Iran’s Economy with Djavad Salehi-Isfahani and Esfandyar Batmanghelidj

[00:00:00] Misc: Salam in the name of the God of Rainbows, welcome to Woman Life Freedom, all in on Iran, a podcast series in which we’ll go deep in conversations with experts on various aspects of the revolutionary uprising that began in Iran when 22 year old Mahsa Jina Amini was killed in Morality Police detention. In each episode, we’ll unpack an important aspect of the unfolding of this historic moment in Iran. I’m your host, Nahid Siamdous, an assistant professor of Media and Middle East Studies at the University of Texas at Austin. Our intention is to quote unquote, archive the important insights of our experts here and now, both in their capacity as professional observers, as well as humans living through these momentous times, stay tuned.

[00:01:11] Nahid Siamdoust: This week, we’ll be talking about Iran’s economy and its entanglements, of course, with politics and society, especially within the framework of the Women, Life, Freedom uprising that started in September, 2022, we will be speaking with two of the best experts on the subject. I am so fortunate to have them give us of their time for this podcast episode.

[00:01:37] Nahid Siamdoust: Djavad Salehi Esfahani really does not need an introduction. Dr. Salehi Esfahani received his PhD in economics from Harvard University and has served on the faculty of economics at the University of Pennsylvania and Virginia Tech, where he is currently. Professor of economics. He has also worked for many different think tanks and institutions among them.

[00:02:01] Nahid Siamdoust: He was a research affiliate of the Middle East initiative at the Belfer center, Harvard Kennedy school, and a research fellow at the economic research forum in Cairo. He was also a non resident senior fellow at the global economy and development, the Brookings institution for a long time over a decade, 2009 to 2021. and has served on the board of trustees of the Economic Research Forum in Cairo, the Middle East Economic Association, and the International Iranian Economic Association. His current research is on the economics of sanctions, inequality, and the economics of the family in the Middle East. He is the co author of the book, How Sanctions Work, with Narges Abajoghli, Bali Nasr, and Ali Vaez. His opinion pieces have appeared across academic journals as well as mainstream publications such as Foreign Policy, The New York Times, Foreign Affairs, Al Monitor, LA Times, Loeb Blog, and The Hill. Very fortunate to have Dr. Salehi on the podcast today. And our second speaker, you will notice this is the first episode we’re doing with two speakers in part because the subject matter is quite complex and I figure it’s a good idea to get a conversation going between two experts and make it a little more dynamic.

[00:03:22] Nahid Siamdoust: Our second speaker is Esfandyr Batmanghelidj. He is the founder and CEO of the Bors Bazar Foundation. Gorsan Bazar Foundation is a London based think tank focused on economic diplomacy, economic development, and economic justice in the Middle East and Central Asia. He has published peer reviewed research on Iranian political economy, social history, and public health, as well as offered extensive commentary on Iranian politics and economics in mainstream publications. as well. Esfandyr has been quite vocal and is very active on in commenting on current affairs and I hope that if you have an interest in economy you have been following. Both of our guests today, we will be talking about a wide ranging array of subjects as far as Iran’s economy is concerned and how it contributed and what role it played in the wake of Iran’s women, life, freedom, uprising. We’ll discuss the sanctions. We will discuss how women and youth are affected. by the economy and how they have inserted themselves because of the ways in which they are affected by the economy, the different governments and their approaches to trying to engineer what the Iranian state has called a resistance economy. And we’ll also talk about the recent release of Iranian American prisoners on August 10th, 2023, in exchange for which Iran received, the Iranian government received 6 billion of. It’s assets or will receive 6 billion of its assets, which it can access for humanitarian purposes. So we’ll discuss the sanctions within the context of

[00:05:05] Nahid Siamdoust: U.S – Iran relations. Very excited to have them. today is August 15th, 2023.

[00:05:12] Nahid Siamdoust: let’s move on to our interview with Djavad Salehi Esfandyri and Esfandyr Batmanghelidj. Okay. Well, hello. Hello. Hello. thank you. Thank you so much to both of my guests for being here today to discuss, um, the entanglements of, Iran’s economy with the uprising that started Iran in September 2022, And today, I really couldn’t be more,pleased to have two experts on Iran’s economy, two scholars and writers who have really engaged with, questions about Iran’s economy in a very accessible way, who have both published in academic journals as well as in more mainstream publications, Um, thank you so much to both of you for being here for us to, really unpack and understand a little bit the role of the economy in the, Protest that started last September in Iran.

[00:06:15] Esfandyr: It’s a pleasure to be here.

[00:06:17] Djavad: Yes. Thank you for having us.

[00:06:19] Nahid Siamdoust: Thank you so much. I just want to start,this podcast is partly to uh, bring in the personal a little bit also into the professional conversation. So I know a stand. You are you, as far as I understand, you’ve been born and raised entirely. outside of Iran. Is that correct?

[00:06:37] Esfandyr: That’s right. I grew up, I was born and grew up outside Washington, D. C. So my arrival to thinking and studying, Iran really started when I was in high school, actually.

[00:06:47] Nahid Siamdoust: Okay, wonderful. and Djavad, is it okay if I refer to you as Djavad?

[00:06:51] Djavad: Please do,

[00:06:52] Nahid Siamdoust: Thank you so much. can you tell us that, you did grow up in Iran, at least during your youth. And then, can you tell us a little bit about your personal background?

[00:07:03] Djavad: Sure. I was born in Mashhad,quite a while back. I traveled when my parents, took me around Khorasan, because my father was a government employee and he moved around. We settled down in Neshabur, which I now like to call my hometown. I got my, high school diploma and then took advantage of a scholarship, offered by the central bank of Iran to go study economics in the UK.

[00:07:34] Djavad: I spent a year in Manchester and three years in University of London. I got my, BS degree there, came to U. S., I studied PhD in economics at Harvard. Then I’ve had, several jobs I taught at University of Pennsylvania and now I’m I’ve been teaching at Virginia Tech since, 1984. That’s a long time.

[00:07:56] Nahid Siamdoust: wow. Wonderful. I find it always so interesting to speak to people who’ve actually experienced the 1979 revolution, because they certainly have this other, very grand historical event, in Iran to compare any protests or uprising that have happened, in the post revolutionary period.

[00:08:14] Nahid Siamdoust: So if at any time,you would like to draw comparisons Would be really welcoming that. I think at the time of the revolution, it sounds like you were outside of Iran studying, but I’m sure you were just as deeply engaged with what was going on there as anybody else.

[00:08:28] Djavad: Yes, absolutely. I was glued to a shortwave radio that I had bought. that was when I just arrived at Pennsylvania as an assistant professor. 1977, revolution started, I spent a lot of time thinking about Iran. And then I went to Iran, in 1979. Spent a year and a half there.

[00:08:47] Nahid Siamdoust: I’m going to, I’m going to come back to that a little bit in the course of our conversation. that’s about to follow. I want to take us to the beginning point of the protests in September, 2022.

[00:08:57] Nahid Siamdoust: I just remember, How contested and polarizing the issue of the economy was instantly when the protests happened,anyone who would mention the sanctions or any kind of economic impact or influence on the uprising was shouted down by a very loud public media and social media As if mentioning the economy or the sanctions somehow decreased or devalued or took away from the political and ideological vigor or reasoning for the uprising that was happening.

[00:09:28] Nahid Siamdoust: And early on, there was an, there was an article in the New York Times. I remember about, in fact, the impact of the sanctions and the much worsening economic. conditions of Iranians, and this was such a problem that there were actually protests outside of the New York Times office in New York by Iranians asking for the New York Times to fire the reporter who had written that piece. why do you think the economy was such a,such a contested and polarizing issue? And where do you stand on the importance of people’s economic conditions leading up to the protests in Iran. If I may start with Djavad first and then, Esfandyr,

[00:10:12] Djavad: Yes. Thank you. That’s a very interesting question. most people in Iran have a more dire view of the economic conditions than I do, and I look at the numbers. Now, even the numbers, paint a very bleak picture. Since about 2011, when Obama sanctions were imposed, Iran’s economy has not really grown. some indicators like inflation and currency devaluation that bother people a lot, although they don’t necessarily.

[00:10:45] Djavad: lower income, have, created a very, negative mood in Iran about economic conditions. So I would say, the economy was, or the poor economic conditions played a role. They were there and they had been there for the last. 10 years before that, but I don’t think they played a direct role in the protests.

[00:11:09] Djavad: If I may just start by saying that, maybe you can come back to this, later. I found the protests, as evidence that social restrictions, social conditions, were really, behind much of the complaint people expressed about the economy.

[00:11:28] Djavad: I don’t know if that’s a controversial statement or not, but I found…

[00:11:31] Djavad: I still find social restrictions are much more, hurting, the youth, hurting the middle class than economic restrictions. There are lots of economies doing worse than Iran, like Argentina, for example, and people are not as upset with their government and not calling for regime change. So I,I come down on this issue as basically, not emphasizing economic issues.

