Rouhani's Empty Economic Package For Iran

[skylight2]

Why President Rouhani’s “Economic Package” is Empty 

Neoliberal Economics Comes to Iran

by ISMAEL HOSSEIN-ZADEH 

Tired of the oppressive financial hardship, wrought largely by the imperialist economic war against Iran, the Iranian people elected Hassan Rouhani president (June 2013) as he promised economic revival. He premised his pledge of economic recovery mainly on his alleged ability to bring the brutal sanctions against Iran to an end and integrate the Iranian economy into the world capitalist system. His promise of removing or alleviating sanctions, however, seems to have been based on an optimistic perception that a combination of the so-called charm offensive and far-reaching compromises over Iran’s nuclear technology would suffice to alter the Western powers’ sanctions policy against Iran.

 

More than a year later, while Iran’s peaceful nuclear technology is reduced from a fairly advanced to a relatively primitive level (from 20% to below 5% uranium enrichment), critical sanctions remain in place and economic recovery remains a dream.

 

To mitigate the oppressive burden of the so-called stagflation, a combination of stagnation and inflation, the president and his economic team recently crafted an economic package, “Proposed Package to Turn Stagnation to Expansion,” which turns out to be disappointingly devoid of any specific guideline or clear policy for economic recovery. Slightly more than 40% of the package is devoted to a withering criticism of economic policies of the previous (Ahmadinejad’s) administration, which is not only full of factual falsehoods and distortions but is also dubious on theoretical grounds. The rest of the package consists of a series of vague statements and general descriptions that fall way short of a meaningful economic plan or program.

 

Reading through the package feels like reading through lecture notes of an academic economist on neoclassical/neoliberal macroeconomic theory, not a policy prescription or an economic agenda. Accordingly, the sentences and, indeed, the entire text of the package make use of an exclusively passive voice (which is characteristic of a theoretical narrative, or a self-protective language designed to avoid responsibility for action) instead of an active voice characteristic of a policy agenda to be acted upon. Implicit in the use of the passive voice in the composition of the text of the package is that the subject/agent, or do-er, is market mechanism, not public policy [1].

 

The purpose of this essay is not to show the emptiness of Mr. Rouhani’s economic package, as this is amply established by many other critics of the package [2]. It is rather to show why it is empty, and why this should not come as a surprise to anyone familiar with his economic outlook or philosophy, as reflected, for example, in his book, National Security and Economic System of Iran (2010).

 

Neoliberal Economic Outlook 

President Rouhani’s economic policy package is devoid of specific development plans or industrialization projects because the president and most of his economic advisors subscribe to an economic doctrine that frowns upon government intervention in economic affairs—unless such interventions help “pave the way” for unfettered market operations. According to this doctrine, called supply-side or neoliberal economics, solutions to economic stagnation, poverty and under-development lie in unhindered market mechanism and unreserved integration into world capitalist system. Recessions, joblessness and economic hardship in many less-developed countries are not so much due to economic mismanagement or the nature of global capitalism as they are because of government intervention and/or exclusion from world capitalist markets.

 

Neoliberal prescriptions that are portrayed as enabling the less-developed countries to harness “benevolent dynamics” of capitalism include: tax breaks for the wealthy and/or big business; privatization of public sector assets, enterprises and services; undermining labor unions and minimizing workers’ wages and benefits; eliminating or diluting environmental and workplace safety standards; deregulating markets; opening of the domestic market to unrestricted foreign investment/trade; and the like.

 

The claim that President Rouhani is a proponent of neoliberal economics is no speculation; it follows from his many speeches and statements, from his recently proposed “economic package” to fight stagflation and, as mentioned earlier, from his book, National Security and Economic System of Iran [امنیت ملّی و نظام اقتصادی ایران]. It is also evident from his policy prescriptions.

 

The president’s book deplores Iran’s “very oppressive” labor laws. It argues that the minimum wage must be slashed and restrictions on the laying off of workers eliminated if Iran’s “owners of capital” are to have the “freedom” to create prosperity. “One of the main challenges that employers and our factories face,” Rouhani writes, “is the existence of labor unions. Workers should be more pliant toward the demands of job-creators” [3].

Mr. Rouhani’s book also sheds important light on the link between his administration’s turn toward Washington and its plans to restructure the Iranian economy after the model of neoliberalism:

 

“There is a close correlation between economic development and political stability, which means maintaining dialogue and friendly relations with the outside world. As stable international relations paves the grounds for economic development, economic development, in turn, makes a country more secure or stable as it makes the country less vulnerable to external threats. Thus, there is a positive correlation, akin to a virtuous cycle, between the goal of economic development and the policy of establishing or maintaining friendly relations with the outside world” [4].

 

This passage (among many similar statements the president has made on numerous occasions) explains why Mr. Rouhani has made the solution to Iran’s economic problems contingent upon political détente or friendly relations with the United States and its allies. In general, there is of course nothing wrong with the desire to establish friendly relations with the U.S., or any other country for that matter; it could, indeed, be of mutual benefits if it is based on mutual respect for national sovereignty of countries involved. The problem with the Rouhani administration’s pursuit of an amicable relationship with the U.S., however, is that it has tied the urgently needed solutions to Iran’s economic difficulties to that unpredictable and unreliable relationship.

 

The administration’s misguided perception that the mere establishment of relations with the U.S. would serve as a panacea to Iran’s economic woes has basically made the fate of Iran’s economy hostage to the unforeseeable outcome of its negotiations with the United State and, therefore, hostage to the endless, and increasingly futile, nuclear negotiations with the group of the so-called 5+1 countries, dominated by the United States.

 

This explains Mr. Rouhani’s dilemma: he has essentially trapped himself into an illusion, the illusion that a combination of charm offensives, smiley faces and diplomatic niceties (in place of Ahmadinejad’s undiplomatic demeanor) would suffice to change imperialist policies toward Iran. In reality, however, the U.S. policy toward Iran (or any other country, for that matter) is based on an agenda, an imperialistic agenda that consists of a series of demands and expectations, not on diplomatic decorum, or the type of language its leaders use.

 

President Rouhani’s neoliberal economic views are abundantly evident from his occasional statements and speeches on economic policy. For example, in a 16 August 2014 (25 Mordad 1393, Iranian calendar) speech in Tehran, designed to explain his administration’s policies to fight economic stagnation, the president fervently maintained that state intervention in economic affairs is often more detrimental than beneficial, arguing that.> – needs to be paraphrased)ledent ionns inistration’ions wiht is that itmic developmment de world. As economic development can “the state must stay out of economic activities, and place those activities at the disposal of the private sector . . . . The private sector understands the economy much better, and it knows where to invest” [5]. (Incidentally, this statement is uncannily similar to what President Ronald Reagan famously said about the economic role of the government: “The government can help the economy by staying out of it.”)

 

The neoliberal policies of the Rouhani administration are, however, best reflected in the actual economic measures the administration has adopted. One such measure has been drastic reductions in a number of import duties, or tariffs, including reduction of tariffs on imports that have competitive domestic substitutes. For example, Mr. Mahmoud Sedaqat, vice president of the Association of UPVC Window & Door Profiles Manufacturers, recently complained (during a news briefing in Tehran) that while domestic production capacity of this petrochemical is more than twice as much as domestic needs, the government reduced import tariffs for this product from 30% to 15%. Mr. Sedaqat further pointed out that government’s careless trade policy and a lack of protection for domestic producers has led to an atmosphere of confusion and uncertainty among domestic producers, which is contributing to further aggravation of the ongoing economic stagnation [6].

Another example of the neoliberal policies of the Rouhani administration is its policy of fighting inflation. According to the president and his economic advisors, government spending and/or excessive money supply are the major cause for the hyperinflation in Iran. This view of inflation is based on the notorious IMF diagnosis for the plague of inflation not only in Iran but almost everywhere in the world. The essence of this approach to inflation, which is part of the IMF’s so-called “Structural Adjustment Program,” can be summarized as follows: (1) excessive government spending contributes to the growth of money supply; (2) growth of money supply automatically leads to inflation; and (3) to control inflation, therefore, requires rolling back government spending, or implementing austerity measures.

Real economic world is of course very different from this purely academic, nearly mechanical, correlation. An often-cited case in this context is the German experience of the immediate post-WW II period. Evidence shows that while the volume of cash and demand deposits rose 2.4 times and the volume of bank loans, both short and long term, rose more than ten-fold in the 1948-54 period, this significant rise in liquidity not only did not lead to a rise in the level of prices but it was, in fact, accompanied by a decline in the general level of prices—the consumer price index declined from 112 to 110 during that period. Why? Because the increase in liquidity was accompanied by an even bigger increase in output. While anecdotal, this experience nonetheless shows that, if or when used productively, a large money supply does not automatically lead to high inflation.

