Ahmadinejad and the “System”

Farideh Farhi

Mahmoud Ahmadinejad went to Qom and gave a rather bombastic economic speech even in comparison to his usual standards. The contours of his speech were not that different from the one he gave last week in Mashad but the details were both interesting and revealing in terms of how he sees himself vis-à-vis what he considers to be the powerful and corrupt entrenched interests or forces in the Islamic republic that prevent him from doing his job and fulfilling his campaign promise of pursuing economic justice. His demeanor was strident as usual; added was the element of exasperation.

Like his Mashad speech, Ahmadinejad highlighted his hard work and success against foreign powers who have tried hard to import a “70 percent inflation” rate into Iran. It was his administration’s efforts, he said again, that presumably limited the damage to only 20 percent (more than 8 percent above what it was when Khatami left office)! He also lambasted the powerful domestic mafia and powerful political forces that have joined the foreign powers in stunting his economic plans. But ironically the detailed explanation of where these powerful forces are located ended up revealing his belief that these sinister economic forces are also operating within his own administration.

As usual, of course, he refused to name names but he identified the roots of economic corruption in the country to be the uncontrolled giving of import licenses and monopolies as though after three years of being in office, he has had nothing to do with these economic policies. “Unfortunately,” he said “these groups are so powerful that they even direct law making authorities towards themselves.” He went on to state:

“I have to apologize to you since the truth is that it was our belief that once the problem became recognized, and order was given to the Central Bank and the Ministry of [Finance and] Economy, they would take steps to solve the problem. Unfortunately they did not perform their duty and the situation continued in the same form and on the other hand some organizations did not perform their main responsibility and could not fight against that mafia-like body…. Unfortunately some individuals said in their meetings that that we will defeat him. No matter how much he [Ahmadinejad]works and tries, we have two places in our control. One is Petroleum [Ministry] and the other are banks…. I announce right here to the people of Iran that I am your humble servant who is standing by his words and in the fight against corruption I will not stand back even a bit from my economic positions.”

Come to think of it, this is an astounding argument, essentially saying that the people he appointed himself to run Iran’s economy did not and are not doing what they are supposed to do, which is to carry his orders. This is presumably why he just sacked one of the folks who was not carrying his order: the finance and economic minister, Davoud Danesh-jafari.

It is important to understand the backdrop to this argument. Like in many other countries, these are turbulent economic times in Iran. There is no doubt that inflation rate has picked up substantially, officially inching above 20 percent and unofficially, particularly in the housing market, well above that percentage. Inflation is obviously harming the poor and the middle class more than those with abundant assets. Economists had warned Ahmadinejad about the inflationary impact of his expansionist economic policies since he embarked upon them. At this point, Ahmadinejad’s options are to acknowledge his mistaken policies and begin a re-direction (which the Iranian economist say will take a couple of years – well beyond the 2009 presidential election – to begin to have an impact) or look for sources of the problem elsewhere.

The desire and urge for confronting mafias and powerful economic interests has been part of the Iranian political dynamics and discourse since the 1979 revolution. In fact, last week, Hossein Shariatmadari, the editor of conservative Kayhan, wrote an editorial essentially acknowledging runaway inflation in the housing market and food prices and also acknowledging that they hurt the poor and not the rich. He, however, said that this inflationary trend cannot really be blamed on policies of a government that is clearly dedicated to combating inflation. The problem, he also said, must be found in the control of various sectors of the Iranian economy by economic mafias and the rich.

All in all, it was a scary editorial, hinting at the possibility of attacks against “those who are causing inflation” Incidentally, it sounded very much like the promotion of anti-profiteering campaign pursued by the Shah immediately before he fell in 1979, which blamed individual entrepreneurs for inflationary policies and expansion of money supply because of the uncontrolled infusion of oil money into the Iranian economy.

Shariatmadari’s editorial immediately elicited a response from a conservative member of the parliament (a cleric to boot) who reminded Shariatmadari that all the inflationary consequences of Ahmadinejad’s 2006 and 2007 budgets were predicted; hence, he pointed out, the conversation should revolve around correction of wrong headed policies and not scapegoating.

And here lies Ahmadinejad's problem in convincing the Iranian elite in Qom or elsewhere that the best policy is to go after the economically powerful and the rich. To boot, of course, is the reality that the Iranian establishment does not have much reason to support a president who, at least rhetorically, wants to attack their economic interests.

These disagreements essentially leave Ahmadinejad with policy confusion and not much beyond fiery speeches attacking members of his own conservative administration, and also attacking the conservative-controlled judicial system, and government-controlled banks for not following his orders or bringing charges against corrupt individuals, and preventing his pursuit of economic reform and justice.

This predicament was perhaps why Ahmadinejad ended up canceling the major economic speech he was supposed to give on the Iranian television, reportedly to announce a plan for the monetization of more targeted subsidies. Conflicts within his own administration over how to deal with runaway subsidies and what to do with the interest rate (raise it by indexing it to inflation or not) prevented the announcement of his new economic plans, at least for now.

At this point, it is perhaps worth remembering that by the last year of his first presidential term, Mohammad Khatami was also bemoaning his lack of power against the systemic forces that were stunting his agenda of political reform. But at least he was not complaining about his own cabinet or his own political wing – the reformers -not doing what he tells them to do.

In order to not take responsibility for the inflationary pressures that are causing havoc in the Iranian economy and harming the poor, in Qom, Ahmadinejad had to confess his lack of power even in relation to members of his own administration.