[00:11:57] Djavad: As a reason for the 22, 2022, uprisings.

[00:12:02] Nahid Siamdoust: Right. Very interesting. Esfandyr, what’s your position on this?

[00:12:08] Esfandyr: I mean, I agree with Djavad. I think that’s, a good explanation of why it’s difficult to disentangle the social and economic factors. And I think that for a lot of the activists inside of Iran and folks in the diaspora who you know, had a lot of their hopes tied up in the protests in 2022. Part of the reason to argue that these were not economically influenced protests was to distinguish them from protests of a similar scale in, 2018, 2019, and 2021.

[00:12:43] Esfandyr: That had taken place in Iran, where, economic grievances had led people to come out into the streets. And those protests had really petered out. And I think that there was this hope that the fact that the mobilization that was taking place after the death of, Massa Amini was. really, taking place across, social classes. It was a woman led movement that these sort of specific social features that there was a, an emphasis on, fundamental political change and a loosening of social restrictions. That this would distinguish these protests and that therefore they might have a better chance of succeeding of actually leading to real pressure on the government where the government would need to make some fundamental changes to its policies and answer the demands of the protesters. So in those early days, I think it was important for,the, for the movement itself for this to be seen as a distinct kind of protest, not like the process. protests that had been taking place before. But at the same time, I think there are questions about whether economic factors may have influenced the protests and their possible, potential for success. And we can talk about that a little bit more. But one of the things that, for example, Myself and colleagues have been looking at our foundation is to what extent the difficult economic conditions that Djavad has described, which have really been in place since, for over a decade now, since 2011, 2012, to what extent those are responsible for making it more difficult to build a successful protest movement. but Of course, these are really sensitive questions because they’re wrapped up in people’s aspirations and hopes for political change in Iran.

[00:14:32] Nahid Siamdoust: Right. And I wonder if we can, try to sort of wrap our heads around the Iranian economy. How do we understand Iran’s economy? If inflation is indeed so high, high employment, the devaluation of the real over the last decade and so on, and the crushing sanctions,if we were to look over the last 44 years of Iranian economy and what the state has called, it’s resistance economy especially since the increased sanctions trying to become more independent in terms of its own productions of necessities inside the country, if we were to just have some kind of description of What constitutes the Iranian economy?

[00:15:09] Nahid Siamdoust: if it’s not as bad as the Argentinian economy as other economies around the world, what is people’s You know, subsistence look like given these extreme sanctions.

[00:15:19] Nahid Siamdoust: How are the majority of Iranians still earning or living? how are they affording the goods that they’re affording? I know this is a huge question, but I wonder if between the two of you, we can sort of try to grapple with this question a tiny bit before we continue with more questions.

[00:15:35] Djavad: Well, the first thing to notice is that, living standards have declined in the last 10 years. And that is undeniable and quite expected sanctions remove, oil income from the government’s budget and also from people’s budget. you cannot, imagine a bigger shock to an economy that loses his main export for a decade.

[00:16:04] Djavad: Iran has not collapsed, but his economy has been severely shrunk as a result of that. So I would say the best way to describe Iran’s economy as is an oil exporting economy. It has a lot of non oil activities, which have become more important since sanctions for obvious reasons, because devaluation made local production more advantageous compared to imports.

[00:16:30] Djavad: And we see that in, non oil GDP, we see that in employment and so on. But, the major, swings of Iran’s economy are really explained by, higher and lower oil prices by sanctions and so forth.

[00:16:46] Nahid Siamdoust: expand your if I may ask you. So who really You know, we hear a lot about how Iran’s economy is mostly owned, by the Revolutionary Guards. what is the role of the private sector in Iran? is that a true sort of reflection of the economy or is that sort of hyped language

[00:17:02] Esfandyr: So this is a really, important question, and it’s one that often comes up in debates in Washington, because whenever there’s a debate about to what extent we engage with the Iranian economy, to what extent we. lift sanctions to allow that economy to reconnect with the with global markets. There’s a question mark about who’s going to benefit from that reconnection and that sanctions relief. And the way that the debate is often framed is that well, we shouldn’t allow Iran’s economy to reconnect with the world because it’s dominated by the IRGC. But the narrative around the domination of Iran’s economy by this One group, the Islamic Revolutionary Guard Corps, which is a part of Iran’s armed forces, is in my view, a bit overblown. it’s often claimed that the IRGC controls the majority of Iran’s economic output, which is. just not true, and in fact, I’ll go back to a statistic that, I’ve heard Djavad use before, which I think is a compelling way of illustrating this. There are approximately 27 million people in Iran’s labor force and every day they get up and they go to work. A very small proportion of those people go to work for companies or organizations that are owned or controlled by the IRGC. The vast majority of those individuals work actually in small and medium sized enterprises or in industrial firms that are either belong to the private sector or are under sort of more typical state ownership. And so when you look at the economy as a whole, I think it can be said that the IRGC is probably as a network, the single most important economic operator in the country’s economy, but they don’t. In and of itself control the majority of the economy. And actually, there is a large private sector, that exists in the country.

[00:18:58] Esfandyr: And that private sector exists because Iran, as Djavad explained, is a country where households matter. There are approximately 20 million Iranian households. and, those households buy things, and these individuals in those households, seek employment.

[00:19:15] Esfandyr: And, it’s basically a situation where the state their role in the economy is mediated to a large extent by the importance of this large consumer base. And so when we think about the effects of sanctions, as Djavad mentioned, and living standards have fallen. And so one of the things that I think becomes important to think about is who is getting hurt and how is their, basically share of the wealth of the country changing and relative terms. So if we’re concerned about the IRGC’s role in the economy, we should be doubly concerned that households have done poorly under sanctions because in a sense. That would suggest that their share of the economic pie is shrinking and someone else’s share is growing, and we may not like the answer of whose share is growing.

[00:20:05] Nahid Siamdoust: Very interesting. I’m going to come back to this question because I know you’ve written a piece about how sanctions in fact are hurting Iranians prospects for, having the kind of mental and financial space to actually, organize and, give thoughts to and space and time to the uprising.

[00:20:23] Nahid Siamdoust: And I want to come back to that. but before we proceed, can we Also tried to get a bit of an understanding of what a resistance economy means. the way that Iranian leaders have framed How does it actually function? And has it been successful? Jabbar, I wonder if I can put this question to you.

[00:20:41] Djavad: Sure. That’s a question that I get asked a lot because I’ve written a couple of pieces on resistance economy. I must say, despite the time I’ve spent studying it. I don’t quite understand it because it hasn’t really been explained in detail. I understand the broad outline of it.

[00:21:00] Djavad: And I, my understanding is that, Iran’s leadership is convinced that United States will not tolerate a prosperous economy, in Iran. while Iran has a challenging, posture towards the US and it’s, hostile towards Israel. with that understanding, they are convinced that globalization, or being highly integrated into the global economy is not a good idea.

[00:21:31] Djavad: And I think they learned that the hard way in the 2010, in the 2000s, they put a lot of their oil money. In, deposits abroad And they haven’t been able to get much of that back. it was very strange to open up the economy in the 2000s while oil revenues were growing and kind of not looking at, the other side.

[00:21:56] Djavad: If something goes wrong and the West, decides to put sanctions or, freeze Iran’s asset, what would they do? they were kind of a sleepwalking, and when the sanctions did come, I think more people, thought that maybe we should try to remove the sanctions. That was the, posture of Rouhani, who I think represented Iran’s middle class.

[00:22:20] Djavad: they wanted to, have a rapprochement and go back, roll sanctions back, and that didn’t work out. And I think the conservatives. then became even more convinced that they need to reengineer Iran’s economy in such a way that sanctions will not hurt it. Now, that’s a very hard thing to do. And that’s why it hasn’t, resistance economy has not been specified in detail.

[00:22:47] Djavad: How As an oil exporting country, do you export and bring the money back and buy other stuff with it if U. S., which is the biggest player in the global markets, tries to obstruct that in every way it can? So I’m kind of sympathetic if you accept that premise, that U. S. is going to keep this hostile position for a foreseeable future, needs to re engineer its economy.

[00:23:19] Djavad: Now that has not gone so well so far, because, we all know that the economy has been growing very slowly, although in the last two years it has grown at a rate of greater than 4%, which is not too bad, because the world economy has slowed down. but this is nothing compared to the five to 10% growth rate Iran, even under the Islamic Republic, was experiencing in the 2000s.

[00:23:47] Djavad: So I would say, depending on what you think is the purpose of the resistance economy, you can say it is successful in that it prevented economic collapse in the face of sanctions. The economy is trucking along still, and, I think that is not a very unrealistic position if you, like me, believe that, there is no amount of,dialogue or agreements that can satisfy the hard right in the U.

[00:24:20] Djavad: S. and in Israel. That Iran should be allowed, to conduct its economy the way it wants to.

