Iran’s economy is one indicator that shows how the Iranian regime acts in the production, distribution, and consumption of goods and services.
Among the various components, we must initially address output. Simply, we must focus on how government institutions and entities provide the society’s needed items through national resources and preserves such as land, water, capital, and labor force.
In other words, we should weigh whether the final product is really worth the raw materials used in production. Is there any “productivity?” Significantly, productivity is one of the critical indicators for measuring an efficient and advanced economy. In this respect, increasing productivity is one of the signs of development and social welfare.
Productivity in Iran
Economists consider productivity as an efficient and fruitful use from the factors of production. However, under the rule of the ayatollahs, this term has become meaningless. Ironically, Iranian officials hold annual festivals, which prompts managers of economic systems in different countries to make fun of them.
In 2019, the head of Iran’s National Productivity Organization, Fatemeh Pahlavani, described productivity as one of its economic dilemmas. “The share of productivity in Iran’s economy is seven percent,” she said at the production support festival. She added that this share is less than the percentage of capital and labor force. It is worth noting that this insignificant seven-percent share has been stable since 2000.
“Referring to the low quality, lack of innovation and high cost for domestic products, the head of the National Productivity Organization, said: ‘From 2000 to 2015, the share of productivity was seven percent in Iran while in Pakistan, this figure was about 42 percent in the same period,” the state-run ISNA news agency wrote on January 9, 2019.
More importantly, Pahlavani announced the share of capital accumulation had been 85 percent in economic growth. In other words, Iran’s economy has only relied on natural resources and raw material, not innovation, creativity, and the invention of manufacturing institutions.
Shameful Comparison of Iran’s Productivity with Other Countries
According to global stats, Iran possesses nearly eight percent of the world’s natural resources. In this regard, we should consider this significant factor in any comparison and assessment. The real scope of Iran’s economic crisis would be revealed once we realize that Iranian officials have pushed the country to a complete collapse. This is while the country possesses billions of cubic meters of petrol and condensate, huge forest, many valuable mines, hundreds of rivers, dams, marshes, and other resources.
“Iran’s economy relies on resources rather than on productivity. Along with Vietnam, Nepal, and Bangladesh, which had even negative productivity, Iran was one of the countries that had the least rate,” she added.
“According to stats published by the Asian Productivity Organization (APO), in a 50-year span, Iran has experienced only one-percent growth in the Total Factors of Productivity (TFP) in comparison to most of the Asian countries… However, the quality of distributed raw material, which is an important parameter for upgrading the productivity of economic activities, does not have a special position. In this respect, in a long-term period, the level of productivity in the economy would remain around the zero marks,” wrote the state-run IRNA news agency on May 21.
“On average, Asian APO member countries experienced a 30-percent share of economic growth in terms of productivity between 2010 and 2017. However, of Iran’s 2.2-percent economic growth, the major share (about 75 percent) came from non-IT investment. The remaining amount is from the increased labor force and quality, and the share of IT investment and total factor productivity has almost been zero,” IRNA added.
In this regard, an economic expert Massoud Nili warned about the fate of this status quo. However, his remarks resulted in his sacking from the position of financial advisory. “At the microeconomic level, there have been odd competition for declining productivity in enterprises. As in many cases, the real value of the raw material used is greater than the value of the final product produced, which means negative productivity,” Donya-e Eghtesad quoted him as saying on August 17.
“We can classify different countries according to the role that productivity plays in their economic growth. Some countries can be classified as productivity miracles, some as successful countries, some as unsuccessful, and finally, a few as productivity catastrophes… No doubt, our country is classified in the last group,” Donya-e Eghtesad added.
It is worth noting that the rest of Iran’s economy is under the thumb of state-run enterprises and private companies, institutions affiliated to the supreme leader Ali Khamenei, and the Revolutionary Guard (IRGC). In fact, these companies are the main reason for the dire economic conditions in Iran. “Sixty percent of the state-run companies and banks are disadvantaged in their financial statements,” the state-run Abrar daily quoted the Parliament Economic Commission Mohammadreza Pourebrahimi’s chair saying on August 18.
Plainly, the disadvantages of Iran’s manufacturing systems are far higher than its advantages. Government-linked institutions and financial holding receive a budget equivalent to several times the country’s public budget. However, the government still faces a massive budget deficit, which reveals systematic corruption in the ruling system’s political and economic structure.