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Poverty And Its Causes In Iran – Analysis

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Energy is the single most important ingredient in any economic activity. While Iran is home to about 1% of the world’s population, it holds 9% and 16% of the world’s proven crude oil and natural gas reserves, respectively. Iran also has considerable reserves of other natural resources and minerals. 

According to estimates from the US Geological Survey, it has major reserves of feldspar (2nd largest in the world), barite (5th largest), gypsum (5th largest), fluorspar (8th largest), and iron ore (10th largest), as well as substantial reserves of other strategic minerals, like copper, manganese, zinc, chromium, and gold. 

Overall Iran is home to an estimated 5% of world’s metal constituent reserves, but much of its vast reserves are untapped. Historically, mining has contributed less than 1% of the country’s GDP. Moreover, despite huge natural gas reserves, Iran’s production barely meets domestic needs and it accounts for less than 1% of total global gas exports. With all these potential, the country is poor. 

Authoritarian leadership, economic mismanagement, widespread corruption, weak legal system, none democratic governance institutions capacity, and unfavorable business regulations, alongside the unprecedented US financial and economic sanctions and the  inhumane coronavirus pandemic management, have been choking the Iranian economy. However, with a population of 85 million, half under the age of 30 and highly educated, as well as a strategic location on the Persian Gulf and vast reserves of energy and other natural resources, including wind and solar energy, Iran’s economy has incredible potential waiting to be unlocked.

Poverty is the most ugliest feature of the human communities and it is a distinct sign of a country’s economic, social and cultural underdevelopment. It is known to endanger the political stability, social structure and psychological health of the society.  

Poverty is also one of the most complicated economic issues, which the resolving of it entails subtle and precise recognition of its root causes. Knowing the relevant factors of its existence is the first step onto the path of making plans for fighting poverty and deprivation. Incorrect identification of poverty causing factors results in intensification of it and correct determination will result in its alleviation in a country. Therefore, clear understanding of poverty causing factors will result in proper eradication programs, appropriate policy-making, good use of resources, efforts, programs and elimination of poverty in the form of culture and sustainable economic development. 

The World Bank defines poverty in absolute terms. The bank defines extreme poverty as living on less than US$ 1.90 per day, and moderate poverty as less than $3.10 a day. It has been estimated that in 2008, 1.4 billion people had consumption levels below US$ 1.25 a day and 2.7 billion lived on less than $2 a day. The proportion of the developing world’s population living in extreme economic poverty has fallen from 28 percent in 1990 to 21 percent in 2001. Much of the improvement has occurred in east and South Asia. In Sub-Saharan Africa GDP/capita shrank with 14 percent, and extreme poverty increased from 41 percent in 1981 to 46 percent in 2001. Other regions have seen little or no change. In the early 1990s the transition economies of Europe and Central Asia experienced a sharp drop in income. Poverty rates rose to 6 percent at the end of the decade before beginning to recede.

Iran’s 1979 revolution was an uprising against inequality and injustice during late shah regime. The main shift in policy after the revolution can be characterized as from urban-biased and elite-centered to rural-biased and populist. Populism in the Clerical Regime has a natural origin “the huge oil boom of the 1970s,” which gave Iran a windfall in terms of a large inflow of foreign exchange. Unaware of the vagaries of the world oil market, the Clerics believed that the road to a bright economic future was paved with rising oil revenues. 

However, various factions taken power among the Clerical Regime since revolution have chosen different discourse and applied policies that were in total conflict with the initial promises of the revolution.  

The economic structure in Iran has shifted from nationalization of private assets after the revolution to privatization of government assets. Social welfare and justice, which were key slogans of the Islamic Republic’s political narrative have been completely forgotten. In practice, income inequality, inflation, and unemployment have been pushing more people into poverty each year. Over the past decades, multiple episodes of national currency devaluation have affected the welfare of Iranians, particularly those with lower income. 

