The following article is slightly abridged from the November issue of Highlights(number 36), organ of the Communist Party of Iran (Marxist-Leninist-Maoist)

ECONOMIC WAR AGAINST THE PEOPLE:

A SURGE OF CRISIS AND OF RESISTANCE

The Islamic Republic continues it’s all out war against the Iranian people: political and economic war, along with security and military crack downs. This economic war has transformed itself into open war against the people. The military and security forces of the Islamic regime have been mobilized to wage this brutal war against striking workers, against the people’s rebellion in opposition to gasoline rationing, and against the uprising of deprived and poverty stricken people in small towns throughout the country. The Ministry of Interior reports that the budget for the suppression of the people’s discontent has increased twenty fold (Mehr newspaper, 09/09/2007).

Rationing of gasoline was the first cannon shot of the regime against the people. Price inflation is the regime’s second volley. The removal of tariffs also is a direct proclamation of war against domestic producers and employed workers.

Inflation (increase in consumer prices) (1), in a matter of just a few months, has produced a huge transfer of wealth from the hands of poor people to the hands of a wealthy group of financiers and to the hands of the wealthy strata of Iranian society who have ready access to holdings and stocks of commodities. Rich families holding top government posts, with access to power of decision making on matters of economic policies, have instantaneously gained astronomical wealth. These rapacious families of privilege have become even fatter by illegally importing consumer goods. In just the first six months of the year, consumer imports increased by 77%. These uncontrolled imports have not only destroyed the domestic sugar cane industry and plantations but also have destroyed the livelihood of thousands of small producers and peasants. The crisis in the sugar sector has caused enormous unemployment among industrial workers and agricultural workers. The same trend is emerging in the domestic tea and rice sectors. Inflation, economic stagnation, and widespread unemployment are the three observable signs of the present economic crisis. Iran’s economy previously suffered these same ills in 1976. Today’s crisis, however, is qualitatively different. Indices of capital’s profit in 1976 were equal to 257 units; but in 2001 these indices were equal to 46. (These statistics are taken from Hadi Zamani’s web site, posted 09/16/2007).

According to Iran Economic News, quoted by Central Bank, the rate of inflation at the end of August 2007 with respect to the end of August 2006 was equivalent to 15.6%. As we know, two years ago Ahmadi Nejad declared his number one economic priority is to reduce inflation. According to the World Bank, Iran’s GDP per capita is less than one third of the average of the world’s GDP per capita; compared with all other countries, Iran is number 111 (Year Manual of 2000). In terms of population Iran is the 18^th most populated country but in terms of GNP it ranks the 34th. Every year Iran’s unemployment increases by one million. The official rate of unemployment has been 20%; among young people this figure stands at 40%. Every year, 250,000 graduates seek to enter the work force, but only 70,000 of them find work. There are 20 million school children and youth in Iran. The vast majority of them will join the ranks of the army of unemployed (Hadi Zamani’s web site).

The Islamic Republic’s economy has reached a dead end. It is the working people and poverty stricken people who are paying the price for it. With every economic shock, one more layer of the population is thrown into abyss of poverty and one more layer of wealth is added to the belly of the 1000 ruling family and their merchant and capitalist cohorts and foreign partners. Poverty forces people to engage in pre-capitalist modes of production, and prostitution develops. Increasing the political repression and social oppression (such as the oppression of women and the tightening of the chain of religious subservience) by the state, is another product of the economic crisis.

This economic crisis is complete mirror image of the contradiction between the ruling reactionary / oppressive production and social relations with productive forces (mainly the productive potential of the people). These reactionary production and social relations waste and destroy human and non human resources.

The economic crisis in turn, intensifies the contradictions between the regime and the people as well as the internal contradictions within the ruling class and pushes the regime more to the end of line. Different top individuals and factions of the Islamic Republic hurry up to criticize economic policies of the government and put the blame of this horrendous economic situation on each other. For example even Khamenii (the Leader of IRI) declared: “I am not aware of all actions of the government”! Or Tajzadeh (a spokesperson for the Reform faction of the II) says: “Corruption has spread to every corner”.

