Hossein Pourahmadi
This article focuses on Some aspects of economic globalization process for the establishment and elucidation of new ways of interaction between national economic systems, including that of Iran, and the global economy. Then the author explains some challenges and contradictory aspects of this process within the framework of interests and costs of interaction with the global economic system. In the third part, the author considers the needed reforms as defined by economic and financial institutes of the global economic system for the Islamic Republic of Iran. In the end some economic and political barriers on the way of economic reforms in Iran will be discussed. Theoretical frame of this article is a political economic approach as well as a critical viewpoint to requisites and results of economic reforms proposed by a global liberal economic system.
Keywords: Globalization, Global Economic System, Liberalism, Economic Reform, Iran’s National Economy
Introduction
The globalization process has led to the integration of trade, capital and financial markets of the world and seeks to regulate rules and regulations as well as special economic activities in the world. In doing so; it has taken more speed with time to explain economic interactions among countries on the one hand, and between the global economic system and every country on the other. Globalization of economy which is moving ahead within the framework of development of a capitalistic economic system introduces requisite regulations of new economic liberalism as essential tools for interaction with global economic system. Such requisites include new economic, trade, financial, and monetary reforms as well as reengineering of economic structure of national economies so as to pave the way for integration of all national economies in a global economic system.(1) Taking advantage of a global system and reducing the cost of interaction of every national economic system with global economy depends on the degree and method of adapting domestic economic reforms with requisites of the new liberalistic economic and capitalistic system of the world. On the other hand, implementing domestic economic reforms that are mainly focused on economic liberalization and reducing government’s role in national economy will not necessarily lead to such phenomena as economic growth and development, increase in economic revenues, reduction of production and trade costs, increased share of foreign investments, emergence and bolstering of new comparative economic and productive advantages, promotion of advanced production technologies, and finally, improvement in economic status and competitive power of countries. Rather, all the above developments would depend on status and active role of other governmental, nongovernmental, and transnational players in a global economic system. In addition, requisites of a global economy for reforming national economies could in some instances lead to serious economic, political and social vulnerabilities at a national level as well as at the level of countries’ relations with global economic system and sometimes may even lead to serious crises for those countries examples of which include recent crises in Argentina, Brazil, Uruguay, and Turkey.
Many authors criticizing the process of economic globalization pay more attention to negative consequences such as social inequalities. Economic globalization will result in spread of poverty and unemployment and reduced social status of many people in poor and even rich countries. In other words, it ends in globalization of rich people and localization of poor ones.(2) As one expert believes “globalization is to the benefit of the richest country and to the loss of the most impecunious states”. According to statistics released by the United Nations Development Program (UNDP), the most impecunious countries constituted 20 percent of global population between 1960 and 1990 and witnessed a reduction in their share of global trade from four percent to less than one percent.(3) Therefore, not only the process of economic globalization delineates many requisites for the method and amount of interaction between national economies of every country and global economy, but those requisites and proposed economic reforms will also be facing serious challenges. Therefore, it is necessary to study economic reforms proposed by the global economic system for the Islamic Republic of Iran to pave the way for better and more advantageous interaction with the global economic system and lessen possible damages resulting from such reforms.
1. New Interactions in the Global Economic System
Economic Globalization is a very important, basic, and more or less new phenomenon that has been focus of more attention especially following the Cold War in a bid to analyze the nature and structure of international economic and political system. Within the new framework of the global economic system, the globalization process has encouraged governments to work more toward engagement in economic interactions and relations, especially to boost their maneuvering capabilities in economic fields. In fact, expansion of interactions at the level of global economic system and efforts made for more integration into global markets, which are among the requisites of globalization process delineate new methods for generation of wealth and increasing economic, political, and strategic power of countries. Entering global markets has been followed by emergence and growth of a new economic and political identity within frame of necessary network for presence of a national power at a global level. Global policies for increased liberalization of economic and trade ties (economic liberalization) have emerged as a main factor in shaping structure and concentration of economic activities.(4) Therefore, expansion of relations and interactions of the national economy with the global economic system has been recognized as a modern tool for safeguarding national production and economic power at the level of an ever-changing international system.
