Iran's economy declines due to failed central planning policies

Iran has faced significant economic challenges since the 1979 Revolution, marked by a shift in governance to a theocratic system under Shia Islam. The revolution forced Mohammad Reza Pahlavi into exile and led to fundamental changes in the nation's political and economic structure. The national constitution established three distinct economic sectors: public, cooperative, and private, with the public sector dominated by the state through nationalization of banks and significant control over foreign trade. This central planning has contributed to a declining GDP ranking, falling from the 18th largest economy in 1977 to 27th in 2017, while other nations like Turkey and South Korea have surged ahead economically. Since the revolution, Iran’s nominal GDP per capita growth has also lagged behind its comparators, highlighting the economic inefficiencies fostered by state control. Countries such as Turkey and South Korea, which had lower GDP per capita in 1980, have significantly outpaced Iran, illustrating the detrimental effects of central planning on economic vitality. The government's monopolistic grip over essential industries and its emphasis on control over the private sector have stifled entrepreneurship and innovation, leading to increased unemployment, particularly among the youth. In addition to these structural issues, Iran's economy has been further crippled by widespread corruption, price controls, and government subsidies, which have exacerbated inflation and raised community grievances against the ruling authorities. While many Iranian officials point to Western sanctions as the primary cause of the economic downturn, the underlying issues stemming from central planning and mismanagement also bear significant responsibility for the current predicament. The IRGC's ownership and management of various businesses have added another layer of complexity and inefficiency, restricting economic freedom and discouraging foreign investment. Concurrently, the state’s refusal to recognize the failures in its policies perpetuates a cycle of economic dysfunction, akin to 20th-century planned economies in Western nations. This distorted economic landscape challenges the Iranian government to recalibrate its strategies and policies to prioritize economic recovery and improve the living standards of its citizens.