The working people and toilers have no way out except to launch waves of resistance against the waves of economic crisis. The courageous striking workers of the sugarcane industry of Haft Tappeh are a typical example of this wave of resistance, which must not subside because the very immediate lives of the working people depends on the spread of waves of resistance.

THE ESSENCE OF THE CRISIS

Among typical and widespread analysis some consider the monetary and financial policies of Ahmadi-Nejad’s government as the key cause behind the present economic crisis; they say that the root of this crisis “lies in rising levels of liquidity” and that the government should change its monetary policies. Some others consider the crisis to be a by-product of the hostile policies of the Islamic Republic against the US and the resulting economic sanctions and believe to remedy economy first the regime should solve this “political crisis”. The functionaries of the World Bank and the International Monetary Fund consider this crisis to be the result of a diversion of big share of government spending toward subsidies - and propose that these subsidies must be cut and instead go into “investment”. (1)

But, this economic crisis is first and foremost, a chronic crisis that has its roots in Iran’s lopsided and backward economic structure. Economy of Iran is a disjointed or lopsided capitalism with remnants of feudalism. The serious lopsidedness of this economic unit (of the world capitalist system) is because on one hand it has a developed capitalist economy which operates –more or less—with productivity standards of the world capitalist system and on the other hand it is an economy that mainly is based on backward productive forces and in some sectors of economy with reliance on pre capitalists modes of productions. This disparity is a source of perpetual crisis and economic shocks include grinding inflation, which takes its toll from the majority of the people in the form of increased poverty and instability.

Some economic analysts speak of Iran’s “distorted economic structure” as the main cause of the Islamic Republic’s economic crisis. But very often they mean that Iran has missed the boat of economic restructuring (or modernization) which other similar economies such as Turkey, India, Algeria, etc have gotten onto in 1990s.

Of course this is partially true. Because the fact that imperialist dominated economy of Iran did not go through the economic modernization that other dominated economies went through, have contributed to intensification of the fundamental structural lopsidedness of Iranian economy. This same problem has increased the inflationary pressures too.

Along with widening of this gulf, economic corruption has skyrocketed and in turn has become one of the important contributors to intensifying the lopsidedness of economy.

Here we will try to further elaborate on the above mentioned 3 factors of lopsided economy, delay in modernization and corruption. These are the most important factors in understanding the present economic crisis. International sanctions have strengthened all three.

LOPSIDED ECONOMIC STRUCTURE

Iran’s national economy is a backward capitalist economy in which remnants of feudalism continue to play an important role in its production and re-production. But this economy has been forged in the context of an international division of labor. Iran, as a strategic petroleum exporter, has had a certain historic place in imperialist international division of labor. According to a division of labor in the world capitalist system, Iran’s responsibility has been to produce and export petroleum. This function, by its very nature, hampers an even and coherent development of economy and its different sectors.

It is only the petroleum industry, and few others, which are run with advanced means of production, whereas the vast majority of economic sectors (agriculture, in particular) are swimming in backwardness. The petroleum industry has no effective back and forth linkages with industry and agriculture of Iran, thus provides no stimulant to their growth and development. On the contrary, it exposes other economic sectors to ruthless competition in the world market, ensuring a continuous instability for them. How? The petroleum sector is the ;ain linkage point between the Iranian national economy with the world economy. This petroleum sector plays the decisive role in transferring the world prices to the economy and setting the currency exchange rates. It imposes the exigencies of world productivity rates and rivalry over domestic economy of Iran. Petroleum export generates a high rate of currency exchange which renders Iran’s domestic agricultural and industrial products non-competitive in the domestic and world markets. The petroleum economy takes away all motivation for developing an agricultural sector by relying on peasants. A strong currency with high purchasing power makes importation of consumer goods and foodstuffs “more rational” to the detriment of domestic production and producers. Hindering steady development of agriculture and food security is an inescapable part of the logic of the world capitalist system in general and specifically and inescapable outcome of the workings of a petroleum economy dependent on the world capitalist system.

