North Africa, West Asia

How Rouhani’s neoliberal policies provoked unrest in Iran

A closer look at Rouhani’s economic achievements, shows that his administration has had little success and disappointed many segments of Iranian society.

Mehdy Shaddel
1 February 2018

Picture by Tasnim News Agency. Some rights reserved. CC BY 4.0When US president Jimmy Carter described Iran as an ‘island of stability in one of the more troubled areas of the world’ on new year’s eve, 1977, not even the most ardent spokespeople for the unfolding revolution had the slightest idea Shah Mohammadreza Pahlavi’s regime was to last less than fourteen months. Similarly, and quite ironically, when the Iranian vice president Eshaq Jahangiri, deliberately echoing Carter, went on record as stating that ‘Iran is an island of stability in the insecure Middle East’ in an address in March 2017, nobody was expecting nationwide unrest to rock the country only ten months later. But the unexpected has now happened, leaving media commentators and Middle East experts struggling to come up with explanations.

One of the most recurring explanations given for this fleeting bout of anti-government demonstrations is economic grievances, especially among the unemployed, suburban youth. But while many analysts, both within Iran and without, have pointed to economic disaffection as the major stimulus for the current upheavals, others have expressed doubts, going so far as to identify ‘rising expectations’ as the underlying cause of unrest rather than declining economic prosperity. During a televised cabinet meeting, President Rouhani himself scapegoated the state-run TV by accusing it of downplaying the government’s economic achievements and, consequently, helping to foment socio-economic discontent. His reformist supporters, who took to the streets themselves in 2009 to contest election results, have reiterated the people’s right to peacefully protest and called on all sides to eschew violence.

Some of the high-profile public figures associated with the reformist camp have branded the protesters ‘uneducated riffraff’ and ‘radicals’ whose actions endanger the democratic process and jeopardise the future of the country. Their conservative opponents, on the other hand, have acknowledged the economic hardships faced by the nation, with some calling on the president to resign. Monarchist émigrés, led by Reza Pahlavi, the current head of the deposed ruling house of Iran, and droves of self-proclaimed ‘Iran experts’ affiliated with various Washington-based think-tanks, per usual, consider the events of the recent weeks to mark the beginning of the end for the Islamic republic.

Some of President Rouhani’s supporters have expressed bemusement at the fact that the economic volatility and 35% inflation of the latter years of the ultra-conservative Ahmadinejad administration—when Iran was subjected to the toughest sanctions regime since Napoleon’s continental blockade of Britain two centuries previously—never resulted in widespread discontent, while Rouhani’s government has succeeded in reversing the negative net economic growth rate and reigning in the roaring inflation (which is now down to 10%), with some seeing the hands of the president’s political opponents at work in this.

The economic climate is still more than unfavourable

A closer look at Rouhani’s economic achievements, however, shows that his administration has had little success in this area and has disappointed many segments of Iranian society. Since the day he took office, Rouhani and his government have, with some justification, laid all blame at the door of his hardliner predecessor, Mahmoud Ahmadinejad, asserting time and again that what they took over from the previous administration was a country on the brink of ruination.

But the fact remains that the economic climate is still more than unfavourable. A recent report by the Tehran Chamber of Commerce, based on Ministry of Roads and Urban Development figures, puts the percentage of Iranians below the relative poverty line at a staggering 33%, which is more than 14% up from 2007. A study by the BBC’s Persian service shows that the average spending of the Iranian household has fallen by 15% in real terms between 2007 and 2016. Economist Djavad Salehi-Isfahani has calculated that during Rouhani’s first two years in office real per capita expenditure has declined for all but the top decile of the Iranians. And there is no sign that the growing tide of inequality is going to reverse course either. Unemployment has risen by around 2 percentage points since Rouhani took office, and the rate is even higher among the youth.

President Rouhani’s response to the economic malaise plaguing the country has been thoroughly monetarist, with his main focus being on taming the inflation and reducing the budget deficit, a policy that some critics believe is the root cause of a recession which has led to a rise in unemployment. With inflation expected to soon fall to below 10%, though, Rouhani is now gearing up to tackle the problem of unemployment. At the heart of the Rouhani administration’s campaign against unemployment is a drive to attract foreign investment. In order to achieve this, the government recently revised and introduced a long-dormant bill that called for further relaxation of Iran’s already lax labour laws, proposing to cut the minimum wage by half—and drawing much criticism in the process.

Another job-creation initiative that elicited widespread backlash, especially from educated college students and labour activists, was an internship scheme that quickly earned the nickname ‘forced drudgery’ from its detractors, who argued that the scheme’s exploitative nature would entice employers to turn to recruiting fixed-term interns, rather than hiring employees protected by more stringent labour laws, and would actually spike unemployment. Crucially, these reforms have been put forward at a time when workers (and even white-collar pensioners) are constantly protesting working conditions, low wages, and pay arrears.

