Friday, April 1, 2016

Ismael Hossein-Zadeh — Rouhani’s “Open-Door” Economic Policy for Iran: Recipe for Indebtedness, Deindustrialization and Dependence

A number of commentators have compared President Rouhani’s policies of opening Iran’s markets to Western business with those of China’s Deng Xiaoping following the death of Mao Zedong some four decades ago [1]. A closer look at Mr. Rouhani’s open-door economic policies indicates, however, that they are more akin to those of Boris Yeltsin’s Russia following the collapse of the Berlin Wall than those of China since Deng Xiaoping.
This study makes an argument that both in theory and practice the Rouhani administration is following an economic model that is widely known to create indebtedness, warped industrialization and dependent development, which also often leads to a loss of political/geopolitical independence. To this end, the study focuses on the administration’s approach to trade and development, to foreign capital, and to industrialization and technological transfer.…
To criticize President Rouhani’s economic policies is not to question his or his advisors’ intentions or objectives of trying to bring about economic development in Iran. It is, rather, to question the means they employ—free trade and economic liberalism/neoliberalism—in order to achieve those ends. They must certainly be eager to pull their county’s economy out of the deep recessionary hole. Why, then, do they insist on pursuing economic policies that have proven—time and again, and in country after country—to be resulting in economic problems of indebtedness, deindustrialization and dependence?
The answer, in a nutshell, is that the president and his economic advisors seem to be infatuated with an economic paradigm that is regrettably detrimental to the goal of self-sustaining development for the less-developed countries. It is an inappropriate, unsuitable and misleading paradigm, crafted by economic ideologues or theorists of the more developed countries as economic “science,” whose practical outcome for the less-developed economies has been trade deficit, indebtedness, dependent development, and extreme socio-economic inequality. It is the notorious economic liberalism of the neoclassical school of economic thought, which postulates that free trade and unrestricted pursuit of self-interest lead to economic expansion and prosperity for all; that state-sponsored social safety-net programs or strategic trade policies are “costly trade-offs” in terms of lost productivity; and that, therefore, government intervention in economic affairs must be avoided.
According to this doctrine, solutions to economic stagnation, poverty and under-development lie in unhindered operations of capital 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, uneven or unfair competition in international markets, or the nature of global capitalism as they are because of government intervention and/or exclusion from world capitalist markets.…
Falling into the trap.

Most of the post is about free trade versus smart trade. Excellent brief summary of the historical dynamic and how it benefits the core (empire) and harnesses the periphery (vassals, colonies).

Rouhani’s “Open-Door” Economic Policy for Iran: Recipe for Indebtedness, Deindustrialization and Dependence
Ismael Hossein-Zadeh | Professor Emeritus of Economics, Drake University

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