[00:24:28] Nahid Siamdoust: Right. I read in one of your pieces where you write, You, you have this discussion about the economy and then you write, but none of that matters much as far as the internal US dialogue is concerned, because at the end of the day, the public, the image that they see are,the women were burning their head scarves and, that takes center stage in, the The Narrative around the state and the kinds of, repressions and violence that it imposes on its own population take center stage.

[00:25:01] Nahid Siamdoust: And so these conversations around the economy really take backstage to any of this and become secondary. and of course, you’ve spent your career sort of, trying to give explanations to how the economy and the sanctions are really shaping the Iranian reality on the ground for the population, not, obviously the regime.

[00:25:20] Nahid Siamdoust: That’s one thing, but also very much for the people for the everyday Iranian woman and man. And,I mean, when we look at the political developments in Iran in the 19 nineties and two thousands, where You know, there was still, economic growth, and, there was also a lot of political activity in terms of the reforms and civil society, and, there’s a big question as to,

[00:25:45] Nahid Siamdoust: Was it ultimately the sanctions that crippled the Iranian people into a position where it’s becoming increasingly difficult to actually,stand up and ask for greater. rights or was it really the state coming face to face with this realization that this open space that led to the 2009 green uprising was ultimately detrimental to its own interests.

[00:26:10] Nahid Siamdoust: And, I wonder whether I can. pick on as fan DR to try to help us understand this a little bit. given that there was this growth throughout the two thousands and then these sanctions, brought about. Great economic stagnation. can you just try to explain to us a little bit what the sanctions have done, not just to Iran’s economy, but potentially, to Iran’s political space?

[00:26:35] Nahid Siamdoust: I know this is again another big question, but I’m only phrasing it that way because you have more recently also written about this in the context of the woman life freedom uprising.

[00:26:46] Esfandyr: So it is a big question. I’ll do my best to try and give you an answer, a way of thinking about this question. So look, ultimately, I think the Iranian people have a pretty sophisticated understanding of when they should be blaming sanctions and when they should be blaming their own government. There’s actually been some really robust nationally representative polling conducted over many years by a team of researchers at the University of Maryland. And when you ask Iranians, whether sanctions are responsible for the country’s economic woes or domestic mismanagement, most Iranians will ascribe, they will say that domestic mismanagement is responsible for most of the economic pain in Iran. And that’s actually a totally logical answer because what is clear is that even though Between let’s say the 1990s and up until around 20 11 2012. Iran was by global standards, a relatively good economic performer. There was not a single recession between 1994 and 2012, and Iranians could expect every year that their living standards would essentially be improving some years faster than others. That despite that fact, there was still all sorts of, inefficiencies, mismanagement, corruption and problems that are endemic to most developing countries around the world. And so when Iranians are sitting there and thinking about the pain points in their day to day, Most of those pain points when it comes to their economic issues are going to be attributable to issues of government mismanagement and not the sanctions in and of themselves. But where the sanctions come into play is that they change the trajectory for Iran’s economic development. So as Djavad mentioned, you had this relatively strong performance up until 2012, and then suddenly an external set of constraints and external pressures come in that make it impossible for Iran, even with all of the problems of domestic mismanagement, to maintain The kind of growth that it had up until that point. And this is when you have a situation where living standards basically start to fall. Now the question is, how does that relate to the political situation in the country? And of course, long before sanctions were a fundamental issue. for the Iranian public, the issue of the state society relations was something that had real purchase in sort of civil society discourse. There were protest movements before sanctions were imposed relating to frustrations over the lack of civil liberties or a failure of the government to meet the basic needs of different communities in Iran. And those protest movements, Speak to I think this really incredible history in Iran of popular mobilization around political causes, both in the form of protest and in the form of basically campaigns around elections, which used to be quite competitive and important in Iran up until just the last few years. And so the bigger picture that we can paint is that up until 2012 Iran was a country that was becoming A In a halting and faltering way, more democratically representative and, less economically unequal. And that was a trajectory that Iran, like many developing countries, was following where the sort of growth in the economic share of middle class families was associated with an improvement in their ability to get the issues that they care about listened to by the political class. Beginning in 2012, I think you had two interrelated phenomenon, that have changed, that sort of political context. The first is, of course, that sanctions very directly had a negative economic impact precisely on the middle class. So, we’ve, been doing some research along these lines, in… The foundation with a colleague of mine named Zeb Kalb. We’ve actually been continuing a body of research that Djavad was doing, 10 years ago, looking at the share of the income distribution of different classes in Iran. And what we can see very clearly is that. The top 5% of Iran’s income distribution. So let’s say the elites in the country have actually done well under sanctions.

[00:31:23] Esfandyr: They have managed to grow the proportion of overall consumption. So let’s say the overall piece of their economic pie from around 25% to 35% in 2020. And in that same period, yeah, Everyone else in the income distribution pretty much saw their share decline. So you had this transfer of wealth from ordinary people to the elite. And of course, that’s going to have negative repercussions for, from a political standpoint. But I think another kind of, related trend is that as part of the imposition of sanctions, And the escalation of tensions with Iran, there was also this securitization of not only the U. S. Iran relationship where the two countries really began to see each other only as sources of threat, but also domestically in Iran, there was this sense that, the country is basically besieged.

[00:32:21] Esfandyr: The sanctions have been interpreted by Iranian elites as a kind of economic war. And as part of that warfare, they have also seen the actual kind of close,close brushes in terms of military, engagements between us forces and Iranian forces in the Middle East in this last decades period where you’ve had really high tensions in the region. And the combination has basically led to this idea where. The Iranian security establishment sees threats everywhere. And there’s a kind of paranoia, and that paranoia extends to how they view popular mobilization by the public. So Even when people mobilize and engage in protest over very clear, legitimate grievances, the price of their daily bread, or the denial of their civil liberties, those protests are not seen as expressions of like genuine political frustration. They’re seen as possibly The sort of as part of this larger kind of conspiracy to weaken the Islamic Republic, and therefore the way in which the state has been responding to those protests has essentially shifted over time. The response is much more securitized, and we saw this in 2022 when there were. upwards of 15, 000 protesters arrested the use of violent force in the streets. But we also see it in this other kind of more, I think, cynical version of the development model of Iran, where elites feel embattled, and they’re perfectly satisfied trying to take what they can get at the expense of everyone else.

[00:34:06] Esfandyr: And so you have this kind of concentration of wealth at the top. And this basically You know, Iranian policymakers appear to have largely forgotten the developmental aspirations that were so so important for, the government planning of the Islamic Republic from basically the time of the Islamic Revolution up until, even just a few years ago.

[00:34:31] Esfandyr: So. An attempt to give you an answer to that question, but I think those two trends, the change in the economic fortunes of the middle class and the securitization of the relationship between state and society are really responsible for this breakdown in the social contract, and that’s why we see this impasse right now in Iranian society today.

[00:34:54] Nahid Siamdoust: Wow, that is fascinating. Thank you so much for that, in depth and yet,clear response to a complex question. And, there’s so many questions that arise from that.

[00:35:03] Nahid Siamdoust: And I’m quoting from a piece you wrote and foreign affairs. this development that you pointed to, you’re right. A more important factor appears to be around ongoing economic crisis characterized by high inflation and languishing economic growth, a combination that led to a 20% drop in annual household consumption between 2010 and 2020. In the same period, the proportion of Iranians living below the poverty line rose by 10 percentage points to 30%. And I mean, in some ways this is fascinating, Because when you look at the, the elite, the top 5% as you mentioned, Being able to grab more of the wealth, taking up from, 25% of the economy to 30 to 35%. In some ways, that development seems to mirror what’s happening in the neoliberal economies of the West, right? And yet this is a completely different economic Right. Context. where, middle classes are being crushed out and the elite, and I, by no means do I want to compare what’s happening in Iran to elsewhere, but it’s just interesting that there are these economic parallels and completely different political contexts.

[00:36:09] Nahid Siamdoust: And so if I may ask, so this, how has the elite, been able to, in fact, prosper so much, Increasingly more within the context of the sanctions. How are they profiting from the sanctions that they’ve been able to grab more of the economic pie,

[00:36:26] Djavad: Do you want me to go first?

[00:36:28] Nahid Siamdoust: Sure. Yes, please.

[00:36:29] Djavad: Well, this is a very difficult question, parsing, the role of sanctions versus, other factors like ease of access to oil revenues as the source of inequality, for academics is a very hazardous task. And I can’t really, say a whole lot about it. You have to realize that, a lot of stuff, during the sanctions period goes, becomes less transparent.

[00:36:55] Djavad: It goes under the table and it’s much harder now to tell what is going on with extreme inequality. those were fascinating data that, Isfan Dior provided on the, share of the richest 5% total consumption. and it is alarming, but I must say that is probably the tip of the iceberg because like everywhere else in the world, the very rich people do not, answer, questions to statistical, interviewers, people who ask how much did you earn?

[00:37:28] Djavad: How much did you spend?

