Why poverty in Iran?

We have posed a question about why there should be such high levels of poverty and undernutrition in a country that is relatively wealthy like Iran. We have moved the discussion of the issue to this page in order to have more room to explore the various dimensions of the problem.

The first entry in our discussion is from Cyrus S, an Iranian in New York:

The problem is that, because the regime is not democratic nor even a republic, the regime’s main source of revenue is natural resources & not tax or industrial production. Power and wealth are concentrated in the hands of only a few, and no one in the system really cares about the economy, job creation, inflation, education, industrial or technical decline of the nation, underdevelopment or anything else as long as there is market for oil and other resources.

Other than employment directly with the IRGC, which gives major advantages including major corporation profit shares, high salary & benefits, top bonus and chance of stealing from the nation’s wealth, being otherwise connected to IRGC or other regime connections means a lot if the person owns a business, needs a loan or is looking for government or IRGC employment.

It was estimated 2 yrs ago that the IRGC controled over 30 percent of Iran’s economy. Considering that the regime always undervalues such data and after all the takeovers and tens of billions of dollars in contract awards since then, it may be assumed the IRGC controls approximately 75 percent of Iran’s economy by now.

In countries like Iran, Nigeria, Sudan, Venezuela were oil is set to be the only important revenue since its on the hands of corrupt politicians or a few using it for their self interest and there is no care for the prosperity of the nation, it happens that slowly all non-oil industries decline, inflation grows & many small businesses go out of business.

Specially in Iran where 90% of the economy is dominated with the IRGC and political figures, all Bonyads (foundation) are set as money laundering machines to transfer wealth to outside of the country while the country itself is dying from lack of the investment. Dubai & Canada are very good examples with Dubai with billion dollars in Iranian investments and also taking advantage of Iranian knowledge, skills & talents.

Also the IRGC dominance (said to be controlling over 1/3 of the GDP, but should be more since the take over so many companies & awarded all major contracts with no competition with private contractors (bid any amount it wish))

In general it hurts the average Iranian in the following ways:

1. Stolen resources: the oil, natural gas, minerals & mining (some estimate gold and copper production revenues from various mines are more than oil revenue) are controlled in almost complete secrecy (many of the exploration contracts are awarded to Chinese or European companies base on cash under the table deals with corrupt officials).

2. IRGC created a zero chance of competition for what ever type of business gets into. They own the raw resources, government paid employees & the power to put any competitor out of business, leading to the closure of many businesses in Iran.

3. IRGC only hires only those connected or with Basij/IRGC service experience. Most times after a company takeover, they replace the staff with unskilled, uneducated IRGC-connected staff, which leads to inefficiency of the companies and further threatens to increase prices & inflation.

4. Drugs and addiction. Years ago it was estimated that Iran’s daily opium & heroin consumption is over 10000 MT/day. Imagine 500 truckloads of drugs crossing the borders, passing through tens of check points & weighing stations to reach Tehran and other cities daily w/o getting caught (that’s excluding the amount being crossed to Turkey). Noting that Iran faces the world’s most serious opiate addiction problem, in 2009 the UN estimated that 105 tons of heroin annually cross into Iran from Afghanistan. This is after the Iranian authorities have intercepted 20 percent of the heroin shipments. Drug addiction has a significant negative impact on the national economy due to loss of productive human capacity. It also has direct effects on household economies as well as the well-being of any children living with addicts.

5. Each year between $10-20 billion is transferred to other countries to aid other Muslims or fund terrorists. That amount is enough to cover each one of the entire 70 million people in Iran with health insurance according to medical cost in Iran and cover a large portion if not all unemployed under a survival welfare program.

6. International sanctions by the UN Security Council and the United States have made the middle class weaker, leading to business closings, reductions and job loss while all the government backed organizations including the IRGC more than doubled in size & revenue. As long as they get the oil $, sanctions works in their favor. The regime purposely tries to crush all non-oil or non-government-backed businesses through allowing major Chinese imports by the IRGC, setting markets on fire, cutting subsidies, etc.

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