In this respect, a group of experts on international politics and economics believe that globalization of economy is related to a group of global factors and elements that strive to generalize and speed up reciprocal communications and interdependence among national economic systems, on the one hand, and between national economic system of every country and a global economic system, on the other.(5) The Organization for Economic Cooperation and Development (OECD) believes that globalization is a process, which includes expansion of international trade and foreign investment through which it develops interaction between each country and the global economic system.(6) In this outlook, globalization of economy is introduced as a process of global unification of sectoral economies, which also includes profound inter-penetration of national economies into one another and involves direct and very advanced competition among them.(7)
Besides, A. MacEwan has opined that globalization of economy is moving toward development in addition to more expanded, freer and international distribution of relations and economic and trade transactions within a global economic system as well as in relations among national economies and their relations with the rest of the world.(8) Paul Krugman defines economic globalization as opening of national markets to global trade; an opening that uses all its structural pressures to promote unification and integration of the global markets.(9) In addition expansion of interactions between national markets and global economic system will depend on the following events too. Therefore, such factors as increasing interdependence in international economic system, elimination of economic borders in the form of national and regional markets, unification and structural integration of multinational companies, increased international cooperation among big economic and technological powers, more development of global information and communication systems which connect all points of the world, will result in the integration and more unification of national markets and national economic systems in a global economic system.(10)
Expansion of economic globalization and acceleration of internationalization of production (as a prelude to economic globalization and a main factor for final growth of capitalistic system) as well as explosive growth in transfer of global capitals including private, multinational, transnational as well as part of national investments all work to propagate and develop infrastructural and large-scale national strategies needed for trade and economic liberalization. According to economic theories presented in this regard, this important goal has been followed and is underway to improve competition within a global economy. Therefore, based on classic economic theories, boosting economic competitiveness following improvement of relative economic and productive advantages of national economies and then expanding interactions between those economies and a global economic system will untimely lead to elevation of standard of living and social welfare in countries engaged in a global economy. This will, in turn, indicate important and strategic role that increased economic competitiveness can play in attracting foreign investments and deploying them for economic development, growth of production and even increasing competitive and trade capabilities of target countries. In other words, promotion of economic ties within a global economic system and increasing competitive capabilities of those countries will pave the way for more growth and development of economy.(11) The United Nations believes that economic privatization and privatization of companies and handicrafts will play an important role in increasing trend of international growth and mobilization of foreign capitals as well as in speeding up the integration of national economies in the process of economic globalization and interaction with a global economic system. Finally, economic globalization will lead to unprecedented reduction in the existing economic and trade (tariff and non-tariff) barriers to more development of international trade ties.(12) During the 1990s, the average level of global trade of production goods increased eight percent while average global trade of services increased seven percent.(13)
When it comes to effective use by any given government of positive consequences of globalization, it should be noted that in practice, and even within the framework of international economic theories, international and free transfer of economic benefits including capital, workforce, production as well as economic competition within a global economy and among the national economies will encourage and bolster economic cooperation among participating countries. This means that based on classic and neoclassic economic viewpoints, free economic and production competition in the world is much different from the traditional disputes that rivaled at an international level, especially up to the end of the Industrial Revolution and economic prosperity of the 18th and 19th centuries and even up to the early years of the 20th century within the framework of mercantilist and neo-mercantilist viewpoints. In addition the mentioned free economic and production competitions within a global economic system are very different from discrepancies among companies and factories that produced similar products and were, therefore, at loggerheads at national or international levels. Such economic and production conflicts and discrepancies at national and international levels surfaced when such conditions as economic and production protectionism as well as economic and production policies based on sustaining trade balance as well as conditions related to incomplete competitiveness, all of which result from a close national or nationalistic policies, prevail. Nationalistic economic policies are based on payment of the state subsidies to protect interests of national companies and industries or regional ones that enjoy lower economic and productive competitive capabilities compared to foreign companies. In fact, they attempt to support various economic and social groups and strata through various means and to support national production in various ways.(14)
Various factors bolster convergence and integration of national economies in global markets and a global economic system. The following instances could be enumerated in this regard: 1. Reduced importance of economic, political and industrial borders as a result of major technological, communication and information developments; global cultural changes; as well as expansion of good grounds for political relations and convergence in the world; 2. More resilience of economic and trade policies of countries toward relations with international transactions; 3. facilitation of transfer system (for goods, money, capital, workforce and advanced technologies), especially facilitated access to capital transfer current; 4. Contraction of time and space and, in other words, elimination of the role of time and space in global markets as a consequence of rapid reduction of prices and facilitated transfer of goods, money, information and individuals.(15)
In short, advocates of the economic globalization stress that this process can pave the way for entry of developed economies as well as developing ones into a unified system of global trade, capital and production as equal members away from any discrimination. From the viewpoint of such analysts, global economic unity including integration and convergence of all national economies as an infrastructure for the economic globalization trend is capable of assuring and increasing positive consequences and benefits of trade and economic growth in an equal manner for both participating sides (both developed and developing countries) on the basis of availability of comparative economic and productive advantages to each of those companies. In fact, the within frame of a neoclassic economic theory, national economy of every country can take part and avail of global markets by relying on its comparative economic and productive advantages. In addition, they are capable of expanding and bolstering those advantages through integration into global economic markets.(16)
2. Challenges Facing National Economy within Global Economic System
Increasing interaction with and integration of national economies into a global economic system, which has taken up more momentum and new dimensions following the globalization of economy, has caused and increased conflicts between political sovereignty and national economy, on the one hand, and requisites of a global economic system on the other. Although drawing a precise line between a government’s economic policies at national and international levels is not easy, it seems that in continuation of the economic globalization process and following the efforts made by governments for integration in and convergence with global markets, those policies are contradicting one another because economic policies at a national level generally aim at social welfare, while foreign economic policies of governments aim at acquiring economic interests, especially for powerful economic and production industries, though both levels finally meet at a common point, which is capability and power of the national economy. International economic policies of countries mainly deal with such issues as rate and quality of tariffs, stocks, foreign investment as well as some global economic occurrences. However, at a national level, those policies deal with such limited issues as economic and productive competition, cooperation between the government as well as national production industries and consumption markets, production standards, job security and incomes of citizens as well as regulation of national economic and industrial institutions. Therefore, in the process of economic globalization and in line with integration in and convergence with a global economic system, national economic policies are mainly affected by international economic policies because the power of national economies of countries in this process will have to acquire an effective position and play an efficient role within global economic system. This would mean sacrificing interests, considerations and necessities of domestic economy and relying on foreign economic requisites so as to meet domestic needs for acquiring a global or regional superior economic and industrial competitive power. But is this an easy goal to realize?