In an economy, where only a single sector (petroleum) has relative stability, and where agriculture and small industry are bankrupt and always in crisis, it can only be expected that the majority of the country’s workforce is unemployed - or underemployed in unstable or informal economies.

Let’s take a look at the “open door” policy of the Iranian regime and elimination of many import tariffs. For instance, 6 million tons of sugar has been imported by Iran – despite the fact that Iranian domestic agro-industry is capable of satisfy this demand. So why is Iran’s agro industry languishing? Because Iran’s domestic economy is part of the world market, and the price of sugar is formed in the world market. Therefore, compared to world market prices for sugar, Iran’s domestically produced sugar is more “expensive”. In Marxian economic terms, the labor power to produce one kilogram of sugar in Iran exceeds the amount of labor power required to produce that same kilogram in the international market [in this era that all economies of the world are integrated into a single world economy, the socially necessary labor time to produce any commodity is calculated on the world scale]. Iran’s economy is subjugated to the law of value at the international level. From the point of view of capitalist market, because Iran’s agro industry (tea and rice, as well as sugar and other foodstuff productions) cannot produce with sufficient productivity, must be destroyed. The fact that millions would lose their livelihood and become impoverished has no significance.

Of course, the gates are always open for reactionary demagogy. Look how the Iranian ruling classes justify this process of horrendous destruction by saying that they want to “defend the consumers”. Mohammad-Sadegh Mofateh, the Vice Minister of Commerce, when asked about the torrent of imported sugar, said: “We cannot permanently protect domestic production with tariff walls. Why should consumers have to pay 800 Tumans (about one dollar) instead of 500 for one kilogram of sugar?” Ali-Akbar Mehrabian, who heads the Ministry of Industry and Mining, said:” Maintaining high prices for sugar in our country, at prices above the world market, only results in consumers being ripped off. That is why we have authorized importation of sugar in a regulated manner.” (Sheida Elmi, Moj News Agency). In reality, the International Monetary Fund (IMF) and the World Bank precipitated the destruction of the domestic sugar industry by imposing a policy of “privatization” in 2002; beginning in that same year, the Iranian government began to authorize sugar imports. In the world capitalist economy, “privatization” does not mean necessarily that state-owned productive facilities are transferred to private ownership and that production continues. On the contrary, it often means that the production facilities are closed down and workers are thrown out of jobs. Sometimes it means the production unit will be replaced by a new line of production (employing higher technology and fewer workers) or that of line of production would be completely erased and replaced by importation of the same products by the state ministries or “private” middle men (“privately” related to the families of the ruling classes—translators not).

The crisis in Iranian sugar agro industry is a clear example of the working of economic subjugation and “lopsidedness”. Until recently, protective tariffs were an obstacle to Iran’s importation of cheap sugar, and Iran’s sugar agro industry was “artificially” (“artificially” with capitalist criteria) propped up. But with the economic “restructuring” underway, the regime has discontinued the tariffs in order to allow the competitive pressures to destroy these “inefficient” domestic economies. We must note here that in typical capitalist economies, competitive pressures lead to modernization of productive forces. But in imperialist dominated economies, it leads to stripping these economies, looting the wealth and holdings, destroying the productive forces (in which the human beings are the principal aspect) and to an economy which is more and more a monoculture economy (like mono product economy of petroleum-- trn)

DELAY IN MODERNIZATION

Lopsidedness of Iran’s national economy is not the product of the Islamic Republic era. This economic structure was forged in the period following World War II under auspice of US imperialism. But as we have noted before, the lopsidedness has intensified during the past 28 years of the rule of the Islamic Republic. Because during this period, while the Iranian economy being thoroughly dependent on the world market; at the same time, has been left aside from the economic modernization which was carried out intensely in other imperialist dominated economies (such as Turkey) in 1990s. In other words, while the Iranian economy has become more deeply dependent on the world market, its productive forces have deteriorated. Each of the blades of this pair of scissors has grown longer and sharper. If the economy was not dependent on the world market and it was not under the command of law of value of the world capitalism, then its lagging behind from the world modernization would have qualitatively less impacts on it.