 

While it is true that, under certain circumstances, excess liquidity can be inflationary, I also strongly suspect that the inflationary role of liquidity is often exaggerated in order to justify and implement the anti-welfare, neoliberal policies of economic austerity. To the extent that curtailment of social spending may lead to curtailment of inflation, it also leads to curtailment of employment, purchasing power, demand and, therefore, economic growth, i.e. to stagnation—a side effect which is much worse than the plague of inflation. This explains, at least in part, the failure of the Rouhani administration’s neoliberal fight against inflation: not only has it not curtailed inflation, it has also aggravated stagnation by cutting social spending and undermining demand.

 

Like their neoliberal counterparts elsewhere, Iranian neoliberals view government spending as a cost that must be minimized. In reality, however, judicious government spending (whether on soft/social infrastructure such as education, health and nutrition or on physical infrastructure such as transportation and communication projects) is an investment in the long-term development of a society, not a cost. It is not surprising, then, that the IMF-sponsored curtailment of government spending in pursuit of lowering inflation has often led to economic stagnation and underdevelopment.

 

One of the first victims of the neoliberal economic policies of the Rouhani administration was the government-sponsored housing project that was put in place by the previous administration in order to make home-ownership affordable to working and low-income classes. Called Maskan-e Mehr (Goodwill Housing), not only did it allow 4.4 million low-income families to become homeowners, it also significantly contributed to economic growth and employment. Despite its success, the Rouhani administration has decided to discontinue the project.

 

Class Interests as Economic Theory

Neoliberalism is essentially an ideology or doctrine that is designed to promote and/or justify policies of economic austerity, thereby serving the interests of the plutocratic 1% at the expense of the overwhelming majority of citizens. This is accomplished through an ad-hoc, utilitarian economic theory that postulates that unhindered market mechanism and unrestricted pursuit of self-interest lead to economic expansion and prosperity for all, that state-sponsored social safety-net programs are “burdens” or “costly trade-offs” in terms of lost productivity and that, therefore, government intervention in economic affairs must be avoided.

This neoliberal ideology is promoted and propagated so effectively that it has evolved, more or less, as a religion, market religion—or as Alex Andrews of The Guardian newspaper puts it, “the market a god and economics a form of theology.” Indeed, the faith in market mechanism is more akin to blind cultism than rational belief of intelligent people in otherworldly religion. Viewing market mechanism as almost infallible and blaming capitalism’s systemic failures on the “irrational behavior of market players” is tantamount to some simplistic interpretations of religion that attribute humans’ misfortunes or miseries to their deviations from God’s ways; that is, in the same way that humans’ “sinful” deeds are said to condemn them to a wretched Otherworld, economic agents’ deviations from market rules are believed to lead to economic crises that would doom them to financial misery in this world.

 

Cleverly, this theory is called supply-side economics, implying that economic policy makers should not or need not concern themselves with the demand-side of the economy, that is, with the purchasing power or the ability of the people to buy or demand. Instead, if policy makers only focused on the production side of the economy and created conditions favorable to expanded growth or a bigger supply, the resulting “trickle-down” effects would automatically benefit the demand-side of the economy. And what are those favorable conditions? They include market deregulations, lax labor and environmental standards, supply-side tax breaks, minimizing wages and benefits, removal of restrictions on international capital flows, long hours and subjection of labor to strict management discipline, denial of trade union rights and suppression of workers’ political actions, and the like.

 

The division or dichotomy between supply-side and demand-side of an economy is, however, a scam: an artificial, utilitarian and arbitrary division that is crafted largely on abstract theoretical grounds, and for ideological reasons. A real world economy is a totality where supply and demand are two sides of the same coin, meaning that the two sides need to be dealt with simultaneously. For example, the need for health care coverage, the critical necessity of public education, or social safety need programs such as provision of subsistence nutrition for the needy cannot be neglected or put on the backburner in the hope of some illusory effects of “trickle-down” economics. Supply side is a façade, a misleading or obfuscationist theory that is designed to camouflage the neoliberal philosophy of social Darwinism.

The experience of the IMF-sponsored “structural adjustment programs” in many “developing” countries around the world shows that curtailing critical social spending in the name of boosting the supply-side of the economy is a counterproductive policy that tends to undermine long-term growth and development by cutting vital investment in both social and physical infrastructures. This can also be seen, even more clearly, in the context of the crisis-ridden core capitalist countries since the 2008 financial collapse, where extensive neoliberal austerity cuts have resulted in widespread misery and escalating inequality without reviving the stagnant economies of these countries.

 

While the supply-side doctrine has a long history (going back all the way to the classical economist Jean-Baptiste Say, 1767-1832, who famously expressed the doctrine as: “supply creates its own demand”), its latest revival started in the late 1970s and early 1980s in the U.S. and U.K., which brought forth two of its most effective propagandists: Ronald Reagan and Margaret Thatcher. It has since been systematically entrenched not only in the core capitalist countries but also in many less-developed countries, including Iran.

 

In Iran, the turn to neoliberal economics started under the presidency of Hashemi Rafsanjani. It was somewhat contained under the presidency of Mahmud Ahmadinejad (although he too had his share of extensive privatizations); but with the election of President Rouhani it is once again gathering speed—Rouhani is basically picking up where Rafsanjani left off.

 

To point out that President Rouhani and most of his economic advisors are advocates of neoliberal economics is not to say that they lack compassion, or that they do not care about the lot of the working and needy classes. It is rather to point out that their policy prescription to remedy the financial distress that plagues the overwhelming majority of the Iranian people is misguided. It rests upon the idea of capitalism as a benign sphere of human activity where innovating entrepreneurs generate wealth to such an extent that some of it is bound to “trickle-down” to the population at large.

 

It is necessary to point out here that trickle-down theory may have had some validity in the earlier (industrial or manufacturing) stages of capitalism where the rise in the wealth of nations also meant expanded (real) production and the rise in employment. However, in the era of heavily financialized economies, where the dominant form of capitalist wealth comes not so much from real production of goods and services as it does from asset price inflations, that is, from financial bubbles, trickle-down theory has lost whatever minimal validity it may have had at earlier phases of capitalism.

 

Illusion and Misconceptions 

 

President Rouhani and his economic advisors’ perceptions that the solution to Iran’s economic problems lies in an unrestrained integration into world capitalism and a wholesale privatization of the Iranian economy is overly optimistic. Abundant and irrefutable evidence shows that, during the past several decades, neoliberalism’s dismantlement of socialist, social-democratic and other welfare state economies across the world has invariably led to drastic declines in employment, wages and living standards of the overwhelming majority of the people, thereby further aggravating poverty and inequality on a global level. In many “developing” countries that are integrated into globalized neoliberal capitalism, the living conditions of the majority of their citizens have, in fact, deteriorated. To the extent that workers can find employment, they are often paid poverty wages; and they are increasingly forced to hold several jobs, often detrimental to their health and family life. As Ben Selwyn (among many others) has pointed out:

 

“The contemporary world has unprecedented wealth, and mass poverty. Total global wealth was $241 trillion in 2013 and is expected to rise to $334 trillion by 2018. Yet the majority of people live in poverty. The World Bank and its defenders argue that global poverty has declined under neoliberalism. They can only make these arguments because the World Bank defines the poverty line as $1.25 a day, below which it is impossible to lead a dignified life. . . . Lant Pritchett, a critical World Bank economist, suggests a more humane $10 a day poverty line; according to his calculations, 88% of the world population lives in poverty [7].

Summarizing his study of the relationship between globalization of neoliberalism and its impact on the living conditions of the worldwide masses of citizens, Selwyn concludes: “Far from a ladder of opportunity, workers in globalized production networks are incorporated into economic systems that reproduce their poverty to sustain corporation profits” [8].

 

Contrary to claims of neoliberalism, major economic developments, critical infrastructural projects and significant industrialization achievements under capitalism have been made possible either directly by the public sector or by the state support for the private sector. For example, in the aftermath of the Great Depression and WW II, most European countries embarked on extensive state-sponsored industrialization and/or development projects under social-democratic, labor or socialist governments, not so much to bring about “genuine” socialism as it was to rebuild the war-torn European economies by mobilizing and pulling together national resources and funneling them toward development projects. Similar policies were successfully carried out in other major capitalist countries such as the U.S., Canada, Japan, Australia and South Korea.

