Economist In Iran Blasts State Control, Advocates Liberal Approach

A television debate on liberal and state-control economic principles captivated audiences in Iran this week, as the country looks for solutions to its crisis.

Two university professors, one an ideological proponent of state-controlled “Islamic economy”, and the other, an avid proponent of liberal economic theories, clashed on national TV, often turning the debate into personal attacks.

Masoud Derakhshan, an economist trained in Britain but an Islamist and a leftist by conviction, who believes there needs to be just one “national bank” in the country running all commercial, private and government banking needs. As an Islamic principle, he strongly objects to “usury” and believes all banks end up charging interest, which is forbidden in Sharia.

Except the issue of usury, it is not clear what “Islamic economy” means.

His opponent Mousa Ghaninejad, a professor of economics says, “There is no such thing as Islamic economy,” and believes in the Austrian school of liberal economic theory, personified by the preeminent 20th century philosopher, political scientist, and economic theoretician Friedrich August Hayek (1899-1992).

Ghaninejad argued during the debate that leftist revolutionaries poisoned the new constitution with their economic ideas after the 1979 revolution. Arguing that Iran faces a serious crisis, he insisted that overwhelming government control established since the 1980s turned into a corrupt system of nepotism.

“Islamic Republic’s development model was based on an anti-capitalist theory, while Islam defends private property,” he argued, adding, “Our misfortune was national socialists.”

Derakhshan in a typical mid-20th century leftist manner responded that “Ghaninejad is distorting the Constitution and the Islamic revolution. The theoreticians of liberalism are defending certain ideas to protect the interests of capitalists.”

At this point, Ghaninejad produced three books during the show, published in the early days of the revolution by the Communist Tudeh Party of Iran, to prove that leftists influenced the Islamic Constitution in its economic precepts. He also argued that President Abolhassan Banisadr, whom he described as a leftist, and the ideas of Islamist-Marxist Ali Shriati had a profound impact on the Constitution.

He went on to say that Liberals are all for competition – something that has been completely stifled in Iran – and as a matter of fact, he argued that as a capitalist gets much richer, he also opposes competition, because he wants to dominate the market.

“Our economy is a politicized economy of nepotism,”Ghaninejad stated, referring to politicians and factions presiding over the government that controls 80-percent of the economy and distributes monopolies and quasi-governmental companies between friends and family. These companies lose a lot of money, but the government-appointed managers get rich.

There is also the phenomenon of shady privatization when government assets I sold at a fraction of their real price to well-connected people.

The Islamist Derakhshan passionately argued that there is no self-sustaining free market, and this is purely a deception. Iran’s economy must be an Islamic economy he insisted, while not responding to his opponents argument that private property and commerce are protected rights in Islam.

Ghaninejad, in an apparent attempt to be politically correct, said he acknowledges that the United States is a dominance seeking power and inflicted huge pain and suffering on Vietnam, much greater than anything it has done to Iran, but today, the US and Vietnam have amicable relations. However, “We unnecessarily dug a hole for ourselves at the beginning of the revolution when leftist Islamists occupied the American embassy.”

Condemning the US sanctions against Iran, the liberal economist said, “To the extent that America’s economy is based on competition I am an advocate of it, but when capitalism becomes political, I oppose it, because it violates liberalism.”