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“Economics is for donkeys”

While oil prices remain high, Iran can afford its contempt for economic orthodoxy

Whatever else he is remembered for, Mahmoud Ahmadinejad is unlikely to go down in history as an economic wizard. Indeed, the Iranian president has worn his contempt for economic orthodoxy as a badge of honour. The late Ayatollah Ruhollah Khomeini, leader of Iran's Islamic Revolution, was famously quoted as saying, "Economics is for donkeys." It is a maxim Ahmadinejad has mirrored assiduously, saying once that he prayed to the Almighty that he would never know anything about a subject he views as a tool of western domination.

His disregard has its roots in political populism. The president sees the prescriptions of seasoned economists as little more than recipes for social injustice. Ahmadinejad's election victory in June 2005 was based on a pledge to sweep away such inequality. It would be achieved, he said, by putting the proceeds of Iran's vast oil wealth "on people's tables". The time for fancy economic theories was past; henceforth the preference would be for old-fashioned redistribution.

Ahmadinejad's government set about its task oblivious to precedent or expert advice. The Management and Planning Organisation, a state body charged with mapping out long-term economic and budget strategy, was broken up and experienced managers sacked; oil revenues were ploughed into state projects in run-down regions; the minimum wage was raised; interest rates were slashed by presidential decree to below the inflation rate; ownership of state enterprises was offered to the public in the form of "justice shares", the government's response to a constitutional amendment requiring it to introduce privatisation.

The results have been a swelling budget deficit, sluggish growth, rising unemployment and soaring inflation caused, economists say, by Ahmadinejad's policy of injecting excess liquidity into the economy. Even the government's own statistics put inflation at more than 27 per cent, and one government official recently said the true jobless rate could be three times the official rate of roughly 10 per cent. The banks have responded to interest rate cuts by refusing to lend money while, for all the talk of privatisation, the economy remains overwhelmingly in state hands.

These consequences have been compounded by a rising chorus of complaints over soaring food prices and housing costs. Further disenchantment has been caused by a previously unthinkable decision to ration petrol, forced on the government by the increased cost of importing petroleum, made necessary by Iran's lack of refinement capacity. Despite possessing the world's second-largest reserves of natural gas, the country has also suffered energy shortages, leading last winter to heating cuts, and to power blackouts this summer.

It seems like a tale of woe, but Ahmadinejad has remained remarkably upbeat, if not always familiar with the facts. In January 2007, he responded to MPs' alarm about a rise in tomato prices to £1.50 a kilo by urging them to visit his local grocer, where he claimed they were cheaper. When I went there a few days later, the shopkeeper said he had stopped stocking tomatoes because customers would not buy them at current prices.

Yet there may be good reason for the president's relaxed demeanour. Thanks to continuously high oil prices, Iran's economy is not facing imminent collapse. The supreme leader, Ayatollah Ali Khamenei - who could be expected to jettison his protégé if the economic problems became a source of instability - has told Ahmadinejad to prepare for a second term when his first ends next year.

Such support is available because not everyone is unhappy, as I witnessed last autumn in the eastern province of South Khorasan during the saffron harvest. Ahmadinejad's decision to more than double saffron's wholesale price had delighted farmers and their impoverished pickers, whose wages had risen in proportion. Cheap government loans and grants had allowed many to renovate their homes and instal indoor bathrooms. To such people, the president was a saviour.

Their view is a far cry from that of many economists, as characterised in a recent report by the International Monetary Fund which warned that Iran's "poor economic policies" would be unsustainable once oil prices dropped. But, with the support of Iran's rural poor and the supreme leader, Ahmadinejad is unlikely to lose sleep over such judgements from a sector whose expertise he does not recognise.

Robert Tait is the Guardian's Istanbul correspondent. He was previously the paper's correspondent in Tehran from March 2005 until December 2007, when he was forced to leave after the authorities declined to renew his residence permit

This article first appeared in the 15 September 2008 issue of the New Statesman, Inside Iran

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The New Times: Brexit, globalisation, the crisis in Labour and the future of the left

With essays by David Miliband, Paul Mason, John Harris, Lisa Nandy, Vince Cable and more.

