For the past couple weeks, we have all been captivated by the protests occurring in Iran. It has been difficult to turn our eyes from videos of brave men and women risking their lives to insist that their voices are heard, even as the regime releases violence on its own people. While some people understandably find the news of these peaceful protests and the ensuing government crackdown difficult to observe, I personally find great hope in the displays of bravery, compassion, and determination among the protesters. As the people of Iran finally stand up against one of the most suppressive governments in the world, the rest of the Middle East has been making economic strides, particularly in Iraq. Even though the Iranian protests may not result in any change in the regime in the near future, the government of Iran is on precarious ground versus other Middle Eastern countries making economic progress.
The Iranian government under President Ahmadinejad has grossly mismanaged the Iranian economy. Iran’s Central Bank recently reported the projected rate of inflation to be 23.6% in the next year while economic growth has slowed consistently for the last four years. With a disproportionately young population, the unemployment rate has climbed from 10.5% four years ago to 17% now. The Iranian economy was booming a decade ago, so why are these numbers unexpectedly getting worse, even after the surging oil prices of 2008? The answer may be found in this interesting fact that the United States government may also want to examine before it heads down a socialist path… Ahmadinejad is a pure populist with a policy of spreading wealth as much as possible. His staunchest supporters are the poor since the President has consistently increased government handouts. So as you watch the protests raging in the streets, remember that these protesters are generally the more educated members of Iranian society and the future of that country. Without these people creating wealth instead of Ahmadinejad simply spreading the current wealth around, the country will continue to deteriorate economically and soon there will be very little wealth left to spread to the poor.
The population of Iran has become disenchanted with their government for many reasons, but one major reason may be the Iranian people looking next door to Iraq. As they watch their neighbors have honest elections, reduced violence, and an improving economy, many Iranians may be questioning why they are denied such progressions. The Iraq National Investment Commission announced on May 31 that it expects the country’s gross domestic product to grow by 7% this year, even during a global recession. This positive number is the result of the Iraqi government performing an about-face on many economic issues. For example, the government has opened its six super-giant oilfields for the first time in 30 years, and at the end of June it will auction off foreign contracts to produce crude oil for the next 20 to 25 years from Iraqi wells. For the first time in decades, the government is welcoming foreign investment in its energy industry, and oil companies are clamoring for the opportunity. Also, Iraq has turned its focus to improving infrastructure by approving bigger budgets, but has found that the country lacks engineers to carry the projects out. So on Monday, Iraq urged scientists and engineers who fled the country amidst violence in the last six years to return home to help rebuild the economy. Across the border, engineers and scientists in Iran have already begun wondering why their country does not value them so highly and may start to leave. Unlike Iran, Iraq has finally realized that to keep these entrepreneurs and educated citizens, the economy must function properly. Last year, Iraq’s Finance Ministry began drafting law necessary for Iraq to join the World Trade Organization. The idea that Iraq may join any civilized world-wide organization is a gigantic step forward. With economic recovery and growth, foreign and domestic investment will increase. This was already seen in May of this year as a total of 745 Iraqi companies registered with the Ministry of Trade, which resulted in a 62% increase in the total number of registered firms in the country in only one year. Iraq certainly has its domestic problems, such as a dwindling water supply, but an increase in business is likely to help find solutions to these problems.
While much of Iraq is still in a dire economic situation, investment should help Iraq’s economy find new footing and spur growth. This is in stark contrast to an Iranian economy that continues to slide. This is certainly the tale of two economies, seemingly headed in completely opposite directions. And no one is watching this tale more closely than the protestors in Iran.
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