 

In Iran too most industrialization projects and infrastructural developments since the 1979 revolution have taken place under direct or supervisory role of the state—when the country relied on its domestic talents, resources, and capabilities in pursuit of self-reliance in the face of hostile imperialist powers and their cruel economic sanctions. Such developments were brought about even under the highly inauspicious conditions of the war, the 8-year war with Saddam Hussein’s Iraq, and brutal economic sanctions. By contrast, extensive privatizations and systematic spread of neoliberal capitalism of recent years, especially since the election of President Rouhani, has basically meant stagnation of the real sector and development of speculative, parasitic or financial sector of the economy.

Evidence shows that, at the early or formative stages of their development, all the presently industrialized countries vigorously carried out policies of export promotion and import substitution; that is, policies that protected their “infant industries” against the more competitive foreign exporters while promoting their own exports abroad. For example, Britain’s adoption of mercantilist and/or protectionist policies of economic development in the early stages of its industrialization, which erected prohibitive tariffs against the then more competitive Dutch exporters, played a significant role in nurturing the country’s manufacturers to excel in global markets.

 

Likewise, the United States pursued vigorous policies of protecting its “infant industries” against the more productive European exporters until the early to mid-twentieth century, when its producers became competitive in global markets. Similar protectionist policies were followed by Japan, South Korea and other core capitalist countries in the formative phases of their industrialization and development [9].

Thus, the neoliberal outlook of President Rouhani (and most of his economic advisors) that ties solutions to Iran’s economic difficulties to integration of the country’s economy into global capitalism and further curtailment of the economic role of the government is far from warranted; it is, indeed, contradicted by development experiences of most countries around the world.

 

Ismael Hossein-zadeh is Professor Emeritus of Economics (Drake University). He is the author of Beyond Mainstream Explanations of the Financial Crisis (Routledge 2014), The Political Economy of U.S. Militarism (Palgrave–Macmillan 2007), and the Soviet Non-capitalist Development: The Case of Nasser’s Egypt (Praeger Publishers 1989). He is also a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press 2012).

Edited October 17, 2014 by skylight2

[Kurdi Fehli]

We saw what Ahmadinejad did to the economy. He was the worst leader the Islamic Republic has ever seen.

 

Let Rouhani work.

Edited October 18, 2014 by Kurdi Fehli

[godzapostle]

Whoever wrote this should be ashamed. As if the problem with the iranain economy is that it is just not being micromanaged enough by the government. What a joke. "Market mechanics" is just a synonym for "people acting in their economic interests". Have faith in the Iranian people. Ahmadinejad did a lot of damage both with his foreign policy and his extreme socialist economic policies. With expanded economic freedom for the Iranian people and an easing of sanctions there is hope yet for Iran.

Edited October 18, 2014 by godzapostle

[Al-Khattati]

I think his arguments is problematic in so far as many government officials, including members of the revolutionary guards use the government and its assets like its own piggy bank. The amount of corruption because government oversight and control is a large problem as you have many corrupt individuals making sure they can milk as much as they can but inevitably insuring that few can start a business in the country.

 

Take this into consideration. In Bahrain it takes less than 2 months to get a business up an running, in the West it takes a few weeks. In Iran it takes over two years because of government oversight where you have to beg, cry and bribe every Tom Richard and Alireza  in order to start the smallest business. This is why Iran is rated as one of the least business friendly countries in the world. Why is it that you have so many Iranians doing startups in California but barely none in Iran? Do Iranians suddenly become smarter outside the country?

 

Rohani's administration is taking this into consideration when it wants to deregulate which essentially means letting people start and manage their businesses without some thieving rat government agent trying to milk and destroy you. 

 

There is a reason why Ayatollah Khamenei has given so many speeches about economic corruption and has supported the privatization of the economy.

 

What I would agree with, however, is the attack on the minimum wage and insurance coverage. Not that these mean anything in a country like Iran, but they are important foundations to have. 

[David66]

Hello,

 

 

 

Take this into consideration. In Bahrain it takes less than 2 months to get a business up an running, in the West it takes a few weeks. In Iran it takes over two years because of government oversight where you have to beg, cry and bribe every Tom Richard and Alireza  in order to start the smallest business. This is why Iran is rated as one of the least business friendly countries in the world. Why is it that you have so many Iranians doing startups in California but barely none in Iran? Do Iranians suddenly become smarter outside the country?

 

 

 

That is a funny phrase.  I like your humor.  I agree.  Governments  should not impose obstacles to economic activity.  Except for insuring such activity is morally sound.

 

 

All the Best,

David

[baradar_jackson]

Whoever wrote this should be ashamed. As if the problem with the iranain economy is that it is just not being micromanaged enough by the government. What a joke. "Market mechanics" is just a synonym for "people acting in their economic interests". Have faith in the Iranian people. Ahmadinejad did a lot of damage both with his foreign policy and his extreme socialist economic policies. With expanded economic freedom for the Iranian people and an easing of sanctions there is hope yet for Iran.

 

Just because you took some university economics classes and learned some ideologically-driven slogans, doesn't make you an expert in economics.

 

The very logic behind the reforms to Article 44 of the constitution was faulty. The stated purpose of privatization was to break up the supposed monopoly the state had over the economy. Yeah because it's sooooooo much nicer (and less monopolistic!!!) for a privately owned corporate entity to control the means of production rather than a government elected by the people.

 

It's all ridiculous.

 

Thankfully, Iran is not completely lost. Iran still does not have a single Rothschild-owned bank, and through the "military sector" they have managed to build a stronghold that prevents private interests from subverting national and collective interests. These are blessings we should be thankful for.

[David66]

Hello,

 

 

 

The very logic behind the reforms to Article 44 of the constitution was faulty. The stated purpose of privatization was to break up the supposed monopoly the state had over the economy. Yeah because it's sooooooo much nicer (and less monopolistic!!!) for a privately owned corporate entity to control the means of production rather than a government elected by the people.

 

It's all ridiculous.

 

Thankfully, Iran is not completely lost. Iran still does not have a single Rothschild-owned bank, and through the "military sector" they have managed to build a stronghold that prevents private interests from subverting national and collective interests. These are blessings we should be thankful for.

:o

 

Me thinks, based on your views, you have never traveled out of the United States.

 

You really need to visit a country that was previously under socialistic governance.  I think your views will change.  And, while you are traveling, visit a country with a centralized / socialistic model.  May I suggest Venezuela or Cuba?  

 

All forms of government have issues.  But, you really need to gain some experience before you "preach" to the forum. 

 

All the Best,

David

[godzapostle]

The very logic behind the reforms to Article 44 of the constitution was faulty. The stated purpose of privatization was to break up the supposed monopoly the state had over the economy. Yeah because it's sooooooo much nicer (and less monopolistic!!!) for a privately owned corporate entity to control the means of production rather than a government elected by the people.

Corporations in a free market economy do not have the luxury of taxing and printing in order to survive. They must build products and offer services that their customers are willing to pay for. They have to put the money they worked for on the line. Government beaurucrats have no clue what it takes to build a thriving business.

And you seem to be advocating communism in this post. You should be aware that Islam strongly promotes individual property rights.

Furthermore, if you think free mark capitalism is being taught in north american university economics courses then you do not have a damn clue what you're talking about. The types of economic policies implemented by ahmadinejad fell perfectly in line with mainstream Keynesian economic theory promoted in western universities.

Also, just because a bank isn't being run by a Rothschild does not mean it is some force for good.

I wouldn't be surprised if you or large numbers of your family work in the public sector. You have no clue what it means to run a business or provide a product or service your consumers aren't forced to consume.

Do Iran a favour and let some people with sense fix the problems your type created.

Edited October 19, 2014 by godzapostle

[King]

Hello,

 

 

:o

 

Me thinks, based on your views, you have never traveled out of the United States.

 

You really need to visit a country that was previously under socialistic governance.  I think your views will change.  And, while you are traveling, visit a country with a centralized / socialistic model.  May I suggest Venezuela or Cuba?  

 

All forms of government have issues.  But, you really need to gain some experience before you "preach" to the forum. 

 

All the Best,

David

 

Socialism does not mean centralized control over the means of production, it's supposed to be the opposite.  Venezuela and Cuba have done a lot of things very well, ie health care, uplifting millions out of dire poverty and making sure the local populace reap whatever financial benefit is extracted out their nation's own natural assets.  We have to remember that these countries are not truly socialist, although they are a lot closer to socialism than say the US, as are some prosperous European nations.  We also know a lot of things relatively more state capitalist countries don't do well, i.e generate unsustainable and not to mention grossly unfair inequality, extend/push/ignore externalities and systemic risk on the vulnerable, which is a key inherent feature of market economics, and inevitably concentrate economic/financial decision making.  

