Cutting subsidies

The solution neither for production nor for distribution

Introduction

The government gives some subsidies to people for more welfare and equality in the society and it is something which is doing for many years in Iran. Of course, these subsidies are given indirectly to people and they are mainly in sector of energy and for importing petroleum.

Now, the government says all people can give these subsidies even rich people but these must be just for poor people. They insist that they want to cut these and pay money obtained from this cutting to poor people directly and by this way there would be more equality in the society. They say they want to reform the economy of the country and cutting subsidies is most important reform.

Why do they insist on this reform while it causes high inflation in the society? Don't they know the inflation has a bad effect on poor people? Don't they know the inflation increases social inequality?

Making decision on this issue is difficult and all last administration of Iran couldn't do it because this decision is difficult from different aspects. First, doing it and second, its results.

Possibility and effects

In my opinion, this plan cannot be done correctly and doesn't have any effective result. Changing economic variable has political, social and cultural results and it is a risk. This risk would double while there is no suitable situation and time for it.

This plan cannot be done correctly because among decision makers there is no similar idea. Perhaps there is an apparent consensus for different reasons among them. If this consensus couldn't be successful for any reason (that it can't be successful), it leads to profound differences.

Doing this plan needs to have correct information, real figures and facts that unfortunately it isn't so. When there is lack of this correct inform, making decision is unreasonable and unpractical.

Moreover, the situation is not suitable to do the plan in economic, political, cultural and social terms

Iran's economy doesn't have necessary stability. Then, how is it possible to manipulate people's every day economy (with such considerable dimensions)?

Many of Iranians also don't have enough salary and appropriate work. In a country where every business is done by the Mafia, it is possible to forget this plan.

Maybe decision makers say that they want to demolish some parts of the structure which are controlled by the Mafia and they want to create more equality. It can't be forgotten that we have seen during some years ago that many plans were created for low classes of society, but in practice, they have withdrawn in benefit of the ruling structure. Even they have fattened the ruling structure.

Moreover, Iran has many problems in productive sector. Also decision makers argue that the plan can help production of the society. This plan cannot help the production of the country because the solution of the production is something else. The production of Iran has a lot of problems such as lack of investment, no equality and correct law, irregular importing and not being supported by government and the most important problem is that the Mafia of the country don't like and let that the production increases because their benefits are in other parts. Growth of the production can endanger their benefits that have been obtained through illegal ways.

This plan increases the inflation and the inflation always is harmful for the poor class and is beneficial for rich people. The inflation which will come into existence is so much that it can't be compensated with a little money which will be paid to the poor people. The money is so little that people can't live with ruinous expenditures. It is clear that in a country where there is no production and also no system of equitable distribution how the low class can live?

Who benefited and will benefit?

The treasury of government is empty. They want to cut subsidies in order to reach money. The government of Iran earned a lot of dollars for selling oil in some years ago, but it lost it because of domestic and international adventures. Now, this treasury is empty and money obtained from this reform can fill the empty treasury. Also a lot of these subsidies which are paid are especially in the energy sector. Iran imports petroleum. The government fears that sanctions against Iran have much effect on buying petroleum that's why they have to buy it at a price and pay a lot for it.

In addition, the government doesn't have any money for buying it. It wants to pay a small portion of these subsidies and evade for paying the rest of that. Then, people have to pay these costs and it is clear that the poor people can't pay and also have to live under pressure of the inflation that will come into existence by this plan. It is ridiculous that the plan is doing in the name of poor people and apparently for them.

It is interesting that the Mafia like and insist on this reform even some of them have suggested this reform. Why? If they lose in case of the reform, why they insist on this reform?

The society has both productive and distributive problems. The most important issue is that who benefits more now and who will benefit more?

I believe, neither now nor future, people don't and won't benefit? This reform is chimera for people who would suppose the economic revolution is happening for them. They don't know it is a nightmare and it embitters the people.

Hamid, Tehran July 28, 2010