Process
Status Items Output None Questions None Claims None Highlights Done See section below
Highlights
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Still, between 2007 and 2012, thanks in part to redistributive government policies, the income share of Iran’s rich — those in the top 5 percent of households — decreased while those in lower income groups made substantial welfare gains; Iranian society was becoming more equal. In part, state elites had decided to redistribute in response to the 2009 Green Movement protests, which had put pressure on the conservative Mahmoud Ahmadinejad government to double down on its populist agenda.
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In 2012, however, things changed. The Obama administration expanded its sanctions to disconnect Iranian banks from the global financial system and block Iranian oil exports. This threw Iran into its first recession in nearly two decades, leading to a period of fiscal austerity that coincided with an increase in the top 5 percent’s income share. At the same time, those at the lower end of the income scale saw their consumption decline.
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the major redistributive projects introduced in the interim period — monthly cash transfers, the workers’ Justice Shares program, the Mehr mass housing project, and the Rouhanicare healthcare program — failed to sustainably reduce and contain inequality as sanctions squeezed Iran’s economy.
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All other households were worse off in 2021 than in 2011, before Obama’s sanctions changed Iran’s economic trajectory.
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Iranian politicians, pundits, and the public often blame corruption for the growing gap between rich and poor. But not everyone who is getting richer is engaged in corruption
✏️ The true culprit is the structural transformation of the economy, spurred by sanctions, and enacted/favored by the elite. 👓 propaganda 🔗 View Highlight
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After a few difficult years in the early to mid-2010s, manufacturers found ways to grow under sanctions, burnishing the fortunes of Iran’s shareholder class. Sanctions did lead to a drop in investment as the cost of capital surged and most manufacturers were constrained by their existing capital stock. But sanctions also fundamentally altered price structures associated with production and international trade. Manufacturers took advantage of import substitution and renewed export competitiveness to expand production in certain fields.
✏️ Evidence of the restructuring. Capitalists and elite expanded production and pricing in certain fields to take advantage of the import restrictions. They also prioritized efficiency and repressed wages, bumping up their share of the revenues. 🔗 View Highlight
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Chart 3 depicts the dynamic in more detail: sanctions substantially reduced workers’ real pay. Average compensation in large industrial enterprises in 2020 stood 22 percent below its 2000s average. At the same time, sanctions raised average labor productivity — not primarily through mass layoffs in the industrial sector, but rather by increasing output per retained worker. Industrial workers in Iran have become more productive, but most of their additional output is accruing to the owners and managers of capital.
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Sparking increased profits and growing inequality, sanctions facilitated a structural transformation of the Iranian economy that favored those who control capital. Sanctions entrenched and empowered Iran’s elite by halting the economic redistribution that had been underway prior to 2012.