Advocates of the economic globalization and the necessity of integration and convergence of national economies into a global and liberalized economic system are incapable of coming up with mechanisms to reduce some costs and negative social and economic consequences as well as uncontrollable negative outcomes of globalization in the field of national economy resulting from engagement in a global economic system, especially with regard to developing and less developed countries. The author is of the opinion that in practice, positive consequences of entry of every country (be it a developed, developing or less developed country) into a global economic system and international markets will basically and, in the first place, depend on the amount of economic and productive power and competitiveness of those countries. This means that big industrial countries are the first and the most important countries that will avail of the globalization process. Economic and trade unification among affluent countries; that is, major industrial and developed countries, developing countries and especially less developed countries that are less rich or are poor will lead to burgeoning of a set of economic, political, and cultural inequalities that would be to the benefit of the first group and against the interests of the second group. Such unequal global economic unity between rich and poor countries will increase benefits of free trade and economic relations on the side of affluent countries and result in less benefits for and jeopardizing the positive consequences of entering free global economic relations for the second group of countries. In the modern global economic system, gaining capital, attracting foreign investments, transferring technology, exporting goods with high added value, participating in large-scale trade agreements and contracts, producing high-quality goods and competitive power, as well as economic and industrial development and having a powerful economic position will be very difficult, if not impossible, for countries that have failed to experience development at a high level due to the existing inequalities.
This reality demonstrates that although integration in and convergence with a global economic system will increase possibility of taking advantage of new grounds for economic growth and development by many countries, due to massive capabilities of the developed countries, they will get the lion’s share of growth and development opportunities and possibilities. In fact, the existing conflict in relationship of rich and poor countries, which is oriented toward gaining more wealth, a bigger share of markets, and more production of capital goods with higher added value by the first group and more flight of capitals, transfer of more added value to the central point of global economy and reduction of national economic and productive capabilities as a result of more import of goods to national markets for the second group countries, has taken on new dimensions as the globalizatins process goes on.(17)
Although from a theoretical viewpoint, the process of economic globalization seeks to increase comparative economic and productive advantages of every country, various attitudes, especially those attitudes that emerge in developing or less developed countries, insist that possible danger from persistent reduction in economic power and competitiveness of national economies of this group of countries within a free global economic system is undeniable.(18) This group of theorists supports regionalism as a safe substitute for globalization that could be availed of, at least, in early stages and as a prelude to the integration of developing or less developed countries into a global economic system without necessarily pointing out the negative consequences of globalization for this group of countries. To this end, advocates of regionalism as a substitute for globalization seek to avoid possible threats of the economic globalization and to do this they recommend that by supporting national production markets, we can widen their monopolistic nature at the level of regional markets. However, such a support would certainly not mean preventing every kind of competition within national markets and the absence of serious, efficient, planned and controlled supervision from national governments on bolstering national economic, industrial, and production capabilities to boost quality and have access to all characteristics and needed considerations of growth and development for competitive and successful presence at regional and global trade markets. Achieving such an important goal will be possible through establishment, bolstering and developing bilateral and strategic economic pacts between countries at the level of regional or even international markets. In other words, this viewpoint seeks to preserve economic power, bolster and increase national productive and competitive capabilities and regionalization of economic and industrial relations of the concerned countries that will be threatened from various viewpoints through the economic globalization.