 

Godzapostle is an extremist who propagates one of the most savage systems devised by man, which thankfully is a bit too extreme even for some of the folks on the extreme right.  Iran would do very well to resist neo-liberal reform, in fact it is the only way it will remain independent.

[baradar_jackson]

Hello,

 

 

:o

 

Me thinks, based on your views, you have never traveled out of the United States.

 

You really need to visit a country that was previously under socialistic governance.  I think your views will change.  And, while you are traveling, visit a country with a centralized / socialistic model.  May I suggest Venezuela or Cuba?  

 

All forms of government have issues.  But, you really need to gain some experience before you "preach" to the forum. 

 

All the Best,

David

 

Iran, before the revolution, was ruled by a very pro-business king, who essentially handed all of the natural resources to foreign capitalists.

 

Life expectancy was 50 years.

Illiteracy was above 50 percent (and much much higher amongst women).

Median marriage age for girls was... 13 years (enlightenment and that).

Infant mortality rate was high.

Most villages and rural areas had no electricity or running water.

Most villages and rural areas had no schools.

Most villages and rural areas had no proper roads.

Health care was inadequate. Opium was rationed.

 

These are all facts. There are many more of its kind. I have just provided a short list, for your convenience.

 

Today:

 

Life expectancy is over 70 years.

Illiteracy has been almost completely overcome.

Median marriage age for girls is 25 years.

Infant mortality is at the same level as your typical Western country.

Most villages and rural areas have electricity and running water.

Most villages and rural areas have schools.

Most villages and rural areas are connected through roads and railways.

Health care is, in a ways, universal and free.

 

Of course I do not mean to underestimate the social inequities which do persist in Iran. And if you want to see these inequities expressed in an artistic medium, you should try on the movies of Majid Majidi for size. However, there is very clearly a difference between today's Iran and the Iran of old.

 

Why is there a difference?

 

Because the monarchy was serving the invested interests of a small group of elites, within the country and outside of the country. Whereas, after the revolution (in particular the turbulent early years) much effort was made so that the economic system of the country caters to ALL people. This is a principle.

 

A government can serve the interests of a small elite, or the interests of everybody. And of course everything in between. The monarchy leaned heavily towards the former, whereas the Islamic system leans toward the latter. This is grounded in the facts and figures which few people can dispute.

 

The people of Sistan-Baluchestan see the difference.

The people of Lorestan and Kerman and Semnan see the difference.

 

The people of any minority-language-speaking province, likewise, see the difference, as their rights and dignity were trampled upon by a cultureless man who claimed to be upholding a great ancient culture.

 

 

 

This is not an ideological debate, by the way. You and others seem to be taking it that way, but it's not. This is about people's livelihoods, not about meaningless terms and political slogans. The cold war is over, and nobody will take you seriously if you keep yourself entrapped in the prison of its outdated slogans. According to pretty much every indicator of public health, welfare, and education, Iranians are better off under the government which prioritized their needs than under the government which prioritized the needs of foreign and domestic economic elites. This is, again, grounded in facts.

 

Now you bring up Cuba. Good topic. Cuba under Batista was similar to Iran under the Shah. A hedonistic paradise for elites (foreign and domestic). A hell for the common people. And although it is a poor country today, the basic needs of the people are provided for. And this is after over 50 years of economic embargo. The free health care which is such a source for arrogance among Canadians (when they compare themselves to the US), is provided to Cubans although Cuba is a far poorer country. Not only that, but if YOU, David66, wanted to study medicine in Cuba, you could do so. Free of charge. Most doctors in Haiti were Cuban, until Cuba trained enough Haitian doctors (again, free of charge) for them to outnumber the Cubans. So I am glad you brought up Cuba.

 

Again, this is not an ideological debate. Those debates belong to the museums. This is about people's livelihoods and a realistic assessment of what is good for the people and what is not. We know from the wide volume of examples all across the world, that privatization always screws over the common people. Doesn't matter if it's the US or Iraq or Russia or Chile. It's always the same result. This is plainly observable. Again: not an ideological statement. Just a statement of fact.

 

 

As for your snarky comment about me not having traveled outside the US: I wasn't born in the US, genius. Nor have I lived my whole life in the US. So this comment, like most of the horsec.rap that emanates from the general vicinity of your mouth, is worthless.

[Al-Khattati]

Just because you took some university economics classes and learned some ideologically-driven slogans, doesn't make you an expert in economics.

 

The very logic behind the reforms to Article 44 of the constitution was faulty. The stated purpose of privatization was to break up the supposed monopoly the state had over the economy. Yeah because it's sooooooo much nicer (and less monopolistic!!!) for a privately owned corporate entity to control the means of production rather than a government elected by the people.

 

It's all ridiculous.

 

Thankfully, Iran is not completely lost. Iran still does not have a single Rothschild-owned bank, and through the "military sector" they have managed to build a stronghold that prevents private interests from subverting national and collective interests. These are blessings we should be thankful for.

 

Many times over that's not how it works in Iran. A state owned company is sold for a rock bottom price, and then Mr. Five O Clock Shadow Hajji who bought it from the government(usually through bribing and corruption) sells the factory and its machinery for a good bargain, many times to foreigners in the black market and thus costing tons of jobs. 

 

A corporation, despite all its evils, is still relatively better than just taking an entire industry and flushing it down the toilet so one can make a few extra $.

 

Iran's business and economic atmosphere is very horrid. A good youtube search on critics of this corrupt machinery can reveal a lot. I am sure you are familiar with academics like Dr. Hassan Abbasi, or even clerics like Alireza Panahian who don't shy away from exposing the crooked machinations of Iran's economy. 

 

If public industry worked well like it had in the past in Brazil (before the destroyed public industries lie mining) or some other industries in the West, I would be completely against privatization. But Iranians, like so many in the Muslim world, are a different breed of people. The bureaucratic corruption in countries like Iran dwarfs that which we have in the West and this is saying a lot considering corruption here in the West.

Edited October 19, 2014 by Al-Khattati

[godzapostle]

Mutah-king must actually be trolling. Economic liberalization made Americans the richest people in human history, it brought hundreds of millions of Chinese out of the poverty inflicted by communist central planning, it allowed for post-ww2 Japan to experience the fastest rate of standard of living improvement in the history of the world. It has allowed small states like Singapore to post a higher median household income than the US despite essentially no natural resource wealth. And despite all this, we are to believe that the failed socialist models of the USSR or Venezuela or Iran (with hyperinflation and huge unregulated black markets) are to be emulated.

WTF??? Who is the ideologically motivated extremist?

Also, he keeps mentioning these supposed socialist paradises in Europe. I suppose he means the Nordic countries.

But does he realize that these are relatively small countries with massive natural resource wealth?

Does he not know that in Sweden, Norway and Denmark the corporate tax rates are more than 15% lower than it is in the US (which is in fact an extreme centrally planned fascist state and has been since the fed made the open market operations amendment to the federal reserve act of 1913.

I mean if you are going to repeatedly spew this BS about socialism being the best economic model for improving standards of living then you will need to start presenting some examples instead of just making obscure references to "some prosperous European nations".

And baradar_Jackson, all those improvements in Iran are great but people still can't afford a loaf of bread due to hyperinflation caused by incompetent beaurucrats in Tehran. You mention that Iranians are living longer and have more access to education and I don't have a problem with government having some say in these sectors but are you seriously suggesting that the tens of trillions of dollars in oil revenue and the exorbitantly high tax rates were needed to accomplish this?

If the Iranian government spent its entire revenue on healthcare,education and building missiles to defend itself then it has been the most inefficient and wasteful beaurucracy in the history of the world.

And in any case how do these things justify the suffocating business environment and extraordinary regulatory restrictions Iran places on all sized businesses??

[King]

Mutah-king must actually be trolling. Economic liberalization made Americans the richest people in human history, it brought hundreds of millions of Chinese out of the poverty inflicted by communist central planning, it allowed for post-ww2 Japan to experience the fastest rate of standard of living improvement in the history of the world. It has allowed small states like Singapore to post a higher median household income than the US despite essentially no natural resource wealth. And despite all this, we are to believe that the failed socialist models of the USSR or Venezuela or Iran (with hyperinflation and huge unregulated black markets) are to be emulated.