[00:37:29] Nahid Siamdoust: And this missing top 1% from the data concerns me a lot. If you look at the real estate market in Iran. You see a lot more inequality. The difference between the price of a house in, Fereshteh or Farmaniyeh, that’s northern district, the affluent northern part of Tehran, to the poorest, real estate, maybe in a village, is much, much greater than the difference between incomes that are reported of the rich versus the poor.

[00:38:02] Djavad: So, I, think that, The perception that people have by just walking in these neighborhoods, of inequality is greater than what we calculate in terms of Gini coefficients from survey data. and this is part of the angst in Iran. You see, earlier when you were talking, you were asking a question about.

[00:38:26] Djavad: why, people blame sanctions or why people blame mismanagement or corruption. I was thinking that it is very difficult for average person to define corruption. First of all, they can’t observe it. But secondly, they probably, can’t distinguish mismanagement versus corruption. Or, corruption versus inequality.

[00:38:49] Djavad: When you see these, very rich apartments in northern part of Tehran, these, very luxurious shopping malls. You may think or ordinary person is, likely to think that’s corruption, that if these people weren’t corrupt, how could they amass, this much wealth to put up this,very, luxurious mall or apartment block.

[00:39:11] Djavad: so I would. be very, wary of trying to get public opinion to disentangle what’s going on, in terms of, sanctions versus domestic mismanagement. They both contribute, but the role of sanctions, if I may go back, for a minute to the earlier question, it is undeniable that sanctions, when they arrive.

[00:39:36] Djavad: In, 2011, finally in October 2012, in one week, they caused a two, three hundred percent devaluation that then fuels huge inflation. There is no way to ascribe that event or those events to rising corruption or rising mismanagement. So, if people, after seeing that oil exports dropped because of sanctions, the currency loses value, local prices go up, and they say that’s mismanagement, they’re just not thinking right.

[00:40:10] Esfandyr: Can I add to that?

[00:40:11] Esfandyr: Yes. So just, I mean, I think the Djavads point there is so important and I should clarify something for the listeners that when we talk about the top 5% of the income distribution in Iran, that’s actually 1, 000, 000 households. There are around 20, 000, 000 households in Iran. So, it is not the case that all of those 1, 000, 000 households are engaged in corruption.

[00:40:36] Esfandyr: There is something structural happening here that is basically meaning that certain households are seeing their economic fortunes improve while other households are seeing their economic circumstances decline. And one of the things that I think we can point to, and you mentioned that what we’re describing in Iran sounds familiar because there’s a similar story that can be told in other countries around the world. And there is a reason for that, actually, and that’s because one of the responses of the Iranian government to, the Pressure of sanctions on government revenue by denying Iran, the proceeds from its oil exports was that basically the Rouhani administration and now the Raisi administration have remained surprisingly committed to fiscal austerity.

[00:41:26] Esfandyr: They are running, quite lean budgets and the places where they cut a lot of the budgetary spending. Was precisely in the areas related to the welfare sort of system in Iran. So when we talk about the dynamics that we’re seeing working class and middle class families, enjoy a rising share of the income distribution up until 2012. A lot of that was driven in part not only by the sort of consumer led growth of Iran’s economy in that period, But also by, policies of redistribution. So Djavad has written about this extensively, but there was a very robust and impressive program of cash transfers where essentially the government was taking oil wealth that it was earning and sending it directly to households to boost their economic well being. And those programs. Really, they remain in place. But in the face of really extreme inflation, they have not been increased. So in real terms, the amount of money that households in Iran are receiving from the government has decreased dramatically. So this choice on the part of Iranian policymakers to kind of batten the hatches and maintain certain expenditures around things like defense, government sort of spending on the civil service and on the salaries of bureaucrats, but maybe letting go of some other kinds of spending.

[00:42:58] Esfandyr: For example, the spending that was really crucial for lifting up families out of poverty is indicative of some of the choices that explain why living standards have fallen so much. And those are political decisions. made by Iran’s economic planners that are not dissimilar to how, for example, a lot of governments responded to the global financial crisis in 2009.

[00:43:21] Esfandyr: So I think that’s where the parallel,that you’ve pointed out is coming from.

[00:43:26] Esfandyr: But I also want to just add to Djavad’s point to say that he’s totally right that the numbers that I’ve described are the tip of the iceberg. And, when. When we talk about the accumulation of wealth by Iran’s elite, we’re absolutely missing the real extent of what’s happening among the 1%. I’d add that in addition to what we can see in the real estate market in Tehran and in major cities, you can also look to Iran’s capital markets. So the stock exchange in Iran has performed extraordinarily well. By global standards in the last 15 years, the, compound annual growth rate of the Tehran stock exchange in Euro terms.

[00:44:12] Esfandyr: So that means that we’re controlling for inflation, has been, 17%. Since 2008, which is basically two or three times what the S. N. P. 500 has performed in that same period. So to put it more simply, the stock market in Iran is doing better than the stock market in the United States and has done better over a long period of time because something structural is taking place in Iran’s economy that is it.

[00:44:42] Esfandyr: creating this kind of, really extraordinary transfer of wealth to those people who are the shareholders of businesses, whether or not those businesses are listed on the stock market and also those people who control, assets like real estate. And I think this is a story where Djavad said earlier, we need to be careful because, when you study an economy, there are thousands of variables and you have to disentangle them to really get the causal story right. And I want to just sort of caveat for the listeners that, this is the, a lot of what I’m saying are, hypotheses that I think are. Important to examine further. But really, the point I’m trying to make is that we don’t actually have a very good picture about what has happened in terms of the distribution of wealth in Iran’s economy owing to sanctions in the last decade. And that’s a really concerning realization for Iran. Basically, American and European policymakers who have been very committed to the tool of sanctions because we are now realizing how little we know about what the medium to long term effects of these tools are and to what extent they may actually have counterproductive effects for, let’s say, the political situation in the country where we had perhaps imagined that adding economic pressure would lead to better social and political outcomes.

[00:46:10] Djavad: Uh, by the way, uh, I wanted to put a, kind of a correction on that, stock market thing, lest people think it’s a very, buoyant economy.

[00:46:20] Nahid Siamdoust: Mm

[00:46:20] Djavad: to, uh, clear up this potential confusion that 17% real rate of return on the stock market that Sandhya

[00:46:31] Nahid Siamdoust: All

[00:46:32] Djavad: mentioned is not a reflection of a buoyant economy.

[00:46:36] Djavad: It’s really the risk premium. there’s a lot of risk involved in all activities in Iran, real estate, stock market and so on. and,I don’t want people to think that, to rush their money into Iran’s stock market because three times as well as other stock markets.

[00:46:55] Nahid Siamdoust: Right. The risk is great. And from one day to the next, the real could devalue by 80%

[00:47:00] Nahid Siamdoust: or, something really drastic.

[00:47:01] Djavad: Or policy could change. There’s a lot of policy change in Iran that are difficult to understand

[00:47:07] Esfandyr: I think that’s a, I mean, that’s a really great point from Djavad. I, the one thing I would sort of say that goes along with that is the people who are investing in Iran stock market are people who don’t have the choice to invest anywhere else. So most Iranians, given the political risks that the economic uncertainty would, of course, prefer to get their money out of Iran and find safe haven elsewhere. But that’s very difficult to do precisely because the sanctions. Basically make it impossible for Iranians to transfer their money abroad. So when it comes to trying to find a place to invest your capital, in Iran, the stock market is kind of one of the few options and, uh, and that’s partially why we see this kind of remarkable growth in the number of investors in the stock market and also the, the performance of the market overall.

[00:48:04] Nahid Siamdoust: Wonderful. Thank you both for that, explanation. I want to take it back to, you, you know, as Fandio, you mentioned some of Djavad’s work, and I just want to quote something that he wrote recently in Responsible Statecraft last December, quote, an otherwise welfare improving reform that the Raisi administration and Planned Parenthood Implemented in May, 2022, ending foreign exchange food subsidies, most of which benefited upper income groups and replacing them with progressive cash transfers, spiked inflation to record levels last summer.

[00:48:34] Nahid Siamdoust: That is just prior to the, start of the uprising. And so if I may steer the conversation a little bit, in different directions, I really would love to understand Java since you. do have the experience of the 1979 revolution, where, of course, worker strikes were a great backbone to, the success of the revolution. How do we understand the situation in Iran, given the devaluation of the real, this,very high inflation, high unemployment? how do we understand the fact that workers ultimately didn’t join the protest? There was a lot of calls on them to do so. a lot of, calls on widespread national strikes to take place, but that didn’t ultimately pan out.

[00:49:18] Nahid Siamdoust: How do we understand that in this uprising?

[00:49:21] Djavad: Well, that’s a very good question. it’s not my specialty to understand protest, but I can hazard a guess. protest is not the default state of working class. or going on a strike. They go on a strike when they have a specific needs. And Iranian workers do go on a strike. You see smaller strikes all over the country in protests to back pay, unpaid wages, or poor management of a company that, you have seen in like Haftar Pay and others.