According to the Clerical Regime’s Parliament Research Center, about 20% of Iranians lived in poverty in 1995. Over 15% of Iranians in urban areas and 27.3% of those in rural areas were living in absolute poverty in 2010. In 2015, the Ministry of Culture and Guidance conducted a poll to assess “the values and concerns of Iranians.” Of the 15,000 Iranians polled (over the age of 15 from urban and rural areas), 76% believed that the gap between the rich and poor had widened over the five years prior to the study (2010-15). Year-to-year poverty ($1.90 per day in terms of purchasing power) increased about 30% between 2018 and 2019. End of 2019, 33% of Iran’s population lived in absolute poverty and 6% were not able to afford sufficient food (a minimum of 2,100 calories per day). Falling purchasing power of the Iran’s currency, high inflation, and the decline of per capita income in recent years caused by a combination mismanagement, corruption, plundering of country’s wealth, huge expenditures for terrorism and suppression of people, inadequate monetary and fiscal policies have accelerated the rate of poverty in Iran. 

Among the factors affecting poverty, the officials of Iran’s Clerical Regime blame sanctions for economic problems, but in reality, their incompetence and inefficiency are the main cause. They systematically mange the harsh economic problems as a leverage to call for the lifting of sanctions while regime-backed institutions continue to loot Iran’s wealth and resources and spend them on nefarious goals. 

However, various regime’s experts have recently acknowledged that poverty or the decline in people’s purchasing power is rooted in the structure of Iran’s political economy and is not necessarily related to sanctions. Poverty is generally attributed to insufficient economic growth and imbalanced distribution of resources. In Iran’s oil-based economy, distribution of privileges based on political, family and social connections plays a major role in exacerbating inequality, leading to more poverty.

In addition to sanctions, inflation is another cause of poverty in Iran. In early 2013, Iran’s inflation rate stood at nearly 40 percent. The depreciation of the country’s money has lead to an increase in the unemployment rate, which has driven many Iranians into poverty. A solution to this issue that the Clerical Regime has sought in the past was rationing, which prevented the country’s impoverished populations from being much affected by inflation. During the period from March 2019 to September 2020, Iranians have witnessed prices of goods skyrocket from 55% to more than 100%, according to a study published in October by the Institute for Trade Studies and Research, a think tank under the Ministry of Industry, Mine and Trade. 

The Clerical Regime has increased the inflation rate by unbridled banknote printing to compensate for the budget deficit. The banknote printing increased the liquidity rate, and since the high amount of liquidity was much higher than the country’s production rate, the inflation rate increased dramatically.

Disparities have simultaneously grown for both income and wealth in the past seven years as economic problems including higher inflation and fall in the value of the currency have worsened in Iran.

As a recent Iran’s Statistical Center (SCI) has reported, about 20% of the population with the highest income holds 47% of the wealth, while the 20% of the lowest income holds only 0.5%. The Gini coefficient for the fiscal year ending March 21 was 40. This coefficient, or index, ranks economic inequality from zero to 100, where zero is perfect equality and 100 the highest inequality.

Lack of growth (recession) or insufficient growth coupled with uncontrolled inflation drives family budgets out of balance and pushes them lower layers toward poverty. At the same time, high inflation reduces households’ purchasing power.

Another factor that has severely contributed to poverty in recent years in Iran is high cost of basic necessities. The government has ended public services such as education and medical insurance or now provides them at a higher price, meaning households spend more resources on these services.

These, along with various political, social, and economic discriminatory factors affect the distribution of income in Iran. Hence, poverty is caused by inequality, multiplies, and adds to the divide between social classes and leads to more poverty.

Here, one must mention, the months long strikes of different classes and every walks of life in Iran. Workers in the oil and petrochemical industries walked off the job on June 19, 2021, and their strike has now spread to numerous sites across the vast oil and gas exploration fields, as well as the oil industry in general.

According to a statement released by the Union of Metalworkers and Mechanics of Iran (UMMI), at least 28,000 workers have downed tools and remain determined to stay out until their demands are met. The strike is proving to be a moment that tests the solidarity between permanent full-time workers and those employed on a contract basis.

One of the key demands of UMMI is that wages must be paid monthly and without delay. Workers in the industry face unpredictable pay schedules or sometimes the prospect of not being paid at all.

The depth and breadth of the strike has raised speculation that it has the potential to cripple the country, similar to the oil industry strikes of 1979. If the strikes continue, it could shut down vital parts of the economy. As a result, the security establishment is keeping a close eye on developments.

