Archive for February, 2011

Economics Behind Iran Unrest

Wednesday, February 16th, 2011

The protests in the Middle East that started in Tunisia and spread to Egypt are now sweeping into other countries, including Iran, where “Iranians confront economic hardships, including rising prices and unemployment, resembling those that helped spark uprisings in Egypt and Tunisia,” Bloomberg reports.

Fariborz Ghadar, director of Smeal’s Center for Global Business Studies, and Rob Sobhani, president of Caspian Energy Consulting, detail Iran’s economic challenges in a post on The Hill’s Congressional Blog:

The challenges facing Iran’s economy remain the same as three decades ago: corruption, mismanagement of Iran’s natural resources, lack of foreign investment, unemployment, brain drain, squeezing out the private sector, and, last but not least, putting ideology before national economic interests.

The late Ayatollah Khomeini’s claim that “economics is for donkeys” has been the fundamental challenge facing Iranians since the establishment of an Islamic Republic thirty years ago. By all economic measures, the people of Iran have fallen behind their neighbors and the world. Iran’s oil-rich neighbor Saudi Arabia has used the past three decades to cement itself as the world’s most important exporter of crude oil. Despite having the world’s second highest reserves of natural gas, Iran has fallen behind its small but agile neighbor Qatar in the quest to supply clean burning natural gas to regional, Asian and European markets. Non-oil exports have also suffered since Khomeini’s declaration. While rent-a-crowds encouraged by the regime have chanted “Death to America,” Turkey has taken in millions of tourists and last year generated over $20 billion in revenues, a figure exceeding all of Iran’s non-oil exports. Most tragic is Iran’s brain drain, which, according to the International Monetary Fund, is ranked No. 1 in the world. As thousands of Chinese, Israeli, Indian, and Arab students take the knowledge they have gained in the U.S. to their home countries and contribute to economic growth, Iranian students have been forced to flee their country into permanent exile. Even newly independent countries neighboring Iran, like Azerbaijan, have done better. Since its independence in 1992, Azerbaijan has attracted over $60 billion in foreign investments.

The sum total of these opportunity costs has created a crisis amidst Iran’s plentiful resources. The historic parallels with the former Soviet Union are telling. The collapse of the Soviet Union occurred, not because of, but despite plentiful resources. Indeed, in spite of taking over the U.S., the system devised by Moscow imploded and collapsed within a short few months.

Continue reading their Hill blog post to learn about Ghadar and Sobhani’s recommendations for U.S. policy toward Iran.

Tags: Economy, Ghadar, International Relations
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Resizing Government

Monday, February 7th, 2011

“Governors around the U.S. are proposing to balance their states’ budgets with a long list of cuts and almost no new taxes, reflecting a goal by politicians from both parties to erase deficits chiefly by shrinking government,” The Wall Street Journal reports. “Some state officials and lawmakers say they have a chance to reshape government in ways that might not have been politically palatable in years past.”

In his newsletter Early Indications, Smeal’s John Jordan writes: “The process of resizing government … needs to begin with a look at what governments can and need to do, as well as how they do it. Furthermore, there are tasks that at one time were essential, but technological obsolescence is slow to alter governments.”

Jordan proposes that there are at least five questions that need to be answered when talking about resizing government:

1. What must government do, and how can other entities help deliver necessary services?
2. What can government stop doing entirely?
3. What is the right level of organization?
4. How can interested parties self-organize?
5. How can government do what it needs to do, more efficiently?

Elaborating on the fifth question, Jordan writes that, when it comes to IT, government could take a few cues from the private sector:

IT in government remains a sore subject. President Obama’s chief information officer, Vivek Kundra, recently put forth a 25-step plan to reform federal IT management. Many of the items are broad and seemingly self-evident to anyone familiar with industry (“consolidate data centers” and “develop a strategy for shared services” for instance). The fact is, however, that industry does not follow federal acquisition or implementation practices; getting federal IT to perform at a reasonable fraction of an Amazon or FedEx would be a massive achievement. Many of the most notable IT project failures of the past decade are government implementations: systems development disasters at the U.S. Census and the FBI are prime examples of the performance gap.

Compared to customer service in travel, banking, shopping, or information businesses (iTunes, anyone?), finding even basic information on most government websites can be painful. Transparency can be difficult to track down. Control of bills passing through legislation is a key perquisite of power, and holding up the process with committee hearings that happen very slowly and/or erratically is common, so clear, open calendars are not always the rule. Like legislatures, regulatory bodies can be opaque, in that budget and headcount information is typically difficult to obtain, unlike the information readily available in a private company’s annual report.

If information can be hard to find, the state of on-line transactions is even more dismal: compare getting a fishing license or renewing other permits to checking in for an airplane flight. While efficient government looks much better to citizens on the outside than to gainfully employed government workers on the inside of slow-moving bureaucracies with no incentive to improve customer service, perhaps the current crisis can provide the impetus for real change to commence. In a sector that lags private industry by many performance metrics, a combination of new tools and more focused motivation has the promise to improve service, cut costs, increase accountability, and enhance security.

Tags: Economy, Jordan, Politics, Technology
Posted in News | 10 Comments