Shia economics

April 20, 2011

The Ayatollah Khomeini once famously said “economics is for donkeys.”
Khomeini’s comments proved to be prophetic–the Iranian economy today certainly looks to be run by jackasses.
Iran’s recipe for an economic turnaround is as follows:
1.  Dub the current year “The Year of Economic Jihad.”
2.  Take more statist, government control of private businesses and bazaars and call it “cooperation” (see details below).
3.  Eliminate three zeroes from the currency to “reduce” inflation.  Seriously.
It has been said that over the centuries, Muslim leaders have often taken a dismissive view of fact-based economic scholarship because they have focused more strictly on the legal or jurisprudential traditions of Islamic financial law.  That seems to be the case in contemporary Iran, and a turnaround looks unlikely.  Poor Iranians are paying the price for their leaders’ anti-intellectual sharia socialism.
From Zawya on Apr. 14:

Minister of Economy and Finance Affairs Seyyed Shamseddin Hosseini said cooperation between the state-run and private sector would create an economic turning point in the current Iranian year (started March 21).

Speaking in the unveiling ceremony of Negotiation Council of Government and Private Sector, he noted that last year was the year of endeavors and challenges and those involving in economic activities took extensive efforts, ISNA reported.

He noted that following the targets envisaged in Vision 2025 caused domestic economy to flourish.

Referring to naming the current year as the Year of Economic Jihad by supreme leader Ayatollah Seyyed Ali Khamenei he said that the measure aims at realizing the objectives set by Vision 2025 in under the general policies of Article 44 of the Constitution.

The minister said that the leader has paid special attention to the economic issues during the recent years, noting a large number of forums, mostly political, have been formed during the past years.
Hosseini stated that the expenses of the political forums are higher that their income.

He called for the members of council to join hands and cooperate with each other in order to create new economic capacity for the country.

The economic structures of the country should be developed, he said, adding experiments show that public and private sector should collaborate to achieving the purpose.

He hoped that the council would help enhance cooperation between the government and private sector and remove the distance between them.

Mutual Understanding
Pointing to the lack of mutual understanding between public and private sector, he said that for example those involving in the industrial activities believe that the profit rates of banks’ saving account are high in the country but when the Money and Credit Council lowered the rate, the private banks wrote a letter to complain about the issue.

The minister said that this year should be a turning point in the economic jihad process and average annual economic growth rate, which stood at 5 percent in the past, should increase this year.

“In order to realize the economic growth envisaged in the fifth development plan, at least, $1000 billion worth of investment should be absorbed. We didn’t have such experience because financial resources have been restricted”, he noted.

Hosseini said that improving the business environment and enhancing productivity are among the necessary measures which should be taken in the industrial sector, adding in line with the same policy the Commerce Ministry lowered final cost of products.

Talking to the reporters on the sideline of ceremony, he said that Money and credit Council would study banking development plan which aims at establishing good relation between money and investment.
Criticizing the way of issuing participation bonds for financing projects, he said that banks themselves are in charge of repurchasing the bonds and paying back the original sum plus profit.

“It is actually like paying profit to saving accounts “, he noted.

He stated that nothing has so far been ratified about new national monetary units and the number of zeros that are to be eliminated from national currency.

Looping 3 Zeros Off
Slashing several zeros from national currency was put on agenda of Central Bank of Iran (CBI) several years ago. But, recently practical moves have been adopted to this end. It seems that upon implementing this plan, at least the volume of bills used in current transactions of the people will be reduced.

In the early days of the new Iranian year (started March 21) Hosseini spoke about the possibility of eliminating three zeroes from the national currency.

Last week, Governor of CBI Mahmoud Bahmani talked about the start of project of lopping four zeroes from the national currency and proposed that the project be executed in the coming months.

Bahmani noted that proposal for implementing this plan will be presented to the Cabinet within the next six months. If the Cabinet approves the plan and the Council of Money and Credit also verifies it, CBI will act to collect the existing bills and print new bills.

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