Once again the “new times” are associated with the ascendancy of the right. The financial crash of 2007-2008 – and the Great Recession and sovereign debt crises that were a consequence of it – were meant to have marked the end of an era of runaway “turbocapitalism”. It never came close to happening. The crash was a crisis of capitalism but not the crisis of capitalism. As Lenin observed, there is “no such thing as an absolutely hopeless situation” for capitalism, and so we discovered again. Instead, the greatest burden of the period of fiscal retrenchment that followed the crash was carried by the poorest in society, those most directly affected by austerity, and this in turn has contributed to a deepening distrust of elites and a wider crisis of governance.

Where are we now and in which direction are we heading?

Some of the contributors to this special issue believe that we have reached the end of the “neoliberal” era. I am more sceptical. In any event, the end of neoliberalism, however you define it, will not lead to a social-democratic revival: it looks as if, in many Western countries, we are entering an age in which centre-left parties cannot form ruling majorities, having leaked support to nationalists, populists and more radical alternatives.

Certainly the British Labour Party, riven by a war between its parliamentary representatives and much of its membership, is in a critical condition. At the same time, Jeremy Corbyn’s leadership has inspired a remarkable re-engagement with left-wing politics, even as his party slumps in the polls. His own views may seem frozen in time, but hundreds of thousands of people, many of them young graduates, have responded to his anti-austerity rhetoric, his candour and his shambolic, unspun style.

The EU referendum, in which as much as one-third of Labour supporters voted for Brexit, exposed another chasm in Labour – this time between educated metropolitan liberals and the more socially conservative white working class on whose loyalty the party has long depended. This no longer looks like a viable election-winning coalition, especially after the collapse of Labour in Scotland and the concomitant rise of nationalism in England.

In Marxism Today’s “New Times” issue of October 1988, Stuart Hall wrote: “The left seems not just displaced by Thatcherism, but disabled, flattened, becalmed by the very prospect of change; afraid of rooting itself in ‘the new’ and unable to make the leap of imagination required to engage the future.” Something similar could be said of the left today as it confronts Brexit, the disunities within the United Kingdom, and, in Theresa May, a prime minister who has indicated that she might be prepared to break with the orthodoxies of the past three decades.

The Labour leadership contest between Corbyn and Owen Smith was largely an exercise in nostalgia, both candidates seeking to revive policies that defined an era of mass production and working-class solidarity when Labour was strong. On matters such as immigration, digital disruption, the new gig economy or the power of networks, they had little to say. They proposed a politics of opposition – against austerity, against grammar schools. But what were they for? Neither man seemed capable of embracing the “leading edge of change” or of making the imaginative leap necessary to engage the future.

So is there a politics of the left that will allow us to ride with the currents of these turbulent “new times” and thus shape rather than be flattened by them? Over the next 34 pages 18 writers, offering many perspectives, attempt to answer this and related questions as they analyse the forces shaping a world in which power is shifting to the East, wars rage unchecked in the Middle East, refugees drown en masse in the Mediterranean, technology is outstripping our capacity to understand it, and globalisation begins to fragment.

— Jason Cowley, Editor 

Tom Kibasi on what the left fails to see

Philip Collins on why it's time for Labour to end its crisis

John Harris on why Labour is losing its heartland

Lisa Nandy on how Labour has been halted and hollowed out

David Runciman on networks and the digital revolution

John Gray on why the right, not the left, has grasped the new times

Mariana Mazzucato on why it's time for progressives to rethink capitalism

Robert Ford on why the left must reckon with the anger of those left behind

Ros Wynne-Jones on the people who need a Labour government most

Gary Gerstle on Corbyn, Sanders and the populist surge

Nick Pearce on why the left is haunted by the ghosts of the 1930s

Paul Mason on why the left must be ready to cause a commotion

Neal Lawson on what the new, 21st-century left needs now

Charles Leadbeater explains why we are all existentialists now

John Bew mourns the lost left

Marc Stears on why democracy is a long, hard, slow business

Vince Cable on how a financial crisis empowered the right

David Miliband on why the left needs to move forward, not back

This article first appeared in the 22 September 2016 issue of the New Statesman, The New Times