Tuesday, July 28, 2009

Unrest, Malaise, and Corruption in Iran

To the news media, political unrest comes out of nowhere. Take the current protests in Iran, for example. News reports explain the origin of the protests with a two- or three-word phrase such asdisputed election result.” There must be a secret reference book, a sort of news media almanac, where reporters can find this explanation if they don’t know it already. A news report is really digging deep if it explains that massive election fraud wasn’t enough to throw the election to the incumbent, so the government just started making up numbers during the vote count.

But it takes more than a single triggering event, such a rigged election, to create large-scale political unrest. You cannot understand the political wrangling in Iran without understanding the economic climate there. Iran has been struggling to get its economy moving for the last 20 years, and it was finally starting to get some traction last year, with the bubble in world oil prices, only to have its hopes dashed with the collapse of the bubble at the end of the year. The economy is also being affected by the global recession, despite the government’s ideological assurances that Iran was above worldly problems like business cycles. Especially in Tehran, unemployment is high and businesses are failing.

Behind any sudden political movement like the Sea of Green in Iran, you find an economic crisis within the context of a long-term economic malaise. You can see the same dynamic at work in the United States, where the most energetic political reformers (and the most frequent political demonstrations) occur in cities where there are large neighborhoods living on the edge of poverty, not just for a few years, but for decades.

Economic malaise also does not come out of nowhere. It could have natural causes, but more often, it is found together with a culture of official corruption. How many troubled U.S. cities that had struggled for decades finally managed to turn around financially within the ten years after city officials were convicted of bribery and corruption charges and removed from power? From economic principles, it makes sense that official corruption could cause economic malaise. When officials see public policy decisions through a lens that is unrelated to the good of the public, the result is horrific inefficiency in government operations, whether it is trash collectors that don’t collect trash or a military that does everything but defend its country against attack.

It is something like this latter scenario that people point to when they look at the troubles in Iran’s economy. There is more than enough corruption to go around in Iran’s government, but everywhere you go in Iran you find the corrupting influence of the Revolutionary Guard. Far more than just a security force and a sort of thought police, the Revolutionary Guard is the biggest player in Iran’s black market, and it has come to own and operate factories, clinics, and countless other businesses that, in happier times, were privately managed. The Revolutionary Guard’s fortunes have grown tremendously under President Mahmoud Ahmadinejad. Among Ahmadinejad’s many other corrupt decisions, he has thrown huge sums of money to the Revolutionary Guard in the form of government contracts. Some of the contracts are completely legitimate, but others are thinly veiled political protection payments to Iran’s version of the mob.

The protesters in Iran are certainly sincere when they ask for peace, freedom, and fair elections. But a big part of the impetus behind the protests is economic in origin. The people in Iran are hoping for a government that won’t rob their country blind.