Theories based on regionalization of economic and foreign trade ties of developing and less developed countries are mainly focused on support, encouragement and bolstering national influential groups, companies and industries that enjoy less global clout compared to foreign and mainly transnational industries and companies. In fact, the agenda of economic regionalism to support economies of developing or less developed countries is a counterbalance to negative consequences of economic globalization that pursues to protect part of national production and products of such countries; that is, applied products that need more manpower productivity, or other sectors that play an important strategic role in economies of the said countries.(19) The main focus of attention by those who study the negative consequences of the economic globalization for the national economic system, is admitting the point that basically, following up goals related to the degree of power increase and the level of economic competition among countries in a global economic system has led to and exacerbated unfavorable, unsafe and insecure economic and production conditions. Such conditions and negative background can end in serious social, economic and even political crises, especially in developing and less developed countries and even, at a smaller but obvious scale, in industrial countries that would engulf vulnerable or low-income social classes or unspecialized workforce.(20)
A major outcome of the globalization process is that although technological developments and increasing role of information and information systems as well as communications and expansion of computer networks have increased speed and possibility of production in the industrialized countries and have, therefore, increased per capita incomes of various industrial and capitalist groups. They have also created a special situation on the basis of which economic power as well as economic and productive competitiveness has been greatly weaned from manpower and has become more and more dependent on the formation and development of the ability to use computers and other industrial robots. Emergence of such a specific and complicated situation has led to relative and incessant reduction in quality and standard of living of a large part of workers and manpower especially in developing, but even in developed industrial nations. Therefore, increased unemployment and incongruities resulting from developing of the new strategic trend of creating economic and trade added value through more use of computers and robots has led to many economic, political and social problems.(21)
To counteract some problems as well as economic and social maladies which are major consequences of globalization, almost all governments - both governments in developing and less developed countries that suffer from social inequalities, and governments in powerful industrial nations that have been witnessing negative consequences of globalization, especially for vulnerable social start and unspecialized workforce - have decided in various levels to support their national economies in the face of untoward effects of this phenomenon. Promoting goals related to protecting national economies with a lower competitive power could only be accomplished through creating and increasing trade restrictions as well as border and customs barriers to the free competition of goods at a global level, and in fact on the way of presence of huge multinational companies. In major industrial states with a long history of liberalization of trade and economic relations, especially the United States, they argue in support of protecting national economy, limiting free trade strives and trying to meet the requirements of various production and labor groups on the basis of principles related to new theories of incomplete competition. This group of theories mainly strives to justify selective economic protectionism and deployment of industrial policies to support and protect domestic production in favor of national industries that enjoy less economic and competitive capabilities.(22)
3. Necessity of the Structural Improvement of Iran’s National Economy
Despite some negative economic, social and political consequences of the economic globalization process for the national economy of the Islamic Republic of Iran, which was discussed briefly earlier, we must not forget that taking advantage of some privileges or sharing the positive consequences of the economic globalization especially in such fields as production, trade, capital and manpower requires some mainly structural changes in national economic system to boost quality and efficiency of the system in line with promoting economic competitive power first at regional and then at global level. At the same time, such structural reforms can work as a two-edged sword to increase economic and industrial capabilities of countries and bring them more wealth through promoting competitive power while the requisite for such reforms is dismissal of some vulnerable social classes and strata from the competition for wealth and power and, as a result, increasing poverty and deepening social divide.
The most important items proposed for structural changes in the national economy of the Islamic Republic of Iran to pave the way for powerful presence in international markets emphasize the reduced role of the government in the national economy that will lead to reduction and then cutting all subsidies spent on consumption to widen production subsidies. Efforts aimed at floating value of the national currency; liberalizing trade (including export and import) relations especially through substituting customs tariffs for non-tariff trade barriers, reducing budget deficit and foreign liabilities, allowing foreign investment, improving tax structure and even slashing production taxes are other necessary steps to be defined within the framework of improving the national economic structure. Efforts made to develop exports, especially by relying on comparative economic and productive advantages of every country and moving toward more competitiveness of the national productive industries and services as well as extensive measures taken to privatize productive and economic system of the country so as to enable it to claim its rightful position without relying on government’s supports are other instances mentioned as necessary improvements to be made in the structure of the national economy. In addition, education and qualitative upliftment of manpower, expanding educational and academic systems and training efficient specialized manpower is important in this regard. Principles of such reforms have been delineated in 20-year outlook document of Iran’s industrial development and their realization would need firm determination in the country.