[00:49:53] Djavad: why they didn’t join this protest? It’s partly because they did not really identify with the slogans. They didn’t think that was the primary, their primary concern. They didn’t want to risk their jobs, risk getting beaten up or go to jail. The workers are mostly breadwinners for their families. And when they see young people, university people, women, protesting over something that is kind of orthogonal to their main concerns, which is putting the food on the table for their family.

[00:50:28] Djavad: they’re not tempted to join. they also see, I don’t know how true this is, but a lot of the, protests in Iran very quickly become. slogans for regime change,

[00:50:41] Djavad: and that’s very difficult, environment for workers to come in to ask for their legitimate desires. For example, if they want to have a better pesticide that doesn’t harm them on, on, on the field, or they want, better working conditions or higher wages, when, there is this loud voice coming from inside and outside Iran, that this is a good time for regime change.

[00:51:07] Djavad: I think they hesitate, they don’t want to get involved in a much bigger fight than it is. right in front of them. So that’s my understanding of why workers didn’t come. I wasn’t surprised, by the way, that workers

[00:51:19] Djavad: did not join the protests. Getting workers to protest Mass National is not something that’s easy to do.

[00:51:30] Djavad: I know that people who put sanctions on Iran and are always looking for, this, proverbial straw that breaks the camel back. They’re always looking for something big to happen and regime change and remove a big headache for the US and Israel. it has created a very difficult environment for, kind of smaller protests that aim at reform and improvements of local living conditions.

[00:51:57] Nahid Siamdoust: That’s interesting. I guess in the 1979 revolution, so many of the calls for revolution were grounded discursively in the idea of uplifting the downtrodden. And so perhaps that spoke more to the workers of the time, than some of the narratives that we’re seeing today. Would you say that’s a fair comment or?

[00:52:19] Djavad: It is, and I think I would, uh, add that, conditions are so different.

[00:52:23] Djavad: the Shah had very, low credibility because of the backing he was getting from the, from the West. a lot of people considered, him illegitimate because of the,1953 coup, for example. this government has a very strong backing of, some 20, 30 percent of the population.

[00:52:42] Djavad: And its main faults are, being hostile to the West, the point of view of its critics, and also Not running the economy well, these are very difficult, different conditions. The other, thing that happened before the revolution, and this is about, questions we’ve been talking about a lot, about inequality.

[00:53:02] Djavad: Inequality was rising before the revolution. because oil income naturally, increases inequality. Why does it do it? Because, oil money flows down a very unequal political power structure and

[00:53:20] Djavad: people at the top get more of it and so on. That happened in, before the revolution. That kind of inequality We have not seen in the last couple of decades.

[00:53:32] Nahid Siamdoust: That’s interesting. It almost sounds though,you know, based on what Esfandyr was, the numbers that he was giving us, that in some ways, sanctions also have a very unequal,effect given that, again, sort of this very unequal image that we see. see coming out of your Iran and you mentioned already, neighborhoods like finished down family.

[00:53:52] Esfandyr: Yeah. And, there are plenty photos of very glitzy malls and Porsches and Maseratis on these streets, which is so at odds with the poverty of the majority of the population that we see. So it sounds to me like in some ways, the, the economy or the elite has figured out a way of, Also reaping the rewards of the sanctions economy in a way that perhaps the oil economy was working, prior to the revolution, I think that what’s clear here in both scenarios is that, the economic elite will act in their own favor unless they have guardrails. And what was interesting about the Islamic Republic for, the better part of its history is that there were certain guardrails around that. So, for example, the fact that you had competitive. If not totally free, parliamentary and presidential elections, where the Iranian public understood that who they put in office would make a difference in terms of the overall sort of direction of policymaking. And that’s why that you had relatively high turnouts of 70 to 80 Up until basically the election of Ebrahim Raisi in what was a very staged managed presidential election, really breaking a pattern that had been mostly in place with the exception of the 2009 election, of course. So those guardrails, I think, are really important. And going back to kind of Djavad’s point, when elections are no longer there as a relatively organized way for a society to express its political demands and have them reflected in policymaking, that pretty much only leaves protest. And at the end of the day for the Iranian sort of,rank and file within Iran society, that the idea of trying to develop a sustained protest movement is very difficult, to do precisely for the reasons that Djavad explained, I mean, first and foremost. the there was some really great reporting in the couple months after the beginning of the protests in September 2022 from the Wall Street Journal and from the Financial Times that tried to look at, why is it that you don’t see an expansion of these protests? Why have they remained obviously very energetic and with a strong message? But you didn’t have scenes of tens of thousands of people in the street. Part of the answer there is, of course, the brutal repression that the Islamic Republic used to dissuade people from taking the risk of protest, a risk of personal safety. You could get arrested, you could get injured, you could get killed. But at the same time, I think there was this other consideration that the reporting from the Wall Street Journal and the Financial Times pointed to, which is that there was also an economic consideration around those scenarios. So you had workers telling the reporters, if I go out and I join a protest or if I join a strike and I’m arrested and I’m in prison for even a few weeks, my family will go hungry

[00:57:03] Esfandyr: They don’t have any savings and their job won’t be there, waiting for them when they’re finally let out. And I think those economic considerations are, they are not the necessarily the fundamental thing that determines whether or not a person participates in a protest movement. I think, of course, the leadership of that movement, the charisma of the message. The, credibility of the movement in terms of Canada actually succeed all matter, but at the same time, this economic consideration can’t be, sort of taken for granted and or ignored. And when it comes to Western policymaking, one thing that I think we should keep in mind is that Western governments have zero capacity to create viable political movements in Iran. They can’t, handpick leaders, they can’t define messages, they can’t create the conditions for movements to,find,the right networks to organize and, find, coalitions that, that are necessary to grow a net, movement from just sporadic protests into something more durable. The one area where they do have influence is on the economic conditions of the country. And actually in a kind of perverse demonstration of this, the fact that the sole Western response to the protest substantively was to add further sanctions as part of an effort to signal support for the protesters and also to maintain the economic pressure that has been the.

[00:58:34] Esfandyr: sort of cornerstone of Western policy, was a reflection of the fact that the only tool we have in the toolbox is basically this tool that changes the economic conditions of the country. So when Western policymakers and diaspora communities who have an influence on them are thinking about Well, what is it that we can do from abroad to actually create conditions for,more sustainable and, ameliorative political change in Iran? At the end of the day, we have to be talking about the economy because it’s the only place where we can really have an influence. And I think that’s why, given all of the sensitivities around talking about the economy, in the context of the protests that we discussed at the beginning of our discussion. it’s time now, as we reach the one year anniversary of the protests, I think to start to in a sober way, unpack these questions because, as Djavad was explaining, they are fundamental to the decision making of individuals and to the extent that the economic horizon seems very dark for so many Iranians. I think their political aspirations are necessarily dark as well.

[00:59:45] Nahid Siamdoust: thank you so much for that. Yes. Java. John, you go ahead.

[00:59:47] Djavad: Yeah, I want to shift the attention a little bit from the debate outside Iran to inside Iran. These issues we’re discussing are extremely important for the conduct of the debates on hijab in Iran, sanctions, and how to approach the global economy that’s taking place inside Iran. I don’t think that people outside Iran are.

[01:00:14] Djavad: aware of, or aware enough of, the amount of discussion that’s going on a daily basis. how to enforce a job, whether one should, whether the government should enforce a job. I think even conservatives are now beginning to, ask those questions. And knowing whether these protests were caused by economic.

[01:00:37] Djavad: deprivation or by social restrictions is obviously extremely important. I think it would be a mistake to think that these protests were caused by economic conditions, that may have led the Raisi government to go in a hurry, try to get a deal. to get 6 billion of money released to improve the economic conditions and at the same time go very hard on enforcement of hijab.

[01:01:06] Djavad: why is this wrong? Because if you look at the data, the two years before the protests, Iran’s economy was actually growing. in the, in a two year period. The economy grew by 8. 6%, and, living standards, that’s real per capita expenditures, increased by more than 12%. So it wasn’t like the economy was taking a nosedive, and then the protests came.

[01:01:37] Djavad: even today, if you go to, smaller towns, you see shops are there, my brother’s,this is our hometown, Neshabur, that I mentioned, and he saw, for the first time, a showroom for Mercedes Benz in that,mid sized city, that wasn’t there a couple of years ago. So, it isn’t like the economy is going down and if you pull it up that the hijab issue will go away.

[01:02:00] Djavad: I really think that the young people need some space, to define their own lifestyle. And being a very, restrictive in that front. is going to be difficult and no amount of economic growth is going to really make people want to put up with, being told, how to dress, and how to conduct their personal lifestyles.

[01:02:23] Nahid Siamdoust: Thank you really for that response, Java. John, because, we hear a lot about sort of this breakdown of the social contract with the state whereby, the state kind of loosens, the issue around the hijab, but offers some kind of economic welfare. And that because the racy government, really tightened regulations around hijab, he came in with a policy to, in fact, you know, bringing it back.

