Iran Economy 5-4-24

Iran has a low debt to GDP, but a bad economy with low per capita GDP. Iran’s Theocratic government funds most of the Islamic Terror groups on the planet.

In 2023, Iran’s Nominal GDP was $366.4 billion. Per Capita GDP was $4,234. Population was 89 million. Trade deficit was $4.743 billion.  Debt to GDP was 30.6%. Size 636,372 sq mi. In 2024, the Inflation is 35.8%. From 1957 to 2024, Inflation averaged 16%. Unemployment 7.6%.

76% of the population is urban, 24% is rural.  Land mass is 636,400 sq miles compared to Alaska with 570,865 sq miles.

Prior to 1979, Iran's economic development was rapid. Traditionally an agrarian society, by the 1970s the country had undergone significant industrialization and economic modernization. This pace of growth had slowed dramatically by 1978 as capital flight reached $30 to $40 billion just before the revolution.

Iran's population more than doubled between 1980 and 2000 and grew increasingly younger. Although a relatively large number of Iranians are farmers, agricultural production has consistently fallen since the 1960s. By the late 1990s, Iran had become a major importer of food. At that time, economic hardship in the countryside resulted in vast numbers of people moving to cities.

The eight-year war with Iraq claimed at least 300,000 Iranian lives and injured more than 500,000. The cost of the war to the country's economy was some $500 billion. After hostilities with Iraq ceased in 1988, the government tried to develop the country's communication, transportation, manufacturing, health care, education and energy sectors (including its prospective nuclear power facilities), and began the process of integrating its communication and transportation infrastructure with that of neighboring states.  

The history of Iran as a monarchy covers Iran’s development from 1925 and rejection in 1979.

Reza Shah Pahlavi (r. 1925–41) improved the country's overall infrastructure, implemented educational reform, campaigned against foreign influence, reformed the legal system, and introduced modern industries. During this time, Iran experienced a period of social change, economic development, and relative political stability.

Modern industries were introduced. From 1925 to 1941, industrial plants grew from 20 to 800.This reduced the country's dependence on imports. The state encouraged industrialization by raising tariffs, financing modern industries, and imposing government monopolies. Changes in the legal system, tax structure, and trade policies attracted domestic financial resources and led to the emergence of a group of new, young entrepreneurs. The shah's court became the biggest investor in the new industries.

Primarily by confiscating real estate, the shah himself became the country's richest man.

Iran Increased investment in mining, construction, and the manufacturing sector occurred, and infrastructure investment grew significantly. Iran increased railroads from 250km to 1700km and increased gravel roads fro 2400 to 12000km from 1925 to 1938.

Iran Industrial growth occurred in fisheries, railroads, sea ports, oil, coal and factories. Argiculture remained unchanged with 90% of the labor force. International trade expanded as World War II approached. Traditional agricultural and industrial export products were replaced by oil exports. Germany, US and USSR bought oil.  Reza Shah Pahlavi abdicated in 1941 and was succeeded by his son, 

Mohammad Reza Shah Pahlavi (1941–79). Hitler had invaded Poland in 1939 and World War II was beginning. Germany needed oil for gasoline to continue its takeover of Europe. After Hitler’s defeat in 1945, everybody wanted oil for gasoline for their cars.  In the post-war period after 1945 Iran built roads, highways, dams, bridges, and seaports. Many large-scale agricultural operations in meat, dairy products, and fruit production were established. Small-scale farmers, however, did not benefit from the new investment opportunities.

By 1968, oil prices were rising and Iran exported oil.  Trade surpluses and foreign investment in Iran were used to build infrastructure and their military. Citizens moved from rural areas to urban cities.

A combination of oil revenues, public spending, and foreign and domestic investments enlarged the middle class in major cities, particularly Tehran. In the wake of the spike in crude oil prices that followed the 1973 war pitting Egypt and Syria against Israel, the process of industrialization and consumption grew rapidly.

Between 1973 and 1977, the specialized banks provided more than 200 billion rials to the manufacturing sector, and the increase in investment averaged 56 percent per year. A flood of imported goods and raw materials overwhelmed the capacity of seaports and warehouses. The military was also a beneficiary of the new economic and social conditions. Military personnel, modern artillery and equipment, and military training absorbed a major part of the budget.

Between fiscal year 1964 and FY 1978, Iran's gross national product grew at an annual rate of 13.2 percent at constant prices. The oil, gas, and construction industries expanded by almost 500 percent during this period, while the share of value-added manufacturing increased by 4 percent.

Women's participation in the labor force in urban areas increased. Large numbers of urban Iranian women, from varying social strata, joined the semiskilled and skilled labor forces. In addition, the number of women enrolling in higher education increased from 5,000 in FY 1967 to more than 74,000 in FY 1978.