All the abovementioned reforms, include widespread, long-term, structural and sometimes strategic economic measures that need planning, supervision as well as short-term, medium-term and even long-term management for the implementation of the projects. But the important point is that the government of the Islamic Republic of Iran cannot take measures for planning, management and supervision over its reform plans aimed at improving its national economic and production structures in a unilateral and quite liberal manner. However, limitations, insufficiencies and, on the whole, structure of a global economic system are among the most significant factors determining success or failure of those plans and the result of their implementation. As referred before, despite the determining role of the government in improving economic and production structures of the country for taking advantage of positive opportunities offered by the globalization process and presence in global financial, trade and technological markets; global economic structure which reflects power relations and inequalities in access to opportunities and facilities provided by the global economic markets will not allow such plans and national economic reforms to be implemented in order to realize predetermined goals. Apart from complexities emerging today as a result of competition in global markets and due to diversity in many consumer goods and even capital goods at global markets, and finally due to domination of major economic and industrial powers on financial markets as well as capital, trade and advanced technologies, it will not be easy for other countries like the Islamic Republic of Iran, which do not enjoy a long record in existance economic and industrial fields to demonstrate a powerful and effective existance. Although various developmental theories define more or less equal opportunities for the presence of all countries in global economic markets, study of the existing structures and relations as well as the current situation of the global economic system will not necessarily verify such theories.(23)
Precise recognition and effective role of the economic globalization and its main sources; that is, advanced production and industrial technologies, capital, trade deregulations and, finally, information and communication technologies are very important factors for guiding capabilities and improving national economic structure as well as its management to avail of the positive consequences of the economic globalization. Monetary and human resources have been mentioned as other necessary infrastructures for success in this process. Such infrastructures can be considered as an effective support for trade activities the lead to growth of the most important production factors; that is, manpower and capital. Importance of such economic, industrial, information and communication infrastructures is so high that major competitive countries of the world such as Singapore, Denmark, Finland and Hong Kong enjoy such infrastructures and, as a result, production, trade and investment has been greatly facilitated in those countries. The government of the Islamic Republic of Iran which aims to implement economic development plans must take necessary measures to expand information related to production, trade and investment markets through defining and implementing efficient plans.(24)
On the other hand, lifting trade barriers and limitations on import and export of commodities will play an important part in economic development of our country. This, along with the efforts made to develop exports, will play a pivotal role in connecting national economies and may pave the way for presence of the national economy of Iran in the global markets. In fact, concurrent with development of information and communication technology, which is inevitable for directing the Iranian markets toward the global markets,(25) deregulation in foreign relations and replacing tariff barriers for non-tariff impediments and, in short, trade liberalization will do a way with the concept of a closed national economy and the concept of the economic globalization will be realized within the framework of the national economic structures of the Islamic Republic of Iran. In other words, limiting government’s supremacy over economic fields, which is a main prerequisite for integration into the globalized economic markets, could be realized through deregulation, removing obstacles and trade liberalization, on the one hand, and paving the way for attraction of national and international investments and using them to promote production and service activities and, finally, efforts made to increase economic competitiveness, on the other, which must top the agenda for improving structure of the national economy of Iran. Otherwise, any kind of contact and increasing the level of relations with a global economic system will add to negative consequences of the economic globalization at a national level and, in fact, will increase negative impact of the phenomenon on the country without necessarily giving us any opportunity to avail of advantages of the global wealth generation.
Besides, in view of the special and basic role of capital in moving Iran’s economy toward development and increasing positive interactions of national economy with a global economic system, we must do our best to take more advantage of domestic and foreign capital. Fluidity of capital and its dependence on information and communication technologies along with deregulation of trade ties and adapting to global standards of production and services, as well as unification of interest rate to bring it close to interest rate in international markets, all act to increase profits from investments and lead to the establishment of a global capital market in Iran. This will be a great opportunity for Iran for attraction of foreign investment and expansion of financial services. Therefore, although integration of the Islamic Republic of Iran into the globalization process has been brought up as a solution to many problems of the national economy, and though such an integration will not be necessarily followed with such advantages as equal, expanded and positive access to the benefits of the said process; there is much controversy about how to join the global markets. In fact, the method of integration into the global markets and an international economic system will be related to kind of challenges that will be facing the country at national and international levels beyond economic and political policies of the country.
Major paths ahead of Iran and other similar countries with regard to globalization include: 1. Staying away from the process; 2. Opening doors to the process of economic globalization; 3. Adopting a rational way for integration (with the goal of improving structures of the national economy). While the first and second options will expose the country to poverty in various ways, the sole realistic way to define and compile an efficient plan for logical integration into the global markets is the third option, which needs basic economic, financial, monetary and trade reforms in national economy as well as foreign economic relations and we discussed those reforms briefly. The next part of this article will delve into solutions to remove several serious and practical economic and political obstacles on the way of constructive interaction between the Islamic Republic of Iran and the global economic system.