[01:02:46] Nahid Siamdoust: Some of the pressures on women to keep their hijab on. it sounds like some of those ways of understanding these protests are, in fact, in line with what you just told us, which is, this is really about people trying to gain certain rights, and it’s,somewhat independent of the economic welfare and well being of the country.

[01:03:07] Nahid Siamdoust: And, That’s an interesting way of understanding this. I want to bring us to, since you mentioned the six billion dollars, I want us to briefly discuss that before really turning, toward the final part of this,conversation to talk about, in fact, youth and women, in these protests, given that they were the substantial,bodies on the street, as far as these, this protest movement was, is concerned, they were driven by women and by youth.

[01:03:33] Nahid Siamdoust: but first, very quickly,when this, prisoner release was announced on August 10th, of course, everybody was pleased to hear that finally, these, Iranian Americans have been kept in prison for many years, some of them, such as Siomak Namozi, Iranian American prisoner in Iran, everybody was very pleased to hear this news, but then there was some,this pleasure with the announcement that this really came in exchange for 6 billion of Iran’s assets.

[01:04:02] Nahid Siamdoust: And I suppose my question is, has the West in some ways or, Western governments, the U. S. Gun themselves into a bit of a trap through imposing sanctions, whereby, these kinds of negotiations then become possible for release of dual national prisoners. I mean, if it wasn’t for the sanctions, would there have been such a large number of assets to be released to Iran in exchange for these?

[01:04:28] Nahid Siamdoust: And how, how do you see this, this prisoner release, linked to the. Release of these 6 billion of assets and there have been some other, numbers thrown around. I’m not sure what to make of them or to trust them, something in the matter of 20 something billion and that the 6 billion is actually not correct.

[01:04:44] Nahid Siamdoust: I’m not sure on any of that, but let’s just stick with the 6 billion, which is not a small sum.

[01:04:50] Djavad: I’ll let this friend of yours go with this. I can come back afterwards.

[01:04:55] Esfandyr: So, yeah.

[01:04:57] Nahid Siamdoust: I know you’ve written about this,

[01:04:58] Esfandyr: I mean, I think there’s a couple points to highlight here. First, we should be very frank that, we’re in a very, unfortunate situation for the simple fact that there is any kind of deal being struck where on one hand, the freedom of people is being weighed against the release of funds. we can have a debate about. You know the incentives, that went into this sort of hostage diplomacy is iran Incentivized to continue taking americans if this is a way to get these funds released I think the converse of that question is also worth asking is the u. s basically creating the need for these dramatic actions like arbitrarily detaining people by freezing assets, even in the case when those assets should be available for the use of humanitarian trade. So we need to be frank that we’re in a very. bad situation. And one of the things that has to happen as part of the U. S. Iran diplomacy is breaking a long pattern of mistrust and of the two sides basically engaging in,pretty coercive behavior towards one another. So to that end, If this deal represents the US and Iran, even for a short time, coming to an understanding that will, lead to the freedom of five Americans and reduce the, sort of pressure on humanitarian trade in Iran, I think it is a good deal. It’s also worth noting that it’s part of a larger trend. Iran in the last year or so has also released a British Australian, French and Belgian nationals who are also detained following diplomacy with the governments of those countries. And so there is some sign that this is part of a de escalation that at the moment there are no nuclear negotiations.

[01:06:51] Esfandyr: Those stalled last summer, and there’s no nuclear deal really, keeping the U. S. and Iran from, falling into a bigger crisis. But the governments, in, Washington and in Tehran appear interested in trying to keep the temperature in check and avoiding that kind of deeper crisis that can be so dangerous. And it’s also worth noting that this was a deal mediated with regional support. Qatar and Oman played a large role. And I think the deal is being welcomed by governments in and around the Persian Gulf, because any situation where the US and Iran are less likely to be at loggerheads is a good outcome for a region of the world that has seen way too much conflict in the last decade. Now, very technically on the 6 billion, and I think it’s really worth emphasizing this, the funds are not flowing to Iran. They will be transferred from bank accounts in South Korea to two bank accounts in Qatar. The U. S. government will remain extraordinary oversight on each and every transaction that Iran will basically make using that money to pay for humanitarian goods, basically food and medicine. And so In reality, this is not the kind of deal that materially benefits the Islamic Republic in the sense of giving them a freer hand to engage in the activities that the U. S. considers malign behaviors, like Iran’s, military, sort of, activities or its support for terrorism. And so we have to kind of keep that in mind so that we’re having a fair assessment of this deal. the Biden administration went ahead with it because they understood that this was a good deal to get five Americans freed, and it did not compromise U. S. National security. Now, that being said, of course, it is, a shame and it’s deplorable that This deal was even necessary that these individuals were detained in the first place.

[01:08:53] Esfandyr: But as I said, there needs to be a pattern of behavior has to be broken. And the question is whether the US and Iran can use this agreement as a basis for further discussions that would finally try and break that pattern by establishing some mutual trust and some understanding of mutual benefit.

[01:09:12] Nahid Siamdoust: Thank you for that. I don’t know if you have a response to this, but I just want to ask a quick follow up sort of clarifying question. So the funds will only be released for purchase of goods outside of Iran and those goods make it into Iran. Is that correct? Because otherwise, if these funds are released to the Iranian government. Presumably it can do whatever it wants with them. And nobody can really have oversight over that.

[01:09:34] Djavad: Yeah, I think the key point is what this family are mentioned that U. S. has oversight over what can be bought with the 6 billion. It doesn’t really matter where the money is because when you order, when you purchase something abroad, the money can go from an Iranian bank or it can go from a. Atari bank doesn’t really matter.

[01:09:57] Djavad: what matters is,discretion over what to buy. so I think, if I may add something to, the larger question of this deal. First of all, I would like to, express. a indignation I have as an economist who has taught about free trade and not mixing politics with economic issues all the time about US behavior.

[01:10:21] Djavad: It is unconscionable that US decides that because it disagrees with Iran’s nuclear program or nuclear ambitions, that it doesn’t allow Iran to trade with other countries with

[01:10:35] Djavad: this is. pure power politics. And if I may go back to 1953, US at the time, when they pulled the coup against Mossad there, the coup that deposed Mossad there and brought the Shah back, Nixon said that was a very successful operation and he was then vice president.

[01:10:56] Djavad: And the reason why he said it is because there was no negative norm, normative judgment against U. S. pulling coups across the

[01:11:04] Djavad: globe. Consider, you know, we are powerful. This is what we do. It was still the colonial era. I think 20, 30 years from now, people will look at what U. S. is doing now with the same degree of abhorrence that they do now,with respect to the, coups of the 1950s.

[01:11:23] Djavad: Thank you. so having said that, let me say that the Iran is making a mistake in making these small deals because the bigger problem for Iran, if it’s really looking forward to a growing economy, establishing resistance economy as a concept, is to be able to trade. If it cannot get sanctions eased, it is a small,penny to try to get two billion here in Iraq, six billion in Korea and this and that.

[01:11:56] Djavad: The big prize is the ability to trade. Why? Because the people who, employers, the employers who really count are Not the largest ones that can run a ship on their own and collect the money in suitcases and so on. These are smaller enterprises, maybe employing, 20 or 50 people. And they are the job creators.

[01:12:23] Djavad: They have no way of surviving these sanctions. They, I mean, in the long run, some of them are still in business.

[01:12:30] Djavad: But if you cannot sell something to, Turkmenistan and bring the money back costlessly, You are really stuck. Iran’s economy, Iran’s domestic demand is very limited because of sanctions, because of the conditions.

[01:12:46] Djavad: So, Iranian labor is the cheapest it has ever been. It’s cheaper than Chinese labor today in dollar terms, right? So Iranian goods can beat almost any country’s good at least in its own neighborhood, in Central Asia and so on. So Iran has within its reach, a,key that it can turn and exports will take place, jobs will be created, the economy will grow.

[01:13:13] Djavad: And it’s not willing to do that for reasons of its own because it thinks, it shouldn’t be, fighting the sanctions. It should, build its own resistance economy. In my opinion, resistance economy really requires some easing of sanctions, some trade, and Iran would do better. than getting six billions into, Qatari bank and buying stuff with it, by asking for, some part of the JCPOA to come.

[01:13:45] Djavad: Iran was very close to solving this problem. I think it was very unfortunate that Trump decided to wither off from the deal. it’s may have. been an irreparable damage done to Iran’s economy? I don’t know, but I think the government of Iran still has some cards in his hands and he should push for sanctions, relief sanctions, easing as opposed to releasing monies here and there.

[01:14:13] Nahid Siamdoust: Thank you very much, Java. John, I just want to make a remark here, because of course, all of these conversations became so contested during this uprising, right? Where people very much,many people, at least on the outside, I’m not sure. Potentially also on the inside would have perhaps, disagreed with some of that saying that, Iran has been using its funds for nefarious activity in the region, its alliances with other repressive regimes and so on, and that cutting off those funds was in part to stop some of those activities.