WTF??? Who is the ideologically motivated extremist?

Also, he keeps mentioning these supposed socialist paradises in Europe. I suppose he means the Nordic countries.

But does he realize that these are relatively small countries with massive natural resource wealth?

Does he not know that in Sweden, Norway and Denmark the corporate tax rates are more than 15% lower than it is in the US (which is in fact an extreme centrally planned fascist state and has been since the fed made the open market operations amendment to the federal reserve act of 1913.

I mean if you are going to repeatedly spew this BS about socialism being the best economic model for improving standards of living then you will need to start presenting some examples instead of just making obscure references to "some prosperous European nations".

 

Really?  Is that why the US radically violated market principles and protected its local industries against foreign competition on its way to becoming an economic super power?   You also forgot massive government war industries/spending which along with the new deal spending, helped pull the US out of the great depression into the world’s largest economy when private industry refused to stimulate demand.

 

Here is a fact for you:  Every single economic power in the world, be it England, Korea, Japan, China, US or Germany radically violated market principles through massive state intervention to achieve their economic success.  It is sheer hypocrisy then to impose the neo-liberal agenda on poorer nations when you have yourself gained competitive advantage while employing highly protectionists and nationalist measures.

 

Since you were so keen on examples, I will elaborate a touch further:

 

Industrial revolution, relied heavily on cheap cotton from the US, where prices were purposely kept low through murder of indigenous populations and slave labour.

England: Employed high tariffs to protect their core industry (textile), prevented foreign competition from a much more advanced industry in India (which it was bleeding dry in any-case), which was virtually destroyed because of it, along with superior industries such as Iron.  All the while when New England also employed high tariffs to protect local industry from British competition, without which it too would have been destroyed with severe consequences for industrial growth as a whole.

 

US: Developed a steel industry by preventing superior British steel from entering US markets.  Europe was rescued through massive investment in the form of the Marshall plan, which also gave the US access to European markets in return through a promise to purchase US agricultural products.  US agribusiness subsidies and trade agreements virtually destroyed superior Latin American agriculture which was undercut by massive state intervention in emerging markets.  Throughout the golden age, the US was pretty much the most protectionist nation on the planet, allowing local industries to prosper while protecting them from foreign competition.

 

Japan: Was in an unusually advantageous position having had its security guaranteed by a foreign power, and also to have escaped colonialism.  Japan protected its automotive industry by draconian measures against foreign investment.  Toyota was a small company which virtually ran at a loss for 20 odd years, it was bailed out by the central bank and GM, Ford were kicked out of the country.  A few decades layer, it is the leading car manufacturer in the world, through the help of massive state subsidies and protection.

 

Singapore:  This has been discussed before, it is not capitalist utopia, 85% of the land is government owned, with massive state control/investment through ‘liberal’ mechanisms, and the economy is essentially built on exploiting cheap labour from poorer countries who work in horrendous conditions and are underpaid.  A country of 5 million with almost a million such workers, terrific example.

 

Korea: Another example of the free market miracle, where in the 1960s-80s the government owned all the banks, heavily subsidized and protected key industries such as steel.  Korea like a lot of other developing nations at the time, allowed local industries to violate intellectual property rights, copy and steal ideas in order to learn and advance their own industries.  It also protected firms like Samsung which began as a small firm in a totally unrelated industry.

 

Scandinavia: Nokia ran at a loss for 17 years before becoming the greatest mobile firm in the world etc.  Nordic countries spend per capita the most on social spending in the entire world, with some of the best living standards in the world.  This means free subsidized healthcare, education, welfare and all kinds of other social services, so don’t come at me with nit-picked figures, there is massive state involvement through a democratic process.

 

According to you the US has been the most centrally run fascist state since 1913, so what liberalization are you talking about? Do you fetishize about defeating your own arguments?  How many more examples do you need?  Name me one developed country with a population of more than 5 million that has developed and reached economic/social prosperity without radically violating market discipline which your likes would love to impose on poorer countries?  You can’t name one, they don’t exist.  They are a figment of the imagination of a religious extremist who religiously believes in the virtues of the free market.

Edited October 19, 2014 by King

[skylight2]

^

 

he probably read Atlas Shrugged and thought it was a history book, or a true story, lol! Having said that true libertarians strongly oppose state intervention on the side of corporations, in the same way they oppose any interventions/wars on others. The only true libertarian of any stature in the US is Ron Paul, and some of the folks around him (not Rand Paul, his son). Liberals and so-called "conservative" alike support state intervention, so long as it is on the side of the corporations, i.e. the mega rich, too big to fail etc. Liberals favor a minimum of welfare for the poor, 'cause they know that otherwise there'll be a massive revolt, "conservatives" i.e. outright fascists oppose welfare, minimum wage etc. outright, because they believe that the population can be controlled by force and violence. 

 

Re: the topic at hand Rouhani is neither a libertarian, nor a liberal, nor a conservative, he is just another colonized mind of the "third world" - seen one too many of them, unfortunately. 

Edited October 19, 2014 by skylight2

[Al-Khattati]

And baradar_Jackson, all those improvements in Iran are great but people still can't afford a loaf of bread due to hyperinflation caused by incompetent beaurucrats in Tehran. You mention that Iranians are living longer and have more access to education and I don't have a problem with government having some say in these sectors but are you seriously suggesting that the tens of trillions of dollars in oil revenue and the exorbitantly high tax rates were needed to accomplish this?

If the Iranian government spent its entire revenue on healthcare,education and building missiles to defend itself then it has been the most inefficient and wasteful beaurucracy in the history of the world.

And in any case how do these things justify the suffocating business environment and extraordinary regulatory restrictions Iran places on all sized businesses??

 

A large part of why Iran's inflation rate is so high is due to its super volatile currency. One of the main culprits behind this volatility are sanctions and constant threats of war. This means that investment and business deals with Iran are very difficult because on the one hand you have Western institutions that can destroy you or fine you millions of $ for breaking the "law", on the other hand you don't want to do business with a country who can be bombed and invaded any day, esp when you see the entire country surrounded by hostile military bases.

 

Iran's oil revenues are less than its partners. First it costs more to extract oil in Iran due to aging equipment (thanks to sanctions) and second, Iran is constantly having to sell its oil at lower than market rates (thanks to sanctions) and it has to pay extra costs to to sell it in the black market. Furthermore, sanctions have stymied Iran's gasoline industry, so a lot of the revenue actually goes to importing higher than market rates gasoline (again, because of sanctions). So its revenues are not all that great. In fact, Iran is one of the most sanctioned countries in modern history, even more so than North Korea.

 

I agree that Iran has a suffocating bureaucracy. But this state of war imposed on Iran and the constant creation of rat lines to overthrow the government has resulted in an environment where the government is more interested in survival than reform. It gives government officials and administrators the green card to scapegoat all of their incompetence to sanctions and to ward off any criticism as something potentially subversive to the survival of the government. I think that in an environment where threats of war and death sanctions didn't reign supreme, things would be much different. There first thing we would notice is that government officials could no longer scapegoat their incompetence and laziness for reform but would have to produce something substantial. Government criticism would be much more lax and there would be a wider option to include more competent presidential candidates who actually know how to run a country. So far the only competent administrator I have seen has been Muhammad Baqir Qalibaf (mayor of Tehran).

 

I would really like to see how Western governments would do (both politically and economically) if only a fraction of the sanctions on Iran were imposed on them.

Edited October 19, 2014 by Al-Khattati

[godzapostle]

Really?  Is that why the US radically violated market principles and protected its local industries against foreign competition on its way to becoming an economic super power?   You also forgot massive government war industries/spending which along with the new deal spending, helped pull the US out of the great depression into the world’s largest economy when private industry refused to stimulate demand.

 

Here is a fact for you:  Every single economic power in the world, be it England, Korea, Japan, China, US or Germany radically violated market principles through massive state intervention to achieve their economic success.  It is sheer hypocrisy then to impose the neo-liberal agenda on poorer nations when you have yourself gained competitive advantage while employing highly protectionists and nationalist measures.

 

Since you were so keen on examples, I will elaborate a touch further:

 

Industrial revolution, relied heavily on cheap cotton from the US, where prices were purposely kept low through murder of indigenous populations and slave labour.

England: Employed high tariffs to protect their core industry (textile), prevented foreign competition from a much more advanced industry in India (which it was bleeding dry in any-case), which was virtually destroyed because of it, along with superior industries such as Iron.  All the while when New England also employed high tariffs to protect local industry from British competition, without which it too would have been destroyed with severe consequences for industrial growth as a whole.