4. Barriers to Islamic Republic of Iran’s Constructive Interaction with the Global Liberal Economy
4- 1. Obstacles to economic liberalization in Iran
Economic liberalization is the main axis of structural economic reforms. This Section will review difficulties and obstacles to economic liberalization in Iran. Then , it will become clear whether moving toward economic liberalization or structural economic reforms will be possible without parallel structural reforms in politics or not? Economic liberalization in the sense of elimination of trade barriers and moving toward development of exports and exchange of commodities is facing serious barriers in Iran. To explain this, one must note that basically, economic liberalization could only be realized within the frame of a market-based economic system and a free economy. The most important characteristics of a market economy include its competitive nature as well as the fact that such a system will allow for unlimited ownership and privatization. It appears that in view of the prevailing economic system, government’s control over economy has been very strong due to various reasons including hefty oil revenues. In fact, by relying on petrodollars, the government has managed to appear as the most important investor in the country; so that, when oil price increased, government’s role in economy also ramped up. After the outbreak of the Islamic revolution in Iran and flight of a large number of capitalists and investors as well as owners of private enterprises and transfer of their property to the government, role of the state in economic activities considerably increased. After the onset and continuation of the Iran-Iraq war, state control over the economy was intensified.(26) As time went by, and due to insufficiency of state-run economy the idea of privatization was gradually encouraged. During the First Economic, Social, and Cultural Development Plan (1989-1993), economic reforms including privatization of state-run economic entities topped the government’s policies. In fact, implementation of privatization plan in Iran started according to an approval by the Cabinet dated May 17, 1991. Now that privatization drive is going through the second decade, existing data and information indicate insufficiencies in privatization trend in Iran. The main obstacles to privatization that are related to the current discussion include:
1. Lack of consensus among the elite about the principle and limits of private and public ownership in Iran;
2. Lack of a clear demarcation between social and cultural goals, on the one side, and economic goals, on the other side. When political, social and cultural goals prevail over economic goals, which include development and capital aggregation; naturally, the nature of economic activities will be transformed;
3. In view of clause (1), the privatization trend in Iran was only pursued in production sector and, therefore, the service sectors, which is considered as an important economic sector, has been ignored during privatization drive;
4. Privatization is a process through which owners of wealth and capital in nongovernmental sector are encouraged to invest. However, privatization in Iran has been largely restricted to cession of the state-run sectors to institutes and entities affiliated to the government such as banks and Social Security Organizations. This means transferring ownership of one state-run sector to another state-run sector and nothing more;
5. Privatization needs a suitable atmosphere which will both foster the idea of privatization among economic policymakers and governmental officials, and draw attention to the accurate evaluation of capabilities and efficiency of the private sector.(27)
All the above points have a more or less cultural and political hue, which can be put in two categories: A) obstacles related to economic culture, political structure and, on the whole, attitudes of statesmen toward privatization; B) obstacles related to structure of the government and political ties of the government with nongovernmental institutions and entities. It must be added that political structure is Iran is such that familial tendencies prevail as the most important criteria to select people for administrative affairs and this is a major political and cultural snag in the Iranian society that leads to administrative failure. In conclusion, although many factors influence failure of economic adjustment or liberalization policies that date back to more than a decade ago, political factors related to the prevailing political structure are of high significant too. Economic liberalization and privatization (improving economic structure) has a direct relationship to improving political structure, especially political culture and attitude of policymakers and statesmen.
4-2. Political and administrative obstacles and underdevelopment
Attention to improving administrative and state bodies is a necessity to attain economic development. The Islamic Republic of Iran has paid attention to this point and concerned authorities are defining improvement methods for important administrative bodies, which are concerned with development, to give guarantees about individual ownership rights and consolidating laws and competitive values in the society. What has been ignored most of all is the role of institutions and hefty cost of dealings that are mostly invisible and created by unsuitable institutions, which work to paralyze production system of the society.(28) Bureaucratic regulations in Iran are a major reason for insufficiency of the economic system. Such regulations not only squander opportunities and resources, but also discourage investors in production and trade sectors instead of encouraging them. Therefore, a centralized administrative structure is controlling investors, on the one hand, and prevents economic dynamism and establishment of economic competition, on the other. The reason is that wealthy people who are in touch with statesmen can launch economic activities without any concern for rivalry and this trend encourages wielders of economic power to engage into a harmful dealing with those who sway political power. The outcome will be lack of economic competition in the society.(29) At any rate, economic and development analysts in Iran enumerate many factors as barring economic development in the country, while paying attention to administrative insufficiency and damages done to administrative structure. The main point with regard to the administrative insufficiency in Iran is somehow related to the ruling political structure and attitude of those wielding political power.
