Tyranny of numbers

Khodadad Farmanfarmaian, the chief architect of Iran’s economic miracle in the 1960s, passed away in London on December 16, 2015 at the age of 87. He was one of the Shah’s few good men, and helped launch Iran’s “decade of economic miracle” in the 1960s, before 9% annual growth rates became commonplace in Asia. He held key positions before the revolution as the Governor of the Central Bank and the head of the Plan Organization. In 1973, he broke from the Shah, whom he described as having “no real understanding of economic development,” over the ill-advised and ill-fated upward revision of the Fifth Plan in 1974.

I did not know Farmanfarmaian closely, but I admired him as a professional economist and development practitioner. He set high standards for integrity in public service and should be a role model for economists who are interested in using public policy to improve the life of ordinary people in Iran. He also had a critical impact on my career and is the reason I became an economist.

I first met Farmanfarmaian in the summer of 1967 when I, a fresh high school graduate, competed for the prestigious Central Bank scholarship to study economics in England. From several hundred candidates who took the written exam, a select group of about 30, including myself, were invited for an interview. As the senior vice present of the Central Bank, Farmanfarmaian chaired the formidable committee of about a dozen members who interviewed and picked the seven lucky candidates. Among other things, the Bank was keen to choose those students who were most likely to return and serve the Bank (for twice the length of the scholarship). Parents of grantees would offer real estate property as collateral to ensure they would return.

During the interview, Farmanfarmaian, sitting at the head of a large oval table, surprised me with a question about marriage! Might I marry someone abroad and therefore not return to Iran? I tried to address his concern the best I could, mainly saying how cultural differences doomed marriage to “foreign women.” Farmanfarmaian let me finish my high-school-composition speech and then said, “I disagree! I am happily married to a `foreign woman!’” Caught off guard, I thought “There goes my education in England,” and decided to enroll at Tehran University to become an engineer.

But I was wrong. Not only did I pass the examinations, I learned later that Farmanfarmaian had liked my interview. Two months later, when I failed to come up with the necessary collateral for the scholarship (we lived in government housing so my parents did not own any property) and given up on studying abroad once again, the personnel department of the Bank called to tell me that Farmanfarmaian directed them to let me go without the required collateral. I think he did this out of a belief that, as Mehdi Samii put it to me, Iran needed highly trained policy analysts that hailed from the middle class. Modern economics, then as now, was taught at the graduate level only in the West. Up to that point, only the children of the upper class could take advantage of such education, so the Bank subsidized it.

Early in November of 1967, nearly two months after school had started, I took off for London.

Years later, after the revolution, I had the good fortune of seeing Farmanfarmaian several times and became very fond of the man who played a key role in my becoming an economist. I was not always as grateful as I am now for his help. Early in my economics education, at the University of London, I hated the subject that the bank had forced on me (the decision to study economics was the Bank’s, but the decision to take the scholarship was mine!). Despite this, London was a fun place in the late 1960s, so the sacrifice of giving up engineering seemed well worth it. My thinking about economics changed radically half way through my PhD studies at Harvard, when I fell in love with the subject.

In the early 1980s, as part of my research on the pre-revolution credit crisis (the results of which were published in 1989), I travelled to Cambridge, MA to meet Farmanfarmaian for the first time since the 1967 interview. He was visiting Harvard at the time, having left Iran after the revolution. To get the appointment with him, I mentioned among my credentials the Central Bank scholarship, my Harvard PhD, and my job at Penn, so when I arrived at his apartment door at 1010 Memorial Drive he knew who I was. He opened the door, standing tall next to his wife, Joanna, brandishing a warm smile. While still at the doorway, he turned to his wife and said something that has stuck in my mind: “Everything I did in Iran has gone to naught; he is all that remains of my efforts!” His reference to me was, of course, to all Bank scholarship students. Years later in a conversation with me he mentioned the Central Bank scholarship program as one of the three accomplishments he was most proud (I forget what the other two were).

I should have corrected him right then, reminding him of his great work to promote economic development in Iran, but I think I was too much in awe of meeting him for the first time after the 1967 interview.  I am happy now that I did so later. Last summer, when I heard of his illness, I sent him an email with this paragraph:

“As you know, I have great admiration and utmost respect for you, not only as someone who influenced my life (and that of many other Bank [scholarship] students), but also as a role model for future Iranian economists.  Your professional integrity, great sense of purpose, and achievements are the standard by which we judge all policy makers that have come after you.  While you were in government, as brief as it was, you influenced the course of economic development and with it the lives of millions in Iran.”

Growing up in Neishabour in the 1960s I was a beneficiary of his vision. In his memoires he talks about the critical importance in the late 1950s of extending the availability of clean piped water to smaller urban areas. With the government coffers empty, he and his team at the Plan Organization came up with a creative plan to help local governments to finance the project. While in high school, I recall our streets being dug up to lay the pipes.

The scholarship program he set up with Mehdi Samii has had a lasting influence on the economics profession in Iran, producing such well known economists as Hashem Pesaran, Esfandiar Maasoumi and Firouz Gahvari, now all living in the United States. But that initiative pales in comparison with his contributions to building basic infrastructure, which became the backbone of the 1960s economic miracle.

Once, about 10 years ago, I reached out to Farmanfarmaian and Mehdi Samii to invite them to an event organized by the Central Bank students to honor them. Unfortunately, neither was able to attend (Samii was too sick to travel and Farmanfarmaian excused himself noting unforeseen travel). Some 40 former students gathered in London in August 2006 to hear a poignant speech by Hassanali Mehran, a former governor of the Central Bank himself, honoring the two visionary leaders who made economics education at the highest level accessible to the children of middle class families.

Despite his accomplishments, Farmanfarmaian was a modest man. In responding to this invitation, before he realized he could not make the celebratory event in any case, he tried to dissuade me from organizing it. His reason was revealing. He said that he was unable to attend evening events because after he left work at 6 pm, he usually went straight home to attend to his wife, Joanna, who was not well, the same “foreign wife” he had mentioned in my bank scholarship interview some 40 years earlier. He lamented the fact that at 75 he had to work full time to earn a living. He was still working at 87 when he fell ill several months ago.