Rouhani administration’s campaign against unemployment is a drive to attract foreign investment

The budget for the next fiscal year (March 2018-March 2019), unveiled on the eve of the protests, is by all counts an austerity budget which anticipates serious cuts to the public sector (including the ‘Rouhanicare’, the president’s signature universal healthcare scheme) as well as an increase in the price of public services, staple items, energy, and duties on goods. One of the most controversial of these was a 200-500% increase on the ‘exit toll’ imposed on those going on foreign trips, which drew the ire of many of the president’s more well-off middle-class supporters. The parliament has, however, vowed to put the brakes on most such measures in the wake of the protests. This came at about the same time as a sudden hike in the prices of several staple foodstuffs (such as eggs) were giving the government some serious headache.

It is no surprise then that the president’s neoliberal fiscal policies—cheered on by the IMF—have resulted in violent backlash from those strata of society who have been hit the hardest by those policies, something of which observers had warned (in Persian) during Rouhani’s first term. Writing for Tehran-based Shargh daily two months before the outbreak of the protests, economist Vahid Shaghaghi-Shahri had predicted social discontentment if the government failed to adopt meaningful redistributive measures in the face of surging inequality and growing poverty.

The demographics of the protesters confirms the prescience of these warnings. In a news conference after tendering his report (in Persian) on the protests to the president, Hossein Zolfaghari, Iran’s deputy minister of the interior for security, announced that 84% of those arrested were under the age of 35, and that 59% have never attended college. This demographic breakdown indicates that the absolute majority of those who took to the streets were the forgotten underprivileged from blue-collar backgrounds (children of well-to-do Iranian families do of course attend college, with the overall percentage of youth enrolment in tertiary education standing at 71.9% in 2015 according to the UNESCO).

Iranian authorities have a way of generating figures that suit their book under such circumstances—for instance, it was claimed during the 2009 protests against election results that 60% of those arrested hadn’t voted at all—but there seems to be no reason for doubting the substance of official statistics this time around, and in fact Zolfaghari went out of his way to add that the majority of those arrested had never been previously charged with security-related offences. This shows that the demonstrations were primarily staged by the children of Iran’s have-nots—those who were abandoned to be ‘crushed under the wheels of growth’ during the 1990s, the long-suffering victims of the blind consumers of IMF-prescribed structural adjustment pills, from Hashemi-Rafsanjani to Ahmadinejad and from Khatami to Rouhani. These days IMF ideologues are having second thoughts about the universal applicability of their one-size-fits-all prescriptions, but their Iranian acolytes still remain adamant.

To categorically call the protests ‘anti-regime’ is to appropriate, decontextualise, and isolate them from their deeper meanings and roots.

There are other dimensions to these events as well. Iran’s economic uncertainty and indulgent labour laws mean that secure jobs could only be found with the country’s cumbersome public sector. But the number of available slots is always limited, and the large pool of educated, overqualified youths allows the government to set strict conditions on those who want to enter government service. The young get to know of the unwritten rules of hiring in the public, and parts of the private, sector before entering the job market: if one wants to stand any chance of getting hired, one has to abide by a certain set of dress and style codes, to appear ‘religious’, and to (or not to) behave and speak in certain ways.

The Islamic republic’s intrusions into its citizens’ private lives and its forcible imposition of the desired religious and moral standards of its ruling establishment on the nation is nothing new, but today’s socio-economic realities have given it versatility in the ways in which it coerces its youth into masquerading as strict adherents to its antediluvian mores. The youth have now struck back at the establishment, not only to decry three decades of structural adjustment policies of successive governments, but also to express their deep-seated frustration with the status quo, their pent-up anger at the establishment’s disciplinarian mentality, and to let out their repressed energies. To categorically call the protests ‘anti-regime’—especially in the light of the adjective’s connotations in the west when used about Iran—is therefore to appropriate, decontextualise, and isolate them from their deeper meanings and roots.

The media commentariat have, once again, lost all nuance in their coverage of this new round of turmoil in Iran, but it seems safe to say that the recent events—despite their manifold causes, from climate change to issues that might be considered more trivial—gave expression to the most radical and organic socio-political storm that has swept through the country in the four decades since the 1979 revolution. Those of Iran’s educated, liberal-minded elite who have taken to Twitter and Facebook to denounce, in grandiloquent terms, the protests as ‘aimless’, ‘dangerous’, and ‘blind’ would do well to note that their own deafness might well come to haunt them in three years’ time (it also remains to be seen how much truth there is to the oft-repeated and hackneyed claim that Iran’s underclass predominantly support the conservatives). But losing the next election (or worse, the rise to power of another ‘rabble-rouser’) is not the most fearsome spectre facing Iran’s liberal-minded pro-reform elite.

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