Debating the economy in Iran’s presidential election
One of the weakest aspects of Iran’s presidential election is fact checking for economic claims made by the candidates. For example, the other day candidate Gharazi seemed to imply that as Minister of Oil for the Rafsanjani government in the 1990s he was responsible for keeping the world price of oil high. He claimed that the world oil price dropped by about 50% when president Khatami replaced him by a reformer. It is a tall claim that a minister responsible for less than 5% of the world oil supply could have such a large influence on the global market.
Mr. Rezai made a similar exaggeration when he said the rial has lost two-thirds of its value since last year. True, in the free market for foreign exchange the rial fell by two-thirds last year, but prices have not tripled, as his remark implied. This is because imported goods account for only a proportion of consumer goods, and not all imports are bought with this rate.
But perhaps the prize for exaggeration goes to Mr. Aref, the reformist candidate, for claiming that 44% of Iranians are poor. If you assume that the 44% poverty rate also held for 2011, the last year for which Iran’s Statistical Center has released the raw data, it is easy to deduce the level of per capita expenditures (pce) that he has in mind as the poverty line. It is a whopping 61,500 rials per day (roughly $12 using the World Bank PPP rate of 5006 rials per USD for 2011). Unfortunately for Mr. Aref, the same poverty line implies a higher poverty rate for 2005 (47%), the last year of the reformist government in which he served as vice president.
Of course, these outcomes are not entirely the result of government policies, and Iran’s economy faces different challenges in 2011 than it did in 2005. But such cavalier use of data by politicians is not becoming for a country that claims to have reached a high level of scientific maturity and which wants to take its electoral process seriously.
The graph of the cumulative distribution functions of the pce for 2005 and 2011 also show that if we pick a lower poverty line, one more in line with international standards, of about $4, or 22,000 rials, we we notice a larger drop in poverty, from 7.1% to 4.3%. The cdf’s also show a decline in inequality. This is most likely the result of the cash transfer program administered under the Ahmadinejad government. Whether or not this was the best way to help the poor is another matter. I have been critical of his liberal import policy that hurt the Iranian economy during these very years, but that criticism is based on the poor losing jobs, not cash. I happen to believe that giving the poor work is much superior to giving them cash, but then that is a debate for another time.