What was mentioned as obstacles to economic development in Iran is mainly related to the nature of political structure and its pathology. Such affairs as insufficiency of the economic system, lack of economic stability and security, as well as lack of a suitable development strategy, are more of a political nature before being economic and this necessitates a review of the political system. The late Hossein Azimi, a researcher on Iran’s economic issues, believed that the process of economic development depends on the following policies:
1. Effective guidance of the economy by the government toward prosperity of production by relying on existing resources;
2. Adopting needed policies for controlling liquidity in short term and guiding society toward a more balanced model for distribution of income and wealth among people;
3. Extensive investment by the government in production and infrastructural affairs and guiding resources of nongovernmental sectors toward such investments;
4. Strict control of service sector including domestic and foreign trade by the government and creating more extensive grounds and more liberties for investment by nongovernmental sectors in production;
5. Compilation and painstaking implementation of regulations related to qualitative control of investment in public sector;
6. Compilation and implementation of a balanced set of price control and stabilization policies;
7. Solving problems of the country’s executive system (administrative, banking, monetary and financial system).(30)
Apart from theoretical considerations, it must be noted that most prescribed solutions are related to reforming economic structure. Therefore, improving economic structure is very important with regard to economic development. The question, however, is whether such obstacles are a result of insufficiency of the economic structure or are related to existing pathology in the political structure of the society? Can such impediments be removed through improvement of economic structure leaving political structure untouched? The author believes that since most of those obstacles are related to difficulties and pathologies in the country’s political structure in the absence of political reforms, any effort to improve economic structure in the sense of economic liberalization and competitiveness will be faced with many serious obstacles and end nowhere. Even the Third Economic Development Plan of the Islamic Republic of Iran, indicates that despite efforts made to promote economic liberalization, privatization, increased competitiveness and liberalization of trade ties by relying on expansion of exports, the practical policies that must be adopted by the government and its commitments are not well-defined. Those commitments must indicate a change in government’s behavior and establishment of fundamental institutions of a liberalized economy and, finally, improvement of national economic structures. In other words, despite claims about following common norms of an international liberalized economy as the basis of economic globalization, the lip service has been more than action and few signs could be found of practical and efficient solutions, management and control of such plans; as well as a timetable for their implementation. Lacking a realistic and unbiased understanding of economic globalization and governing structures of a global economy and absence of a consolidated program for logical delineation of interaction with that process and world order will pose many problems to the national economy of Iran.(31)
Conclusion
While the process of economic globalization has turned into an undeniable reality in the global economic system; status, position and method of participation of every country in this process and integration into global markets is very different and this is the most important index for deciding vulnerability or availability of countries including the Islamic Republic of Iran in the face of negative or positive consequences of globalization. In other words, the process of economic globalization and emergence of intertwined global economic markets does not ensure wealth, resources and golden opportunities for all countries, all people and all fields of economic, production and trade activities. Rather, they can avail of this process in proportion to their conditions and the status they enjoy within a global economic system. Globalization of economy is a double-edged sword that has both positive and negative consequences. It can increase wealth of many people and countries and bring poverty and wretchedness to other people and countries. Despite such realities, improving structure of the national economy of the Islamic Republic of Iran, especially in view of the fact that the country has had few experiences in terms of the economic globalization, as well as exchange of goods, services, advanced technologies and capital, is an undeniable fact because, at least, it is the article prerequisite for taking advantage of positive consequences and reducing negative outcomes of the economic globalization. The main argument in this article was the point that though the economic globalization per se may be a limitation for Iran because it poses serious challenges to all national economies, which cannot be considered as an opportunity, but those challenges can be turned into opportunities and this will depend on decision made by economic policymakers of our country. Preparation for positive interaction with a global economic system will require definition, implementation and continuation of an applied and double strategy that will supplement each other; that is, domestic economic reforms; as well as an externalized strategy and attention to breeding grounds for development of foreign economic relations.
Today, the Islamic Republic of Iran’s national interests could not be realized merely through relying on a national economy, but we must try to create opportunities and gain an appropriate position in a global economic system to pave the way for economic development of the country. Undoubtedly, the capacity, quality and volume of producing goods, services and capital in the country will be directly related to implementation of the abovementioned strategy; that is, domestic economic reforms and adopting an eternalized strategy. Iran’s national economy must move to adapt to norms, programs and general principles of global economy and in doing so, it must brace for negative consequences of integration into global economic markets. Undoubtedly, before implementing structural reforms and invigorating the national economy, becoming part of a global economy will bring nothing but more poverty to the nation. We must first shore up national economy in terms of economic power, competitiveness, privatization and quality before thinking about integration into and with a globalized economic system.
Theoretical discussions of this article not only argued in favor of economic and political reforms as a prerequisite for interaction with global markets, but also emphasized on the necessity of economic liberalization, adjustment of monetary and financial policies, and finally, compiling a suitable economic development strategy (an strategy for developing foreign trade) as well as role of the Iranian government as presumptions for promoting economic development and availing of the benefits of a globalized economic system. Since the said topics enjoy a serious and direct relationship with political structure of the society, we discussed the relationship between economic and political reforms. Therefore, since political structure of the governments in the Third World countries plays an important part in economic policymaking and can work to pave the way or bar economic development in such countries, any economic reform without parallel political reforms will prove a failure. In the end, obstacles to economic development in Iran has also demonstrated that the political structure of the government plays a pivotal role in this regard. Therefore, success in economic adjustment policies, economic liberalization and so forth, is dependent on reforms in political structure of the government and changes in attitudes of political authorities.
Footnotes:
1. Hossein Pourahmadi, “New Dialectics of International Political Economic System: Globalization and Economic Regionalism,” Political - Economic Ettelaat, August & September 2000, pp. 186-197.