Falling of productivity of production and rising of the costs of production, have ousted the Iranian domestic productions from the Iranian market itself let alone from the world market. This has been Islamic Republic’s economic achievement.

Majority of Iran’s present economic infrastructures were initially built during the period 1954 to 1978 – and have not been renewed since. This is more so in the case of the petroleum sector which due to the lack of access to improved technology there was little or no upgrading or renovation of production facilities. Consequently, large segments of the industrial sector have been operating under 40% capacity. Or due to lack of spare parts which are imported from abroad have shut down completely. During the Shah’s reign, Iran produced 6 million barrels of oil per day. Today, Iran’s daily production barely surpasses 4 million barrels a day. Because the international petroleum companies do not make investment in renovation of the petroleum means of production (petroleum technology). The US government have forbidden the American oil companies to do so. Petroleum investments has gone steadily down especially since 2000.

Volatility in the relations between the Islamic Republic and the imperialist powers is the main reason behind this situation. According to the World Bank, Iran ranks 135^th in terms of attractiveness for investment (Fars News Agency, 09/26/07). That is a fall of 16 ranks compared to the previous year.

The economic impacts of the Islamic Republic’s crisis ridden relations with the imperialist powers have other aspects too. The global capitalist system using financial leverages such as banking and credit system, has caused delays and obstructions in accumulation circuits. For example, most of Iran’s international trade and financing is transacted through banks in Dubai or Iran obtains many of its needed technologies from black markets.

Once the imperialist powers – especially US-- decided that the for them the consumption date of the Islamic Republic of Iran is over and no longer useful for them, their economic pressure has multiplied. This pressure further deforms Iran’s economic structure, pushing it closer to disintegration.

At this point we should make a point regarding the effects of Ahmadi-Nejad’s monetary policies on consumer price inflation. There is no question that Ahmadi-Nejad’s policies have intensified the inflationary spiral. But while Iran’s economy may be subject to influences of Ahmadi-Nejad’s policies, it is actually under command of the world market. Price inflation in Iranian economy is not like those in typical capitalist economy. Iran’s dilemma is what we have discussed above: twins of dependence on the world market and economic backwardness (the backward production relations and means of production) have united in a painful economic scissors. Additionally, deterioration of productive forces and the constantly diminishing productivity under the Islamic Republic have doubled this inflationary drive. As stated above, in this era of world capitalism, the prices (or the socially necessary labor time for production of this and that thing) are not determined at the level of the domestic market but rather on the scale of the world market. In a backward economy which is connected with the world economy like a connected container, the commodities will be produced with above average world market cost. This causes an upward pressure on prices. To mitigate this situation the governments utilize subsidies. But the same logic which seems to demand subsidies also ultimately dictates that such subsidies be eliminated.

One essential conclusion we can draw from this state of affairs is that any political force (regardless of its origins and intentions, being “secular” or even “socialist”) sits atop this same economic structure, only trying to “manage” it better without radically transforming it, eventually will become just like the present reactionary ruling classes.