 

US: Developed a steel industry by preventing superior British steel from entering US markets.  Europe was rescued through massive investment in the form of the Marshall plan, which also gave the US access to European markets in return through a promise to purchase US agricultural products.  US agribusiness subsidies and trade agreements virtually destroyed superior Latin American agriculture which was undercut by massive state intervention in emerging markets.  Throughout the golden age, the US was pretty much the most protectionist nation on the planet, allowing local industries to prosper while protecting them from foreign competition.

 

Japan: Was in an unusually advantageous position having had its security guaranteed by a foreign power, and also to have escaped colonialism.  Japan protected its automotive industry by draconian measures against foreign investment.  Toyota was a small company which virtually ran at a loss for 20 odd years, it was bailed out by the central bank and GM, Ford were kicked out of the country.  A few decades layer, it is the leading car manufacturer in the world, through the help of massive state subsidies and protection.

 

Singapore:  This has been discussed before, it is not capitalist utopia, 85% of the land is government owned, with massive state control/investment through ‘liberal’ mechanisms, and the economy is essentially built on exploiting cheap labour from poorer countries who work in horrendous conditions and are underpaid.  A country of 5 million with almost a million such workers, terrific example.

 

Korea: Another example of the free market miracle, where in the 1960s-80s the government owned all the banks, heavily subsidized and protected key industries such as steel.  Korea like a lot of other developing nations at the time, allowed local industries to violate intellectual property rights, copy and steal ideas in order to learn and advance their own industries.  It also protected firms like Samsung which began as a small firm in a totally unrelated industry.

 

Scandinavia: Nokia ran at a loss for 17 years before becoming the greatest mobile firm in the world etc.  Nordic countries spend per capita the most on social spending in the entire world, with some of the best living standards in the world.  This means free subsidized healthcare, education, welfare and all kinds of other social services, so don’t come at me with nit-picked figures, there is massive state involvement through a democratic process.

 

According to you the US has been the most centrally run fascist state since 1913, so what liberalization are you talking about? Do you fetishize about defeating your own arguments?  How many more examples do you need?  Name me one developed country with a population of more than 5 million that has developed and reached economic/social prosperity without radically violating market discipline which your likes would love to impose on poorer countries?  You can’t name one, they don’t exist.  They are a figment of the imagination of a religious extremist who religiously believes in the virtues of the free market.

 

No, you're committing a fallacy now. You're attributing protectionism as the cause of the increased standard of living in Europe, the US, Japan and South Korea. Correlation does not imply causation and without protectionism these countries would have enjoyed a higher standard of living even sooner than they did.

90% of the people in these countries did not work in these protected industries but were left to incur the cost of protectionism through higher prices.

What good is a non-competitive steel or agriculture industry if 90% of the population does not work in these industries but is forced to pay through the nose to maintain them? All you're doing is massively reducing living standards for 90% of people in order to increase it for the other 10% (and even these 10% dont really benefit because they also pay more for protectionism of industries they do not work for).

 

You communists continue to assume that economics is a zero-sum game. Intuitively this assumption seems reasonable to make but in reality it is not and is also not when it comes to protectionism. When non-competitive industries in a country are allowed to fail they are replaced by competitive industries and these industries will produce goods and services that they have a competitive advantage in producing. Everyone wins, except the CEO's of the failing industries and the communists who cant wrap their mind around the idea of letting losers fail.

 

And really what the hell do you think the point of Economic policy is? For Japanese people to boast about buying Japanese cars? The entire point of studying economic theory is to deduce how to best increase living standards in a country. Who gives a damn if Toyota is a Japanese car maker as long as they are offering you the best car for your money? Why are you against people paying less for the same or even better goods?

 

Also, you continue to LIE (yes LIE) about the condition of foreign workers in Singapore. More than half of all foreign workers in Singapore make over 200,000USD per year. Oh how they exploit foreign workers......................... 

And who cares about how much of the land is owned by the government, the government also owns 100% of the airspace, and what?. What does that tell us about how much economic freedom businesses enjoy in Singapore?

 

And why do you continue to equate indicative planning with directive planning (communism)? Indicatively planned economies are nowhere near the communist ideal you desire. There is no compulsion with indicative planning.

 

With regards to Scandinavian countries, you should know that despite their low corporate tax rates they also have extremely high personal income tax rates. The average Scandinavian is paying through the nose for these "free social programs". The fact that the bureaucrats in Oslo and Stockholm are slightly more competent than the ones in Tehran and Caracas and are more efficient with spending other peoples money is nothing to write home about.

 

Also, the open market operations amendment was not made in 1913 but rather in the mid 1920's just in time to contribute to the great depression (thank you government bureaucrats). And i will point to the countries of western Europe, North America and Australia that prospered in spite of violating free market principles because free market capitalism was the foundation of their economic policy. Now please provide an example of a country with a population over 5million that greatly increased living standards of its populations while implementing largely socialist economic policy. Note the difference between increasing living standards and maintaining them. You will be hard pressed to name a country that was largely socialist and did the former.

 

And honestly, if the people of Iran have your socialist mindset then they deserve the failing economy they have. Fortunately, they voted for Rouhani this time so they might be wisening up.

[King]

No, you're committing a fallacy now. You're attributing protectionism as the cause of the increased standard of living in Europe, the US, Japan and South Korea. Correlation does not imply causation and without protectionism these countries would have enjoyed a higher standard of living even sooner than they did.

90% of the people in these countries did not work in these protected industries but were left to incur the cost of protectionism through higher prices.

What good is a non-competitive steel or agriculture industry if 90% of the population does not work in these industries but is forced to pay through the nose to maintain them? All you're doing is massively reducing living standards for 90% of people in order to increase it for the other 10% (and even these 10% dont really benefit because they also pay more for protectionism of industries they do not work for).

 

You communists continue to assume that economics is a zero-sum game. Intuitively this assumption seems reasonable to make but in reality it is not and is also not when it comes to protectionism. When non-competitive industries in a country are allowed to fail they are replaced by competitive industries and these industries will produce goods and services that they have a competitive advantage in producing. Everyone wins, except the CEO's of the failing industries and the communists who cant wrap their mind around the idea of letting losers fail.

 

And really what the hell do you think the point of Economic policy is? For Japanese people to boast about buying Japanese cars? The entire point of studying economic theory is to deduce how to best increase living standards in a country. Who gives a damn if Toyota is a Japanese car maker as long as they are offering you the best car for your money? Why are you against people paying less for the same or even better goods?

 

Also, you continue to LIE (yes LIE) about the condition of foreign workers in Singapore. More than half of all foreign workers in Singapore make over 200,000USD per year. Oh how they exploit foreign workers......................... 

And who cares about how much of the land is owned by the government, the government also owns 100% of the airspace, and what?. What does that tell us about how much economic freedom businesses enjoy in Singapore?

 

And why do you continue to equate indicative planning with directive planning (communism)? Indicatively planned economies are nowhere near the communist ideal you desire. There is no compulsion with indicative planning.

 

With regards to Scandinavian countries, you should know that despite their low corporate tax rates they also have extremely high personal income tax rates. The average Scandinavian is paying through the nose for these "free social programs". The fact that the bureaucrats in Oslo and Stockholm are slightly more competent than the ones in Tehran and Caracas and are more efficient with spending other peoples money is nothing to write home about.

 

Also, the open market operations amendment was not made in 1913 but rather in the mid 1920's just in time to contribute to the great depression (thank you government bureaucrats). And i will point to the countries of western Europe, North America and Australia that prospered in spite of violating free market principles because free market capitalism was the foundation of their economic policy. Now please provide an example of a country with a population over 5million that greatly increased living standards of its populations while implementing largely socialist economic policy. Note the difference between increasing living standards and maintaining them. You will be hard pressed to name a country that was largely socialist and did the former.

 

And honestly, if the people of Iran have your socialist mindset then they deserve the failing economy they have. Fortunately, they voted for Rouhani this time so they might be wisening up.

 

Now that we have gotten the facts out of the way, none of which you seem to digest, let’s focus on your contradictions and the conceptual underpinnings of what you are propagating.

