Iran: More of the 1970s Spiral Story

Yesterday, I told a good bit of the history decline of Iran, and the Shah.  A fair amount of the ending....leads to economic woes of the 1970s.   So this blog today digs into the end.

One single problem in economics?  No.  This was a cascade of issues....some related to the Shah's management of things...some by bad luck.

First, there was a over reliance on oil profits/revenue.  The bulk account for the majority of government revenue. Amazingly....the 1973 oil boom, triggered by OPEC's price hikes, gave Iran a flow of cash.....but this also hooked up the nation to a chaotic economic path. 

When oil prices dipped and fluctuated....the nation wasn't ready for this type of environment.  All of this....with the Shah's 5th Development Plan (coming in 1973 and lasting through 1978).....was planned oil income positives....not the negatives.

From 1970s on....inflation was a yearly topic.  The Shah's crew cranked up the "White Revolution" and designed a pretty aggressive industrialization scheme to re-make Iran into a European-style economy.  Within this mix....came big plans for infrastructure, military, and nuclear-power projects.

Inflation level?   Twenty-percent per year...minimum.  The working class?  Screwed.

Then came economic mismanagement.  Large-scale projects with unsustainable growth were prioritized. Bureaucratic inefficiency went hand-in hand with corruption....with elites and insiders getting rich. 

Public anger was noted as these issues were seen.

Then came the effort to modernize agriculture...which oddly changed traditional family farming systems.  The small small farmer couldn't compete....so they packed up and moved to urban cities for 'real' jobs (this simply created urban slums by the mid-1970s).  Late 1970s?  Iran's agriculture’s share of the GDP had dropped like a rock, and Iran became dependent on food imports.

All of this led to what one could describe as social inequality....where the rich did ok, but the working class were left to deal with inflation and housing shortages. 

Skilled labor shortages?  Yeah....so the effort to update ports, roads, airports and power grids were in a spiral. This led to a lack of trained professionals...meaning non-Iranian expensive foreign contractors.

So as Iran approached 1980....unemployment was up in the 10-to-15 percent range....inflation was killing off public support for the Shah. 

It was an odd public anger where four groups were now...anti-Shah.  The radical Islamic crowd....the radical leftist folks, the urban-working-class, and nationalists, all pitted against the Shah, and not  really grasping what the alternate path would bring. 

The Shah?  You could make a case that he was surrounded by people who didn't really agree his agenda....saw insider ways of getting rich, and weren't capable of evolving the general plan when it was leading to failure.

It's been 45 years of the 'after-the-Shah' agenda, and you probably could say that the period has been just as screwed up as the 1970s....just longer in duration.  Banks marginally work....capital mostly flows out of the country as business owners don't see a reason to expand.

Inflation?  Since 2000....up to to 2010...it was in the 10-to-15 percent range.  From 2010 to 2020....20-to-30 percent per year  inflation rate.  From 2020 to today?  Mostly 30-to-40 percent range.

Currency issue?  If you have excess Iranian currency....you convert to dollars, Euro or Dubai currency.....arranging for it to leave the country.

Amazing story.