CORRUPTION OF DOMESTIC ADMINISTRATORS OF THIS ECONOMIC SYSTEM

Widespread corruption, or what everyone in Iran knows as runtkhary and runthkharan ( rent gobbling and rent profiteers), is a very important factor in the current economic crisis. Runtkhary refers to the various ways that the ruling class members and affiliates enjoys special privileges in both formal and informal economic activities: for example, access to insider information before those being declared openly (such as information on interest rate changes, stock prices); easy access to raw materials and capital commodities with preferential prices offered by the state; easy access to state permissions for business investments, building constructions, import /export licenses, and access to leverages of the judicial system for squeezing out the rivals; and infinitely other ways. [These privileges are the “rent” of being close to the powers that be. That is why it is called “rent gobbling” and rent profiteers -trn] The vast size of Iran’s informal economy and its black market is a clear indication of mind-boggling corruption in the Islamic Republic. The implementation of the UN-sponsored sanctions against Iran for continuing its uranium enrichment program has greatly boomed the black market economy controlled by the Islamic capitalists and merchants. A credible German newspaper has written: “The black market is best business of the Mollahs. They have no difficulty importing contraband products because they control customs, border crossings, and the postal service.” This paper adds: “Iran’s economy is tightly controlled by the clerical regime. Virtually all transactions are, directly or indirectly, conducted by the religious elite. There are nearly 120 religious foundations, who not only have petroleum exports under their control but also are owners of construction companies, air transport, automobile and food production factories and distribution firms, banks, import of electronic gadgets etc. It is also said that they control the contraband traffic in firearms and narcotics. Nikola Pedeh, an Iran specialist from the International Research Institute in Rome, says “They hand out [government] contracts through their network of affiliated foundations” (Welt Am Sonntag-Nr. 19, May, 2007). This paper also notes that, the international sanctions have further consolidated the control of these Foundations over trade in Iran.

Corruption has so thoroughly encrusted the Islamic Republic’s government apparatus that the regime’s own functionaries have begun to complain. According to a report by ISNA (Iran’s official news agency) date August 3, 2007, Mohammad-Reza Rahimi, the Director of Accounting for Iran’s Supreme Court, has said that “The volume of financial corruption charges is so huge that consumes half of the country’s judicial budget.” Just two of these cases, Parse Jonoobi (Petropars Company)*2 and Sandoghe Gharzol Hassasne Espehan *3, could themselves account for nearly half of that budget. Corruption if not outright robbery by top government officials during the privatization program / transfer of state assets to private ownership through Article 44 is so huge that Rahimi was obliged to say that: “ In our country, so far, privatization has a very mixed record; in other words, it has become associated with collusion and transfers at prices below the values.” (ISNA, 08/03/2007). In this sense, the economic crisis has become just another source for these reactionaries to rob the working people from what they have produced with their collective toil.

Formation of a mafia economy is not an exclusive art of the Islamic Republic of Iran.This parasitic stratum is a feature of all imperialist dominated economies. In the face of the crisis which is gripping Iranian economy the strategy of the administrators of the Islamic Republic is “to loot”! That is the only thing they can do: they will plunder and strip the economy as much as they can. They do this with taking full advantage of decision making power. This “looting” has intensified in the recent period as because the Islamic mafia are not sure how long more will last in the chairs of power.

CAPITALIST PROPOSALS TO “RESOLVE” THE CRISIS

Capitalism, through the government officials or international institutions or the mouth of its economic experts, have proposed a number of solutions to Iran’s economic crisis. The IRI have implemented some of those proposals. For example it has eliminated gasoline subsidies and import tariffs and “freeing” the prices. But from the capitalist point of view, structural reforms will require far more ruthless measures: Iran’s labor laws will have to be revised so as to make Iranian workers more right-less and cheaper to be appealing for foreign employers. Iranian labor is still considered to be “expensive” in comparison to Chinese labor. (For this reason, imported Chinese tombstones are half the price of Iranian ones!); unproductive industrial units must be closed down and be replaced with imported goods; and in future on the ruins of those units in agriculture and industry (and destruction of millions of workers and peasants) are to come out new lines of production; the banks must be privatized, and the major and minor operations of petroleum industry also should be transferred to private firms; the law regarding foreign ownership of Iranian assets and property must be revised to open gates for unlimited activity of foreign capital. Petroleum revenues must be invested primarily in the upgrading of infrastructures in communication, banking systems, etc. in order to facilitated free flow of capital. These are measures which Iran’s ruling classes are quite willing to implement. However the road is not straight. Different power centers dominating the economy throw obstacles at each other creating tensions within the ruling class as between the IRI and the imperialists capitalist powers. One of the demands of the imperialists is to break these monopoly interests and the power centers are not willing to. Economic restructuring within the framework of the world capitalist system does not only entail the destruction of small domestic industries like sugar industry, etc; it also entails the breaking up the monopolies who lead the economy along the old lines. (A similar tension also existed between the Shah’s regime and the US imperialists in the 1960s—the Shah at the beginning was unwilling to adopt the US proposed socio economic reforms but later accepted them and called them White Revolution).