[01:14:44] Nahid Siamdoust: That is not, to say the US doesn’t have its own, incredibly nefarious activities across the world. I mean, you just have to look at Cuba, an island that is so close to its own shores and, depriving its people of any kind of welfare for decades. But, anyway, just to put that in there, because we’ve, we’ve now gone down the, economic, rabbit hole and all these discussions are so, so, valuable, but just to put that within the context of why this was.

[01:15:13] Nahid Siamdoust: this had become so contested at the time. If I may just turn us toward the last, question that I want to put to you too. I’ve already taken up so much of your time and I’m so grateful to you for being here to discuss this all with us. I know that I’ve learned so much just within this past hour and I’m sure our listeners have too. Um, you know, to the, to the question of women and youth and Java Joan, I know you have,you had a piece a while ago about, The, this youth social exclusion that has happened in post revolutionary Iran. And some of the numbers that you’ve given us in a revisiting of this issue in 2022 are really staggering.

[01:15:47] Nahid Siamdoust: When we look at the unemployment of youth, ages 20 to 29, when we look at, these graphs that are just climbing up mountains when it comes to unemployment or time to first job for university graduates, the number of years it takes from, One and a half years to close to three years, or,the number of proportion of youth living at home from if we take it from, 1990. again,going up by several percentage points. And, why has this been happening in post revolutionary Iran? And if we then combine this If I may, and if if it’s not too much to sort of couple the two together, if we couple this together with the number of women who are struggling to find jobs over the course of the last five, six years, and just generally women’s participation in the workforce and how, adversarial the conditions are for them, first of all, why is it that youth have been having such a tough share of the economy and have had It’s such a hard time to establish independent homes and, really go into their own lives, establish marriages and, households and so on.

[01:16:56] Nahid Siamdoust: Why has, has the economy be so adverse to them? and I know You explain to us so, lucidly, I think, the fact that we really have to keep social repression as a cause for the uprising apart from the economic developments that have been happening and really understand this as a demand for, other kinds of freedoms.

[01:17:15] Nahid Siamdoust: But, if we look at these, Conditions for youth and women and the number of, the great participation that the fact the protesters were mostly young and many of them women. How do we explain these processes in post revolutionary Iran and how they may have really aided these protests that ultimately happened in 2022?

[01:17:38] Djavad: Yes, thank you for bringing this question up on youth. It was the topic I spent a lot of time on. A decade ago, but since then, sanctions, much less happy topic, I must say, has taken my time. when I wrote about youth in Iran and the Middle East, we had a phenomenon known as the youth bulge,

[01:18:03] Djavad: because of high past fertility.

[01:18:06] Djavad: The population of young people was growing very fast, was hitting against, barriers, obstacles in the education system and in the labor market. So they were, spending a lot of time, either studying, not working. If in the Middle East and in Iran as well, if you don’t have a job. and you don’t have a home, house, you cannot get married.

[01:18:31] Djavad: So, one of our colleagues coined this term, Waithood,

[01:18:35] Djavad: which is a amalgamation of waiting for a job, unemployment, waiting to get married, living with your parents and all that. Now, what is interesting is that a decade later, half in the 2010s, The youth bulge has all but disappeared, so we don’t have that pressure anymore.

[01:18:56] Djavad: We do have some pressure from college educated because for a time the Ahmadinejad government opened up the doors of universities allowed The unemployed youth, high school graduates, to go into these low quality schools and get a bachelor’s degree, they are out now. So unemployment for educated people is still very high, and it is twice as high for women as it is for men.

[01:19:29] Djavad: So the problem hasn’t gone away. But it’s now the solution now lies more in, reforming the economic structure, which requires allowing greater role for the private sector, both in designing the education system, what people learn, you know, when government employs people, you, your education system comes to serve the government in a way, having a lot of multiple choice, a lot of memorization and.

[01:19:58] Djavad: Things that are as far away from global skills as you can get. But under the circumstances with sanctions, this whole debate has been distorted and society and the government don’t seem to have the wherewithal. to deal with this. they can’t deal with the price of gasoline. That’s dirt cheap. And they have to import gasoline.

[01:20:22] Djavad: They can’t deal with young people not able to get the right skills to get the right jobs. So there is a kind of a perfect storm in a way that is coming. And I don’t think this is going to, satisfy,the requirements for a regime change. It’s just means a lot of unhappiness in Iran.

[01:20:41] Nahid Siamdoust: that is not a very good, note to end on, it sounds like it’s just we are basically in a bind. And so, I wonder if Esfandyr wants to chime in on this question of, women and youth,

[01:20:53] Esfandyr: I was just sort of processing job. It’s point. also really thinking back to the fact that I mean, I remember when I started, I mentioned at the top that,I started thinking about Iran really when I was in high school doing some of my first research. I traveled there for the first time, in I think my sophomore year of college.

[01:21:12] Esfandyr: And it was around that time that I actually came across Djavad’s scholarship on this issue of waithood. And what, what I remember is being of that age. That, you’re in college, you’re thinking about your future, you think about your possibilities and reading about how for my peers in Iran, whom in a sense I was getting to know for the first time through my travels and just from a greater familiarity with the country, just trying to understand how different their circumstances were and that they couldn’t approach, their Forever. the end of their adolescence with optimism. And I think that’s an incredibly corrosive thing for any society. And it has been that way. And arguably, it’s gotten worse for the last 10 years. And within that picture of the sort of travails of Iran’s youth, there is, of course, the even more kind of concerning story about the incredible, Inequality and injustice facing Iranian women, and their circumstances have arguably gotten a lot worse.

[01:22:17] Esfandyr: in that research that I mentioned earlier, when we looked at, the drop in household consumption in Iran, and you cited a statistic from a paper, a report that we published, by Zeb Kalb, who identified that the average household has lost 20% has decreased its consumption by 20% between 2010 and 2020. What was another finding of ZEPP’s research is that, different kinds of households had different outcomes. And in fact, the households that experienced the most significant decrease in consumption Were households led by an individual who works in the civil service, or households led by basically farm workers and zeps, observation, which I think is an important one, is that actually those two categories of employment, the civil service and, agricultural labor are the categories that account for the lion’s share of women’s employment in Iran.

[01:23:18] Esfandyr: So. In fact, the trends that we’re looking at are fundamentally hitting women harder. And again, to Djavad’s point, the reason why the woman life freedom movement emerged is not because of economic, sort of, causes or frustrations. It’s because of this fundamental dissatisfaction with the social condition of women in the Islamic Republic. And so even if The economic conditions are improved. I think those tensions will remain and women will continue to, basically push for their rights. And there is this kind of nascent movement that could take that, sort of effort further than ever before.

[01:24:00] Esfandyr: The question is whether they will have the means to do so and I think this is where the economic issue comes into play and I think where it would be fair to say that in addition to kind of a woman life freedom framework there is this idea that within life there is the idea of livelihood

[01:24:17] Esfandyr: as something that is enabling or important for their ability to assert their political freedoms and their social position within Iranian society. So, I would just say that it’s been, we’re in an interesting juncture because now we can look back across a decade and look at these trends. And we couldn’t do that 10 years ago. You didn’t have these trend lines to, to analyze. But now that we have this benefit of, a longer perspective, It gives us a chance to project 10 years into the future and to sort of say what needs to change for us to end up in a better place. And ideally, just to kind of remediate the harms that have happened in the last decade.

[01:25:00] Esfandyr: And that’s going to be a lot of very hard work, but I would hope that I have a lot of faith in the people in Iran to continue to sort of push through their incredibly resilient. And that’s been demonstrated time and again. I am also hopeful that the diaspora can, come to see some of these trends, some of these realities with more nuance. And then Find a way to articulate their solidarity and their support that perhaps it goes beyond where we were last year and really does a better job of meeting the moment that we have in Iran and that we’re going to be marking with this anniversary to come up next month.

[01:25:40] Djavad: I –

[01:25:41] Nahid Siamdoust: Thank you so much. Yes, go ahead.

[01:25:42] Djavad: one, point we have not talked about the pandemic and that’s okay because, we covered a lot of other issues. But, if you look at women’s employment, during the pandemic years, you see that they were hurt disproportionately compared to men. year after the pandemic. Men’s employment had recovered, women’s employment was still down 20, 25 percent.

[01:26:11] Djavad: That is mostly because of the social norms in the country, which are, very paternalistic, if, the kids can’t go to school because the school is, either closed or risky to send Your kid, too, is the woman who has to quit the job and stay at home. I am not saying that contributed to the,protests, women, life freedom protests, but it’s good to keep in mind that, not everything that happens in Iran is the fault of the government or of sanctions.

