Teaching Comparative Government and Politics

Friday, November 12, 2010

The politics of economics

There are good economic reasons for the changes coming in Iran's subsidy program, but the government might well have political goals as well as economic ones. The costs of ending subsidies will not be borne equally.

Iran's middle class to be hard hit as subsidy program is overhauled

Last year, Tehran's writers, doctors and small-business owners formed the backbone of a grass-roots opposition movement against President Mahmoud Ahmadinejad. Now these middle-class urbanites feel they're being singled out by a government plan that will soon cut off state subsidies and boost the prices of a wide array of everyday products…

[I]n the coming weeks they expect to be hit again, when the cost of gasoline, bread, electricity and other staples are set to increase to market levels, with some prices possibly rising as much as tenfold. While the rural poor will be partly compensated by direct cash handouts from the state, many in Iran's cities will have to fend for themselves.

The subsidy overhaul lays bare a deep rift between the Islamic Republic's leaders and the influential middle class over what kind of country Iran should be, three decades after the 1979 revolution…

"The middle class has updated itself to modern times," said Mehdi [a copper trader who asked not to be identified by his full name out of fear of retribution]. "Now I want out leaders to do the same."…

Ahmadinejad has said the program is an attempt to redistribute wealth to the poor. When it is implemented, some 60 million Iranians, including most of the country's poor and lower middle-class residents, will receive the equivalent of $40 a month in their bank accounts to compensate for the steep price increases. But the remainder of the population, some 15 million by government estimates, including many in the urban middle class, will have to fend for themselves.

"The subsidy plan will lead to the middle classes becoming more dependent on the state. They will be poorer and lose influence" said Abbas Abdi, a political analyst critical of the government. "The government will be pleased with this…

Iran's middle class has long been at odds with the country's revolutionary leaders, who dislike their moderate values.

In the revolution's aftermath, Iran urbanized at rapid speed. Illiteracy was nearly wiped out, universities became accessible for all social and economic classes, and the most remote villages were connected to the national electricity grid. But the changes came at a price for Iran's leaders.

As carpet weavers, shopkeepers and farmers moved to Tehran, bought cars and sent their children to universities, their revolutionary fire was slowly extinguished…

The changes heralded increasingly loud political demands for more personal freedom, moderate policies and better foreign relations. In the past decade, the middle class formed the base of a moderate movement of clerics and politicians attempting to modernize and reform the Islamic Republic from within…