THE PETRO ECONOMY

During the first decade of the Islamic Republic (1979 to 1989), the state a petroleum revenue of $500 billion. Since 1989 these revenues have nearly tripled. Now the question arises – how has this oil income benefited the Iranian masses, in particular the toiling masses of city and countryside? And what kind of economy has developed? Compared to 1979 the population under poverty line has doubled, and the class divisions has widened dramatically. What has developed is an economy that is not even able to provide food and the basic necessities of life for the masses; an economy that creates unemployment, rather than generating jobs; a crippled economy that is incapable of productively producing the simplest industrial products; an economy that promotes corruption and mafia-type monopolies; an economy which is at the mercy of international thieves.

The obvious conclusion to be drawn from an analysis of the economic crisis in Iran is that the

current economic structure – be it under rule of the Mollahs or monarchs or the republicans—will have this same criminal workings. As a proverb says: sting of Scorpio is not out of meanness but out of its nature. Even if a revolutionary force takes command of this economic system without radically overturn it – by breaking away from the world capitalism, by uprooting feudalism as well as comprador capitalism – then its nature will rapidly change and will dance with the tunes of this system and will become a guardian of a reactionary backward economy imposing exploitation and poverty on masses and swimming in corruption. This point, in particular, must be brought to the attention of those who call themselves “communists” or “socialists” but their vision of the future economy is to take the same thing but “run it better” and carry out “more equitable and just” distribute of the revenues among the masses and use the oil revenue “rationally”. The radical transformation of this economy in the interests of the masses of people will be a daunting and complicated task and is possible only by mobilizing and organizing the masses, in their millions, for a New Democratic and Socialist revolution.

The economic crisis hand in hand with political crisis (in the center of which lies threats of US military attack) has placed the society on the thresholds of big turns and upheavals. Under these conditions, both opportunities for making a proletarian revolution are under way as well as great dangers. We communists must mobilize and organize the working and toiling masses of the county for a revolution wile avoiding the pitfalls of dogmatic stagism and gradualism. Waves of economic crisis should generate waves of popular resistance by the masses who suffer oppression and exploitation. The communist analysis and economic program must find its place in the midst of these struggles and among the advanced masses of the struggle. We must and clarify the characteristic feature of a libratory economy for the working people and toiling masses and lead their fighting energy towards the only real solution which is a genuine socialist revolution.

*1- One IMF report on Iran says: “Iran has now reached the point where a clear choice must be made between an strategy that continues to rely primarily on subsidies and government intervention with long term negative effects on macroeconomic stability and growth, and one aimed at sustaining long term growth efficiency and private sector-led economic development” (IMF- “Islamic Republic of Iran—Selected issues and statistics Appendix 11--cited in: Iran’s Quandary Economic Reform and the “Structural trap” by Parvin Alizadeh- 2002)

*2- South Pars Oil company also known as Petropars Oil company. The largest of Islamic

Republic Oil Company that has a right to make a contract with all foreign multi national

oil companies

*3- influential government monitory fund company based on Islamic law in which money loaned

without interest.