Economic growth became increasingly dependent on oil revenues in the 1970s. By 1977, oil revenues had reached US$20 billion per year (79 percent of total government revenues). Other sectors of the economy and regions of the country did not experience a uniform pattern of growth during this period. 

Agriculture, traditional and semi-traditional industries, and the services sector did not thrive to the same extent as the “modern” state-sponsored manufacturing industries. As employment opportunities in rural areas and traditional industries decreased, public employment in urban areas increased. The proportion of self-employed Iranians remained stable.

Education was stressed and the middle class expanded and included women in the 1960s and 1970s. The “establishment” was rejected in the 1960s and in Iran, the establishment was the monarchy. Protests against authority became a fad. Autocratic governments were at risk. Most Iranians were excluded from political and economic decision making. Propaganda from the Mosques suggested a Muslim resurgence. In 1979, Iranian voters rioted to depose the Shah and invited Ayatollah Kohmeini to move from exile in France to take over Iran.

Islamic Republic of Iran

After the Revolution of 1979, Iran's government proceeded with 4 reforms: First they nationalized all industry, including the NIOC, and all Iranian banks. The new Constitution divided the economy in 3 different sectors, namely "State", "Cooperative" and "Private", with the majority being state-owned businesses. The Government started using central planning to control the economy, having the Supreme Leader, the President and Majlis 

creating 5-year socio-economic plans. The State took control of setting prices and subsidies.

According to the 1979 Iranian Constitution, it is the duty of the Islamic government to furnish all citizens with equal and appropriate opportunities, to provide them with work, and to satisfy their essential needs, so that the course of their progress may be assured. Iran's long-term objectives since the 1979 revolution have been economic independence, full employment, and a comfortable standard of living for citizens. This never happened.

1979, with the outbreak of the Iran–Iraq War, over 80% of Iran's economy came under the control of the government. After the end of hostilities with Iraq in 1988, Iran sustained a loss of $500 billion through the Iraq war.

In the 1980s, global oil production increased and oil went to $20/bbl.

By the late 1990s, Iran was a major food importer, and economic hardship in the countryside had driven vast numbers of people to migrate to cities.

In 1996, the U.S. Government passed the Iran and Libya Sanctions Act (ILSA) which prohibits U.S. (and non-U.S. companies) from investing and trading with Iran for more than $20 million annually, with the exception, since 2000, for items like pharmaceuticals, medical equipment.

In 2017, the US had isolated Iran and their revenue was exhausted. By 2020, Iran was a failed state.

Iran remains highly dependent on the extraction of petroleum and natural gas for export, and the government faces increasing difficulty in providing opportunities for a younger, better educated workforce. Such lack of opportunities has led to a growing sense of frustration among lower- and middle-class Iranians.

Iranian students are taught Persian language, literature, mathematics, science, history, geography, art, physical education, religious studies, and Quranic studies. They also learn about physical sciences, humanities, and foreign languages from secondary education.

Iran's privilege-based welfare system provides greater support for Iran's formal sector employees, particularly public employees.

https://en.wikipedia.org/wiki/Economic_history_of_Iran

Comments

In 1979, Iran elected Ayatollah Kohmeini who set up a Militarized Communist Shiite Muslim government intent on destroying Israel.

In 2021, Biden removed all sanctions on Iran and returned $6 billion in frozen hostage payment assets to Iran. He also resumed negotiations with Iran over their nuclear program. This has failed. Iran has resumed its funding of Terrorist groups in Afghanistan, Syria, Yemen, Lebanon and Gaza.  Bidens mishandling of the US Afghanistan withdrawal encouraged the Hamas attack on Israel that prompted Israel to begin removing Hamas from Gaza.

Iran made progress from 1925 to 1941 under Reza Shah Pahlavi and Iran’s economy survived under his son and successor Mohammed Reza Shah Pahlavi from 1941 to 1979.  Riots broke out in Iran in 1979 aimed at deposing the unpopular Shah who was replaced by their current Islamic government. They have also failed to improve the economy for their citizens. Their Islamic government has become militarized and abusive and has increased its support for Terrorist organizations most active in the Middle East. 

Iran’s once westernized citizens supported the establishment of the current Islamic government in 1979.

Now their children will be forced to pay the price, as the US starves Iran’s government into oblivion. Trump will encourage our Abraham Accord allies to support the rebuilding process.

Comments

I suspect that Iran became Radical Islam because the Muslim Clerics saw the population “westernize” under the monarchy and they saw their influence wane. They encouraged the revolt against the Shah’s autocracy. Iran was 95% Shia. They offered a Shia government and the voters approved.  

If Trump is elected in November 2024, he will open oil and natural gas drilling to increase production to meet US demand. This will lower global oil and natural gas prices and reduce Iran’s revenue. He will reinstall sanctions against Iran. He will call for total economic isolation of Iran and the eradication of all Terrorist organizations.

Norb Leahy, Dunwoody GA Tea Party Leader