the GDP, then the per capita income of Iranians in 2002-03 on the basis of 2000-01 fixed prices will be 5.461 million rials or 683 USD!

It is my sincere conviction that if an independent body works out economic indices for Iran quite accurately, it will become evident that in a rich country like Iran the masses are extremely poor. Is it not bewildering and
sorrowful that in a vast land with such natural resources, such gifted and educated people, such an exceptional strategic position, the country of “four full seasons”,... most people should be poor while a small minority is
very rich, because the economy is run inefficiently under poor management?

Table 2- Inflation rate Year % 2000-01 12.6 2001-02 11.4 2002-03 14.4

Many scholars consider the solution to be privatization. Indeed, there has been talk of privatization and a strong private sector for at least a decade now but nothing concrete has materialized. But lately a trend has emerged, which will prove most effective if it is allowed to continue. The formation of a number of private banks authorized by CBI sets a glimmer of hope in the hearts of all the advocates of free market and democracy. If these banks are allowed to be fully active they will gather the astray capitals that people possess and which lie idle. These will be offered to the private sector.

Able businessmen will invest them in sensible entities that will be properly managed and efficiently run. Industries and service providing firms shall grow and – if allowed – will undertake more and more of the production and services that presently the public sector provides very inefficiently. Then, and only then will there be hope for the future of Iran’s economy.

1- March 20th –June 20th 2002