A statement released by the Council of Protesting and Striking Temporary Contract Oil Company Workers, said: “We…will continue our protest and strike to express against our present unbearable economic poor conditions, such as minimum unpaid wages, daily reduction of our household purchasing power and the empty promises and we demand a better increase and higher wages and salaries, adequate social security and better living conditions.”Protesters and strikers in other sectors have been waiting for oil workers to join their ranks and now it has happened.

The demands of oil and petrochemical workers are the same as other sectors but strikes in the oil industry are going to get more attention and therefore play an important role in spreading the protests to the entire labor community. 

The security establishment is trying to undermine the protests with various measures, from firing labor activists, to imposing more stringent hiring practices to keep out “troublemakers” and bringing discord among workers by pitting parallel state-controlled labor organizations against independent unions.

One June 23, 2021, the Free Workers Union of Iran reported that Tehran refinery officials had reacted to a strike at one of its units by firing 700 protesting workers. The refinery’s public relations official,  as a regime’s known usual tactic, denied the layoffs as “completely false.”

News of appointing of a new president have distracted attention from the strikes during their first few days but as the strike wave expanded to new oil and petrochemical refineries and regions, a range of social and political groups took notice. The strikes, due to their size, geographical spread and relative organizational strength, have acquired a political edge. Moreover, their grievances and demands are resonating with large sections of the working population and reviving political memories of oil workers’ special role in the historical events around the Iranian revolution of 1978–1979. 

Workers weren’t the only layer of the Iranian society to go on strike or put up a demonstration, retirees, teachers, nurses, medical interns, staffs and other working sectors have done the same in recent years. Although, retirees have been held nationwide rallies regularly for months, their demands have not yet been met. The protesting retirees, in addition to increasing the level of pension to the level of the poverty line, which is now 10 million tomans ($400). They are demanding the repeal of Article 69 of Social Security, ‌which is an  increase in their annual pensions and free medical treatment.

The Iranian teachers have been protesting since last year but  their demands have not been met by Iran’s Clerical Regime. Among the teachers’ unmet demands are pension rate adjustments in line with inflation. 

The Clerics propaganda machine has downplayed the teachers protests and tried to delegitimize their claims, saying that some of the teachers have “failed their exams.” Teachers earn around $200 a month and many have fallen into severe poverty amid a 50% inflation rate in the country, which has resulted in some teachers committing suicide, according the media outlets. 

It is clearly undeniable, that Iran’s poverty situation is not due to sanctions but its reason lays into the Clerical Regime’s nature. The Clerical Regime is buried under multiple self made crises, and until these crises are not resolved, regime will not have any way out. First and foremost of them, regime does not have legitimacy among Iranians due to its massive committed crimes within the country. Those individuals perpetuated such crimes benefit impunity and even are promoted to more prestigious authority. 

The Clerical Regime has been incapable of meeting the demands of basic needs of the Iranian society; such as food, water, shelter, education, and else since its inception. The Clerics response to any demand comes in with IRGC and twenty-two various kinds security forces intimidation, harsh suppression, jail and executions. Now, every walk of the life of Iranians are seeking their demands off the streets.

Regime’s not meeting the demands of protestors and strikers in time contributes to poverty of those individuals. Due to daily changes of inflation and loss of country’s currency value, once strikers are being paid or partial paid, they are losing much of their buying power. The Clerical Regime is purposefully making such decisions in order to make poverty status quo, keep people occupied with misery and hold them at string not to revolt against establishments. Regime’s inhuman decision of banning WHO approved vaccines, which resulted in massive casualties of Iranians were one of such decisions. As a result, many lost their lives and their jobs as well, which brings more  poverty. Man is witnessing these, while regime is spending $ billions on its terror apparatus, suppressing its citizens, and its involvement in the region. 

In addition to the above mentioned reasons, its longstanding confrontation with the world on illegal nuclear activities, especially its confrontation with the US, issue of its long range missiles, terrorisms, and political meddling in the region. The Clerical Regime does have no solution for any of above mentioned crises, waiting for its destiny to be overthrown by Iranians and their resistance.

* Khalil Khani is an Environmental Specialist and a Human Rights activist. He holds a Ph.D. in Ecology, Botany, and Environmental Studies from Germany and has taught at the University of Tehran and the Hesse State University in Germany. He is also a Doctor of Medical Psychology from the United States.

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