2. Zigmund Bowman, Globalization of Some People, and Localization of Some, No. 37, March 1998, p. 48.
3. Marie France Bow, Globalization of Market, Payam UNESCO Magazine, No. 318, 1996, pp. 32-34.
4. Pierre Velts, Une Organisation geoeconomique a niveau multiple, Politique Etrangere, 62(2), ete 1997, pp. 265-276.
5. Robert O. Keohane and Joseph S. Nye, Power and Interdependence, 2nd Edition, Glenview, Scot, Foresman and Company, 1989, pp. 250-251; Richard O’Brien, Global Financial Integration: The End of Geography, London: Printer for RIIA, 1994, pp. 3-6; Kenichi Ohmae, The Borderless World, London: Fontana, 1991, pp. 1-4; Robert Wade, “Globalization and Its Limits: The Continuing Economic Importance of Nations and Regions,” in Suzane Berger and Ronald Dore (eds.), Convergence or Diversity? National Models of Production and Distribution in a Global Economy, Ithaca: Cornell University Press, 1996, pp. 62-63.
6. OECD, Globalization of Industrial Activities, Paris: OECD, 1994, p. 11.
7. Feredrique Sacgwakd, Les deis de la mondialisation: Innovation et Concurrence, Paris: Masson, 1994, pp. 3-9.
8. A. MacEwan, “Globalization and Stagnation,” in R. Miliband and L. Panitch (eds.), Between Globalization and Natoinalism, Socialist Register, 30, 1994, p. 130.
9. Paul Krugman, Past and Prospective Causes of High Unemployment, Economic Review, 70(4), 1996, pp. 342-358.
10. M. Humbert (ed.), The Impact of Globalization on Europe’s Firms and Industries, London: Printer, 1993.
11. Kevin R. Cox, “Globalization and Its Politics in Question”, in Kevin R. Cox (ed.), Spaces of Globalization: Reasserting the Power of the Local, New York: The Guliforal Press, 1997, pp. 1-19, Geoffrey Garvet, “Capital Mobility, Trade, and the Domestic Politics of Economic Policy,” in Rober O. Keohane and Helen V. Milner (eds.), Internationalization and Domestic Politics, Cambridge University Press, 1996, pp. 79-107.
12. United Nations Conference on Trade and Development (UNCTAD), World Investment Report, 1996, pp. 2-3.
13. Inter-American Development Bank, Informe Mercosur, No. 1, 1997, p. 3.
14. John G. Ruggie, “At Home Abroad, Abroad at Home: International Liberalization and Domestic Stability in the New World Economy,” Millennium: Journal of International Studies, No. 3, 1995, pp. 309-322.
15. Anne O. Krueger, Trade Policies and Developing Nations, Washington: The Brooking Institute, 1995.
16. Jeffery Sachs, “International Economics: Unlocking the Mysteries of Globalization,” Foreign Policy, 110, Spring 1998, pp. 97-111.
17. J. Naisbitt, Global Paradox, London: Nicholas Publishing, 1994, pp. 22-24.
18. Helen Milner, Resisting Protectionism: Global Industries and the Politics of International Trade, Princeton: Princeton University Press, 1995, pp. 2-11.
19. Jeffrey Frieden, “Invested Interest: The Politics of National Economic Policies in a World of Global France,” International Organization, 45(3), 1991, pp. 425-452.
20. Dani Rodrik, Sense and Nonsense in the Globalization Debate, Foreign Policy, No. 107, Summer 1997, pp. 19-37.
21. William Greider, One World, Ready for Not: The Manic Logic Global Capitalism, New York: Simon & Schuster, 1997, pp. 3-11.
22. Paul Krugman and Robert Lawrence, “Trade, Jobs, Wages,” Scientific American, 270(4), April, 1996, pp. 13-19.
23. See the interview with Joseph Stiglitz, former deputy of the World Bank and Economics Nobel Prize winner in 2001, Le Mond Diplomatique, April 2002 (translation in Hamshahri newspaper, Saturday, September 26, 2002).
24. Mohammad Mehdi Behkish, Iranian Economy on the Way to Globalization, Tehran: Nei Publications, 2001, pp. 28-30.
25. See Hossein Pourahmadi, “Information-Communication Revolution: New Description of National Power Sources at an Age of Globalization,” Political and International Strategies Quarterly, School of Economics and Political Science, Shahid Beheshti University, No. 2, 2002, pp. 47-79.
26. Ibid., p. 117.
27. Ibid., pp. 190-127.
28. Mousa Ghaninejad, Modernism and Development in Contemporary Iran, Tehran: Markaz Publications, 1998, p. 9.
29. Lester Tarow, Big Encounter, translated by Kiavand, Tehran, Didar Press, 1996.
30. Hossein Azimi, Underdevelopment Circuits in the Iranian Economy, Tehran: Nei Publications, 1992, p. 159.
31. Abbas Akhoundi, “Globalization and Development Plan,” Bourse Monthly, No. 25, July 2001, p. 17.