[01:26:43] Djavad: Other things are there. in fact, if you look. Carefully at the data that I have, which is time use, you find out that the strong role of social norms that hurt the women, if you compare Young people with college degree who are unemployed and living with their parents and look at the, their contribution to, chores in the house.

[01:27:07] Djavad: Women work three times as much. These are women with a college degree who happen to be living with their parents. They work three times as much in, on house chores than, a typical male child with a college degree. This is not something that we can easily ignore. I think it’s very important to keep in mind that Iran is a traditional society.

[01:27:30] Djavad: It has Very strong social norms against women working, against women being, the leader of the household or being the leader of a company or an office and so on. And this is something that Iranians need to work out on their own, without, a lot of interference from outside who’s constantly trying to use every tension that Typically, that naturally arises in a developing country in the process of development to make it very political and take it, to illogical conclusions.

[01:28:05] Nahid Siamdoust: thank you very much. Algen. I mean, that’s interesting. I mean, the pandemic did affect women adversely across the world, but more so I suppose in places that have traditional values. And I just want to quickly, and I’m bringing this to a close, we’re done, but I want to quickly quote something that you wrote in, I believe it was in December, Iran’s conservative tightrope, just The difference between the women’s population in the 1980s and today, where you write many women back then in 83 lived very different lives. They experienced six to eight pregnancies on average, did not seek work outside the home and were not as highly educated. The pro poor policies of the early Islamic revolutionaries provided electricity, clean water and health services to rural, poor and urban areas, transforming many women’s lives.

[01:28:47] Nahid Siamdoust: Today, however, women in Iran marry in their mid to late twenties and have two Children. On average, 38% of Iranian women in their twenties have at least some higher education compared to 33% of men in their age cohort. To them, the mere thought that they could be arrested and dragged to reeducation camp by the morality police is intolerable. to close this off,

[01:29:11] Nahid Siamdoust: I wonder if I could ask each of you to please, if you were to give one piece of advice to the Iranian government to better Iranian lives, and one piece of advice to Western US slash European governments in their policies toward Iran, what would those two pieces of advice, respectively to these two governments or these two powers, as it were, what would they be?

[01:29:33] Nahid Siamdoust: Wow, that’s a very good question. I haven’t thought about it, but let me tell you two things that I think is very important. They need to narrow the gap of understanding between themselves, the conservatives, and the general public about the need to, have an adversarial stance towards the West. and therefore have these economic sanctions and therefore trying to create something called resistance economy.

[01:30:06] Djavad: They have failed in carrying the population with them as they have gone from, some, moderate stance towards the West to more belligerence and more confrontation. they need to close that gap. And the other gap is between. The lifestyles that Iranians prefer, the middle class, and the lifestyle they think, ordinary Iranians should like and should live.

[01:30:35] Djavad: I don’t know how one does this, but this should be on the top of their agenda. Iranian revolution was a popular revolution, and, it can still, look at Iranians as, The same people who were there before, who wanted Islamic Republic, if that was a good thing, and they agreed with them, today they say, we don’t want to have so much hostility with the West, or they, we don’t want to have so much policing of lifestyles.

[01:31:06] Djavad: I think it would behoove the government to respect, respect that, and try to find out how to compromise. These are, I think, the two issues that need to be addressed. Closing the gap in understanding. in terms of resistance economy and the need for it and closing the gap between, the understanding of what lifestyles Iranian want to live and like lead and what lifestyle the government thinks they should lead.

[01:31:34] Nahid Siamdoust: Great. Thank you. And how about U. S. And European governments? What would be your one piece of Recommendation to them.

[01:31:41] Djavad: Oh, that’s a very good question. I’ve been so frustrated with the lack of understanding of Iran. I would say You know, when I was in graduate school, and then also at University of Pennsylvania, each department at Harvard and Penn had a full professor studying Soviet Union with an entourage with budgets.

[01:32:01] Nahid Siamdoust: And they had a decent understanding of what was going on. And compared to that, they have completely blindsided themselves with respect to what’s going on in Iran. They do wishful thinking, not at all becoming of a superpower to say that, like President Trump a couple of times claimed, Iranians don’t have bread to eat.

[01:32:23] Djavad: bread is one of the cheapest commodities in Iran. They eat too much of it, or to say that, devaluation is very quickly going to be followed by regime change. There’s a really pathetic kind of knowledge, bringing knowledge to a very, I think foreign policy conflict.

[01:32:43] Djavad: I wish they would start studying Iran.

[01:32:46] Djavad: you can’t get any grant to study Iran. Uh, very early on I got a grant from Social Science Research Council to study fertility in Iran. And, after they give me the grant, they wrote a letter saying, we have been advised,uh, not to give you any money because of, Iran is not, uh, contribu can give money to, this is before sanctions.

[01:33:07] Djavad: So you, it’s deprive yourself. I mean, European and.

[01:33:13] Nahid Siamdoust: government from the kind of expertise, the kind of knowledge that you need. To, not to, I wouldn’t say to be successful in this, foreign policy challenge, but to conduct it with knowledge and with,understanding of what the other side is doing.

[01:33:29] Djavad: They are

[01:33:30] Djavad: continually surprised at what goes on in Iran.

[01:33:34] Djavad: There is data. Iran produces more data than any Arab country. And they’re all on the websites. And they are the data that the ZEP has used successfully, and

[01:33:46] Djavad: Isfandiyar consults all the time.

[01:33:49] Djavad: Why aren’t they studying Iran more carefully and with a more open mind?

[01:33:55] Djavad: That’s, I think, the question.

[01:33:57] Nahid Siamdoust: That is a really great recommendation from a professor, do your work, study, understand the place before you come up with,unhinged sort of policies and, yeah, paths forward that, actually sometimes like we discussed throughout this past. hour and a half potentially have the adverse effects such as these extreme sanctions thank you Esfandyr to you and your recommendations both to the iranian government and us eu governments

[01:34:24] Esfandyr: I mean, I would absolutely echo what Djavad has just said about the need to study Iran more seriously and to really start to answer very fundamental questions about what is happened in Iran’s economy in the last decade in particular, in Iran’s society, in Iran’s political system that haven’t been answered by Western policymakers.

[01:34:45] Esfandyr: And I think once furnished with those answers. They will be in a better position to make policy. The other sort of thing that goes along with that is I feel that both for the leadership in Iran and also in Western governments, it’s really important to stay ambitious when it comes to what can be achieved through diplomacy between the two sides. Given the really tortured history of U. S. Iran relations in particular. There’s this kind of fundamental pessimism that I’ve encountered in Western policymakers who feel that, certain things are impossible. because of political constraints in Tehran or political constraints in Washington. And what was really striking about the moment that we had from, let’s say, 2014 to 2017, was the idea that, the diplomacy that the U.

[01:35:36] Esfandyr: S. and Iran could take, could undertake, Could be transformative that even a limited agreement over something specific like Iran’s nuclear program could have a transformative impact on the overall atmosphere in US Iran relations and also, in terms of the sort of place of Iran within the Middle East and The Trump years seem to have kind of dulled that transformative ambition. the Iranians don’t trust the US, enough to pursue kind of that big deal. They think that it’s impossible to move out of this pattern of, of betrayal that the two sides have been locked in for so long. And on the US side, it’s a similar story. They see Iran as a country that is never going to change its ways and become a sort of constructive member of the international community. And I think unfortunately, that pessimism clouds the policymaking, you have to remain optimistic, if you’re going to be creative about how to solve the pressing issues. that are facing both countries and really to secure the national security interests of both countries as well. So, that it goes along with what Djavad was saying is, really do your homework, try and understand, in a sophisticated way, what is happening and what the conditions are.

[01:36:58] Esfandyr: And then once you know those conditions, don’t let. Sort of pessimism prevent you from imagining a really transformative set of circumstances because that’s ultimately where we need to aim. And as Djavad said, we may not be successful in always achieving that transformative policy, but it does need to be the shared goal if the two sides are going to maximize the potential of any diplomacy that might take place in the future.

[01:37:25] Nahid Siamdoust: Well, thank you both so much. Dr. Djavad professor of economics at Virginia Tech and a frequent contributor to academic and mainstream publications. And Esfandyr Batmanghelidj, founder and CEO of the Bourse and Bazaar Foundation think tank focused on economic diplomacy. Development and justice in the Middle East and Central Asia. I cannot thank you enough for giving us this time of yours. I know it’s very precious. I know you both are very busy. So thank you so much for being here today to just unpack Iran’s economy a little bit for our listeners. and also to, engage,that question with the political questions over the course of the last year with the woman life freedom uprising in Iran.

[01:38:12] Djavad: Thank you.

[01:38:13] Esfandyr: for having

[01:38:13] Djavad: Yeah, that’s a great conversation.

[01:38:16] Nahid Siamdoust: Thank you so much for listening. Again, my guests were Dr. Djavad Salehi Esfahani and Esfandyr Batmanghelidj. Next episode will be a special episode on the anniversary of Iran’s Women Life Freedom Uprising. Until then, be well.