Exploring the untapped economic growth opportunities in Iran and the barriers preventing it from reaching its potential, including authoritarian government and heavy reliance on fossil fuels. It examines the consequences of Iran's war with Iraq and the rise of bonyads as tools of corruption. The chapter also discusses the impact of sanctions on Iran's economy and highlights the missed potential of the country as an economic superpower.
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Quick takeaways
Iran's economy has the potential to rival major global economies like Germany and the United States, but it is currently underperforming due to the government's disregard for the well-being of its people and corruption within the country's economic system.
Extensive sanctions imposed by the United States and other countries have crippled Iran's economy, leading to fluctuating output figures and limiting its access to global trade and technological advancements.
Deep dives
The Potential of Iran's Economy
Iran has the potential to be one of the world's most prosperous economies, given its large population, well-educated workforce, abundant natural resources, and strategic geographical position. It could rival the output of countries like Germany, Japan, the United States, and China. However, despite these advantages, Iran's economy is currently underperforming, with a GDP per capita similar to Sri Lanka and Lebanon. The authoritarian government's disregard for their people's well-being and the corruption within the country's economic system contribute to this economic failure.
The Impact of Bonyads on Iran's Economy
The Iranian government established bonyads, independent trusts intended to provide social services to the poor, but they have become tools of corruption. These bonyads, which operate without financial transparency or tax obligations, contribute to 20% of the country's output and employ 10% of its workforce. Their control and influence discourage private businesses and foreign investors from investing in Iran. As a result, the Iranian economy remains heavily reliant on oil and lacks diversification.
The Role of Sanctions in Restricting Iran's Economic Potential
Iran has faced extensive sanctions imposed by the United States and other countries for various reasons, including support to internationally restricted groups and concerns over nuclear weapons and human rights abuses. These sanctions have crippled Iran's economy, leading to fluctuating output figures and hindering its access to global trade and technological advancements. The sanctions have significantly limited Iran's ability to reach its full economic potential and maintain sustained growth.
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What has prevented Iran, teeming with natural resources and a young, educated population, from becoming a world-leading economy? How did it go from rapid growth to economic failure, and why is it still unable to fulfil it's potential?