Wednesday, July 1, 2009

How to Destroy An Economy, in Five Easy Steps

. Wednesday, July 1, 2009

From an excellent article by Laura Secor in the New Yorker (published in February, well before the election), profiling Iranian economist Mohammed Tabibian (who was "forced into retirement" for criticizing Ahmadinejad's economic policies):

The current President, Mahmoud Ahmadinejad, who was elected in 2005 on a promise to distribute Iran’s oil wealth downward, has shrugged off expert economic advice in favor of grandiose gestures toward the poor. Upon taking office, he promiscuously handed out grants and subsidies; when these were not approved by the state budget office, he simply ordered the banks to issue more currency. He injected billions in oil revenues directly into the economy, dipping into the country’s savings to do so. Liquidity increased by nearly forty per cent in the space of a year. Iranians, lacking incentives for investment, used this cash to buy imports, which buried local industries and sent prices soaring. Already on the rise worldwide, inflation in Iran skyrocketed. Within a year of Ahmadinejad’s election, the inflation rate was the fourth highest in the world, after Zimbabwe, Uzbekistan, and Burma; by the summer of 2008, it topped twenty-eight per cent. Meanwhile, Ahmadinejad slashed interest rates, a move that encouraged lending, pushed the country’s fragile banking sector to the edge of ruin, and contributed to a surreal housing bubble in Iran’s cities. For each of the past two years in Tehran, real-estate prices have more than doubled.

It's never a good thing to have your economic policies mentioned in the breath as Robert Mugabe's.


How to Destroy An Economy, in Five Easy Steps
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