 

Yes, protectionism has played a big role in helping nations gain an eventual competitive advantage in key industries which have contributed significantly to economic prosperity and growth.  I did not imply causation, I merely stated the facts.  It is a simple concept (stop trying to evade it): We do not live in a perfect world where everyone starts of in conditions of perfect equality (one of the conditions of true liberty (Adam Smith).  If a country with a severe competitive disadvantage in a key industry allows far more advanced foreign firms free access to its markets, the following tends to happen more often than not:  Local home grown businesses are overwhelmed and wiped out, the core decision making apparatus as to how to organize the industry and what to do with the profits shifts from the local population to some company headquarters in foreign land.  Local firms can’t just magically compete while the entire market is being gobbled up by some powerful foreign player, or even a powerful private local firm, they need to be allowed to fail and grow in a nourishing environment, not a vicious one.  You keep ignoring the realities,  I just gave you examples of 2 of the biggest corporate names in the world in Toyota and Nokia which were allowed to fail over and over again till they created a range of products other more profit obsessed firms could not compete with.  This is hardly surprising, some of the best innovations and research takes place in subsidized environments where maximizing short term profit for a handful of unknown shareholders is not the primary objective.  The dire consequences of neo-liberal reform is there for everyone to see from Latin America, through Africa to Asia, it isn't up for debate.

 

The issue with people like you is that you reduce every single ill in society to the following conclusion: Government is the problem. 

 

Private investment fails to create demand: government is the problem.

 

Financial deregulation causes severe concentration of wealth and a subsequent crash: too much regulation. 

 

Governments protect key local industries: automobile, textile, manufacturing etc etc, allowing them to prosper: would have prospered more without protection.

 

I couldn’t get an A in economics: must be a government conspiracy.

 

Look, I do agree that in certain cases privatizing an industry can yield better results if the government is terribly inefficient and undemocratic but this isn’t always the case.  Studies after Studies show that Scandinavians enjoy some of the best living standards in the world and don’t mind paying taxes since they live in a system that is relatively far more democratic compared to most other developed nations.  That is not communism, it is closer to socialism, a democratic (not centralized) state controlling key industries that provide essential services to people, significantly increasing their standard of living.  Why is it that the best, most efficient health care systems in the world are public?  Why is it the same with educational systems?

 

Research also clearly demonstrates that even by modern measures of economic efficiency, which ignore all kinds of social variables, public firms are generally just as if not more efficient than private ones.  Keeping in mind that public firms can potentially be controlled and reformed by the public to serve their interests, while private are accountable to no one but a handful of shareholders.  You cannot ignore these realities and simply reduce everything down to lack of private enterprise.

 

As far as Iran is concerned, government mismanagement is a concern, but the primary reason for its economic predicament is as Al-Khattati points out, harsh economic sanctions.  There are countless although not desirable examples of even centralized state run industries performing very competitively, certain state run Chinese firms are a good example.

Edited October 20, 2014 by King

[Wahdat]

 

 Studies after Studies show that Scandinavians enjoy some of the best living standards in the world and don’t mind paying taxes since they live in a system that is relatively far more democratic compared to most other developed nations.

 

 

What good has ever come out of Scandinavian countries except good words and well wishes..... and maybe with the exception of Swedish massage. Facebook, eBay, Amazon, the Internet, Computers etc that today are means to earning honorable livelihood for 100s of millions of people around the world (and not only Americans) are American borne out of their economic model.

[lover]

What good has ever come out of Scandinavian countries except good words and well wishes..... and maybe with the exception of Swedish massage. Facebook, eBay, Amazon, the Internet, Computers etc that today are means to earning honorable livelihood for 100s of millions of people around the world (and not only Americans) are American borne out of their economic model.

Internet is American, you gotta explain that to me, bro.

[Wahdat]

Internet is American, you gotta explain that to me, bro.

 

Google is also American and could do a far better job than me.

[lover]

You are American too, brother, since according to you everything is American. Please explain.

I give you some help:

This NeXT Computer was used by Tim Berners-Lee at CERN and became the world's first Web server.

But maybe Cern is in America, too.

[baradar_jackson]

What good has ever come out of Scandinavian countries except good words and well wishes..... and maybe with the exception of Swedish massage. Facebook, eBay, Amazon, the Internet, Computers etc that today are means to earning honorable livelihood for 100s of millions of people around the world (and not only Americans) are American borne out of their economic model.

 

First of all, facebook is stupid so I don't know why any country would brag about having "invented" it. That's like being proud of giving a billion people a cancerous tumor.

 

Secondly, it is true that many innovations have come out of the US in the last century. Attributing this to the economic model is dishonest and lazy. Moreover, the US wasn't always governed by the economic model it has today. At the apex of American political power, the US was a strong welfare state. And as much as rightists deify Ronal Reagan, even Reaganomics was far less extreme than the economic model we have today, which is a throwback to the late 19th century. (but at least tycoons actually dealt in something productive)

 

Let me give an example which illustrates the problem.

 

Donald Trump.

 

Everyone knows this name. Who is he? He is a man who inherited his father's wealth, and has gained fame from naming all of his business enterprises after himself (like a cat peeing on something to mark his territory). Do you know what else is true about Donald Trump? He has filed for bankruptcy ten trillion times. (Go look up the exact number; it's a lot). That's right. Now go read his twitter feed and see all the nonsense he spews about how Barack Obama is turning the country into a socialist hellhole for brilliant business minds like himself.

 

That, in a nutshell, is what's wrong with the current economic model of the US. For the poor man, everything he does is failure. For the middle class man, failure is a likely outcome. Even for the moderately rich guy who owns a small business, failure is not just possible, it is likely! Meaning, everybody has to deal with the consequences of their actions (and sometimes, just consequences that they have no control of). But Donald Trump can fail and fail and fail and fail and then fail some more, and he will not be affected in any way. The government will help him. You see what this is? This is socialism for the rich. And what's worse is that Donald Trump has gained his wealth through no work or talent of his own.

 

What the heck does that have to do with innovation? On what planet does that kind of economic model, stimulate innovation?

 

And by the way, you mention computers and eBay. Do you know what Sweden has? Social justice. I am pretty sure that beats out the Atari 2600 any day of the week, bro.

[mina]

The US is the master of spying,stealing and killing...and then claims to be innovative...i would laugh if it wouldn't be a serious desaster for mankind.

Edited October 22, 2014 by mina313

[Wahdat]

Br. Jackson

Facebook might be lame and cancerous to you and I (I opened my facebook account about a month ago for work purposes only) but it makes life easier for 100s of millions of people who think otherwise. Families stay connected and businesses thrive through facebook. Another example that comes to mind is that when the Afghan govt hides things as per norm of third world countries, people stay informed through it. Yes there are people who use facebook for wrong purposes. I would blame their stupidity and not facebook.

In regards to Donald Trump I must say that its better to help him who in turn would employ others than throw it away on small welfare cheques and keep folks dependent.

I know lots of people outside of the US that benefit from US's innovations such as Amazon, Facebook, or eBay but I yet have to see anyone outside Sweden benefit from Swedish social justice.

Yes the current American economic model is far from ideal but it still is far far better and just than anything out there. European model might be 'humane' but it is far unjust and tilted in favor of white Europeans. The way its set up is that it only allows native Europeans to excel in life and not others. 

 

Due to political reasons and the fact that you live in the US you might not appreciate the American model but once you leave US you would appreciate what US really is. I also used to hate the American system but going out of it and getting exposed to other systems was real eye opener. Its no surprise that America is America and Sweden Sweden. Europe is racist man.

The US is the master of spying,stealing and killing...and then claims to be innovative...i would laugh if it wouldn't be a serious desaster for mankind.

 

If not for the US (Internet), you would not have been able to enrich us with your wisdom.

You are American too, brother, since according to you everything is American. Please explain.

I give you some help:

This NeXT Computer was used by Tim Berners-Lee at CERN and became the world's first Web server.

But maybe Cern is in America, too.

 

I am not American. You simply should not compare Europe to US.

[mina]

The man who invented the internet is british and invented it in Switzerland...

http://en.m.wikipedia.org/wiki/Tim_Berners-Lee

[King]

What good has ever come out of Scandinavian countries except good words and well wishes..... and maybe with the exception of Swedish massage. Facebook, eBay, Amazon, the Internet, Computers etc that today are means to earning honorable livelihood for 100s of millions of people around the world (and not only Americans) are American borne out of their economic model.

 

America is a country of 300 million people which shortly after the second world war, owned half of the worlds wealth.  Facebook, Ebay and anything Apple has come up with are not monumental inventions (most of what they create is essentially wasteful in terms of productivity), however computers and the internet itself are.  The internet, computers and even the modern GPS system were created in the state sector through large public subsidies, not private enterprise (economic model American's boast on about), so I hope you realize this is what you are referring to.  There was a time when the US also had the worlds best education system, when it was essentially entirely public.  Europe (also played it's role in creating the internet) has given us the modern welfare system, which has been a key development.  As far as Scandinavia is concerned, given it's population, it's highly competitive in the technological industry and has had some of the leading IT firms, apart from being relatively democratic, their economies are advanced and competitive.  It wouldn't be fair just to portray the region as some pleasant village not keeping up/contributing to the real world.

