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Poverty: A Political Football in Iran among Rival Factions

Iran is not going to the 2010 World Cup, but there is another football being kicked around in the domestic Iranian media: the extent of poverty in Iran.

Last month, the Statistical Center of Iran reported that 70 percent of Iranians earn less than a monthly income of $450 for a household of five.  This is a staggering and eye-catching number, and thus it was immediately repeated in reformist newspapers, set along with interviews of economists long critical of the Ahmadinejad administration.  One such individual is Hossein Raghfar, professor at Al-Zahra University, who is almost always the go-to guy for quotes on poverty.  In a recent interview in Etemaad (reformist newspaper), Raghfar said that Ahmadinejad’s government has “failed completely in the management of the country’s poverty.”

Are things really that bad?  Is Iran the Zimbabwe of the Gulf?  Both have a political crisis on their hands, for sure, but there has been a long-standing tendency in reportage on Iran to skew the economy.  Iran’s government has never set an official poverty line.

When reporters in the West do a story on Iran’s economy (which is rare compared to economic stories written on China, Russia, or even the Saudi kingdom), this means they tend to repeat the worst figures they hear.  They spend a few weeks in Iran, see the sights, interview dissidents and one or two regime diehards, listen to countless cab drivers complain about their horrible lives, and go back and tell the world that Iran’s economy is collapsing.  Furthermore, they attribute poorer Iranians’ political decisions to their supposed destitution — often one reads that support for Ahmadinejad is “bought.”  This is unfortunate — I doubt that a cosmopolitan, well-traveled and liberal-leaning journalist would write that votes by poorer families in the United States are being bought off.

What they also do not tell us is that talking up poverty in Iran is one of the primary ways to score points against your political opponents, and that the debate is mired with inconsistency and questionable methodology.  When Hashemi Rafsanjani was president in the early 1990s, his opponents on the left (to be known later as the reformists) attacked him mercilessly in the press for his economic policies.  When Rafsanjani was running for a seat in the parliament in 2000, at the crest of the reformist political wave, he was pilloried by many of the organizations that now see him as a supporter after the questionable June election.

Yet Mohammad Ghouchani, former editor of Sharq and Etemaad-e Melli (reformist newspapers), who was imprisoned in June 2009 for more than four months, admitted to a research team from the International Crisis Group in 2006: “Some of Ahmadinejad’s criticisms against Hashemi were similar to those levied by the reformists against him five years ago.”  A main subject of this criticism was the extent of poverty.  Now that the factions have shuffled, the receiving end of the criticism is Ahmadinejad.

But the only way to understand economic figures, unless one wants to be a sensationalistic reporter, is to look at trends — changes in figures over time.  A snapshot can tell us nothing about the past or the future.  I could tell you that Iran’s economy is predicted to grow 3 percent to 4 percent in 2009, while Turkey’s economy will shrink by 6 percent.  This is true, but it would make one think that Iran has a much better economy than Turkey’s without looking at past performance.

This is not to say that Ahmadinejad is an economic wunderkind, or that the economy has performed marvelously during his tenure.  It also does not help that the president dismissed the utility of an official poverty line at a recent press conference, when he commented that a poverty line is not like a border between Iran and Afghanistan.

As a result, economists in Iran have to often generate their own data and combine government surveys to get an accurate picture of the changes in poverty over time.  Djavad Salehi-Isfahani, an economics professor at Virginia Tech, in a recent article reviewing the existing data from the period of 1984–2005, argues that Iran’s poverty peaked in the late 1980s and has since declined quite rapidly.  In fact, in the period 1995–2005, which overlaps with the era of former President Mohammad Khatami, poverty levels were cut in about half.  While Salehi-Isfahani used lower poverty lines than the one Raghfar often uses, he shows that, even with a higher poverty line, the trend over time was still decreasing.  On his informative blog, Salehi-Isfahani argues that claims of rising poverty in Iran over the early years of Ahmadinejad’s first term were a statistical artifact, and did not reflect reality.  However, last year, average incomes were reported to have taken a steep decline due to the effect of the high inflation during that year, which likely increased poverty levels to some degree.

If we use the common international standard of absolute poverty that the World Bank employs in its Millennium Development Goals, one of “$2 a day,” which is actually less than $2 in poorer countries but is an adjusted figure to give a sense of the goods and services one can consume there given lower costs of living, Iran had a poverty rate of only 8 percent in 2005.  Turkey, in the same year, and with about twice the economic wealth of Iran, had a poverty rate of 9 percent at that same level.  One wonders what Turkey’s poverty rate would be if we used the line cited in the beginning of this article — would it be higher than Iran’s?  We do not really know, because each country has its own official poverty line that is not always at international levels.

While the government naturally likes to proclaim this rate as the real poverty level, more than 8 percent of Iranians certainly feel that they are not benefiting from the economy.  But this might stem more from the rise in inequality in Iran rather than an increase in absolute poverty.

As in China, Iran has seen over the past twenty years a remarkable reduction in the latter but an alarming increase in the former.  The class divisions between Iranians have never been starker.  This is probably why denouncements of corruption and speculative behavior resonate with large parts of the population.

Furthermore, due to what development economists call the “demonstration effect,” Iranians and other middle-income countries often feel they should be consuming at First World levels.  Thus, they want to own products such as high-end cell phones and other luxury goods, even though the impact on their budget is much higher than for a First World consumer.  The luxury imports, high rise construction, and general consumption binge in Iran over the last four years, aided by Ahmadinejad’s lackluster industrial policy, has made the demonstration effect palpable to any observer in Tehran.  Ironically, this benefited middle and upper class Iranians much more than poorer ones, because the latter possess much less disposable income.  Inequality is less discussed in Iran, yet it likely generates more social problems than poverty.

Western commentators who want to accurately report on Iran should understand that what they are hearing is a debate that masks a long bitter dispute between rival factions, not an objective picture of the economy.

Correction: The original version of this article incorrectly stated that the Statistical Center of Iran put out its recent figure as a poverty line.  In fact, the SCI does not issue an official poverty line.  The author regrets the error.

Kevan Harris, who frequently conducts research in Iran, is a sociologist at Johns Hopkins University.  This article was first published by insideIRAN on 15 December 2009; it is reproduced here for non-profit educational purposes.

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