Edited October 22, 2014 by King

[Wahdat]

Armaments industry is the backbone industry of all industrialized states except Japan. The R&D for this industry is publicly or state funded. But we see global scale innovation in the US.

Lets take you as an example. Do you think you have a better chance of success in life in US or in Sweden? And I am not talking about welfare cheques.

Welfare system is the biggest con since Ponzi's scheme.

[lover]

 

I am not American. You simply should not compare Europe to US.

Because...?

[Wahdat]

Because...?

America is great and Europe not.

[godzapostle]

The US economic system is only nominally capitalist in its current state. In actuality it is not capitalist at all. Wealth is no longer generated by workers/labour and capital/savings but by debt. The entire US financial system lives off debt and the creation of debt. Capital and capitalism is no longer needed because money costs nothing and the population will acquiesce so long as the EBT cards and welfare checks continue to renew each month.

In my opinion the socialists and communists are not the real threat, the people that believe in these things are armchair generals who have never experienced having worked a grueling 40 hour week only to see half their paycheck eaten up by beaurucrats who promise to do more with it than they themselves could. They have not lived under soviet rule or in Chavez's failed Venezuela where empty store shelves was the norm.

In my opinion, the real threat to capitalism are the new age economists who believe in capitalism but also believe that capitalism can succeed not with savings, labor and risk with potential reward but by debt and speculation.

In order to restore the economic prosperity of the past the US must push these new age economists out of key places such as the fed and as economic policy advisors to presidents and governors. This is not going to happen until at least another couple major depressions and until the people come to the realization that the excuses of the debt fanatics have been worn out.

[King]

Armaments industry is the backbone industry of all industrialized states except Japan. The R&D for this industry is publicly or state funded. But we see global scale innovation in the US.

Lets take you as an example. Do you think you have a better chance of success in life in US or in Sweden? And I am not talking about welfare cheques.

Welfare system is the biggest con since Ponzi's scheme.

 

If you define success as exploiting workers, avoiding taxes and making insanely risky investments (with public bailouts as insurance) to rake in stupendous profits on my way to owning private jets and a fancy yacht then yes, US would give me the best chance at success.  If you as an ordinary person are interested in having access to quality education (without large debts), quality health care, clean environment, reasonable job security, decent standard of living and want to contribute to society in a meaningful way, then I would rather be somewhere else.  The welfare system has it's problems, but taking care of the vulnerable is what civilized societies do, a feature lacking in the US economic model in general which has welfare for the elites.  Welfare isn't just about handing checks to what amounts to a handful of 'lazy' leeches, it's about democracy, equality of opportunity and fair distribution of wealth.  The Scandinavian/German/French welfare model isn't perfect, but it's still the most democratic and relatively equitable in the world. There is a reason vast regions of the richest country in the world resemble third world poverty.  

 

I don't understand the issue here, the US has been for the greater part of the century, by far the richest nation on earth, as with other super power's before it, it has had a relatively strong R&D sector backed by the state, as did the Soviet Union and Germany before so it isn't unique.  The likes of Ebay and Facebook are terrible examples of technological innovation anyway.

Edited October 22, 2014 by King

[Wahdat]

The US economic system is only nominally capitalist in its current state. In actuality it is not capitalist at all. Wealth is no longer generated by workers/labour and capital/savings but by debt. The entire US financial system lives off debt and the creation of debt. Capital and capitalism is no longer needed because money costs nothing and the population will acquiesce so long as the EBT cards and welfare checks continue to renew each month.

In my opinion the socialists and communists are not the real threat, the people that believe in these things are armchair generals who have never experienced having worked a grueling 40 hour week only to see half their paycheck eaten up by beaurucrats who promise to do more with it than they themselves could. They have not lived under soviet rule or in Chavez's failed Venezuela where empty store shelves was the norm.

In my opinion, the real threat to capitalism are the new age economists who believe in capitalism but also believe that capitalism can succeed not with savings, labor and risk with potential reward but by debt and speculation.

In order to restore the economic prosperity of the past the US must push these new age economists out of key places such as the fed and as economic policy advisors to presidents and governors. This is not going to happen until at least another couple major depressions and until the people come to the realization that the excuses of the debt fanatics have been worn out.

 

Petro-dollar recycling system messed up the American system. It was like a steroid whereby US could print all the money it wanted but it backfired real good. And now US has to deal with its come down. Goes to show it does not matter if its America, Israel, Saudi or elsewhere. Good things done bring good things and vice versa. And in terms of economic freedom, US with all its flaws still remains the best country in the world where people are free to pursue their dreams and away from the heavy arms of bureaucracy. 

If you define success as exploiting workers, avoiding taxes and making insanely risky investments (with public bailouts as insurance) to rake in stupendous profits on my way to owning private jets and a fancy yacht then yes, US would give me the best chance at success.  If you as an ordinary person are interested in having access to quality education (without large debts), quality health care, clean environment, reasonable job security, decent standard of living and want to contribute to society in a meaningful way, then I would rather be somewhere else.  The welfare system has it's problems, but taking care of the vulnerable is what civilized societies do, a feature lacking in the US economic model in general which has welfare for the elites.  Welfare isn't just about handing checks to what amounts to a handful of 'lazy' leeches, it's about democracy, equality of opportunity and fair distribution of wealth.  The Scandinavian/German/French welfare model isn't perfect, but it's still the most democratic and relatively equitable in the world. There is a reason vast regions of the richest country in the world resemble third world poverty.  

 

I don't understand the issue here, the US has been for the greater part of the century, by far the richest nation on earth, as with other super power's before it, it has had a relatively strong R&D sector backed by the state, as did the Soviet Union and Germany before so it isn't unique.  The likes of Ebay and Facebook are terrible examples of technological innovation anyway.

 

One can have all those things you mentioned in US as you'd get in Canada, Sweden, or France with the only difference that in US its not handed down to you by the state. You'd have to work for it and there are tons of ways for those who really want it. Soviet Union fell simply because it was the other way around. State provided eeeeeevery thing and people took life for granted. People no longer cared for their husbands, children, or parents as State became all those. Europe is somewhat like that as well. In US, banks do those things and the transaction is rather dynamic. 

 

Facebook or eBay are not by far the marvel of American technology but they have generated Billions of dollars to the economy and have transformed the landscape of the entire global economy. Since we were talking about economics I thought they would prove better examples of American ingenuity. Today in US and through eBay or Amazon I can find just about anything and can buy it with few clicks. Who can say that in SIberia or Kabul?

or even Sweden? or Norway?

[skylight2]

"Who can say that in SIberia or Kabul?"

 

Hilarrriousss!!!! That's like asking who can say that somewhere in the middle of Alaskan Wilderness with no wifi ... or in the middle of civil war torn US... 

 

come one... yawl can do better than that kind of logic. 

[Wahdat]

"Who can say that in SIberia or Kabul?"

 

Hilarrriousss!!!! That's like asking who can say that somewhere in the middle of Alaskan Wilderness with no wifi ... or in the middle of civil war torn US... 

 

come one... yawl can do better than that kind of logic. 

 

Actually some friends and I ordered a tent and some fishing gear in Alaska.

There is internet in India as well and probably 10000 times more programmers as well. Then why do lag behind.....far far far behind US? Its the absence of that innovative mind borne of an innovate system. Its funny its very black and white for you folks. US is bad and hence everything about US must be bad. Including all the good things. This is absurd yo!

[Marbles]

A simple, analytical look at various economies inform us repeatedly of one defining observation.

If countries starting from the proverbial scratch employ wholesale neo-liberal economic model they would only be passing death sentence on themselves. And if they continue with centrally planned economy after having achieved competitive strength through decades of protectionism, they would still be passing death sentence as it becomes almost impossible to maintain the momentum forever. China and India are two major examples of how to wade through various stages of economic life of a nation.

 

An economy has to turn inwards for sustained internal development, like a prepubescent girl, before it is mature and capable enough to have a marriage with an outside player to produce fruits.

Iran, even if there were no draconian sanctions, couldn't have achieved anything without first becoming self-sufficient. Sanctions only made sure Iran had to go down that road. And now in time when politics is less hostile, Iran will need to open itself up, guardedly, to realise its full potential.

Edited October 23, 2014 by Marbles