After the revelation of astronomical corruption in the field of tea imports by the “Dabash” agriculture and industry group, public opinion is under the influence of events and is seeking an answer to this fundamental question: how has such widespread corruption occurred and why is the culture of special privileges in Iran’s economy becoming more prevalent day by day?

While the Office of the President’s Inspectorate has stated in a statement: “The root of corruption and embezzlement in the import of tea in 1398 (2019-2020) goes back to a prominent company,” media reports show that this corruption has taken place over several years with the involvement of a wide network of managers employed in the Ministry of Agriculture and the Organization for Trade Development.

It is evident from these untold interpretations that once again the hands of government institutions and officials have been involved in this aspect of economic corruption, and such corruption could not have occurred without the involvement of the Ministry of Agriculture, Samt, Central Bank and Customs.

There is no doubt that in order to answer the main question of this report, one must first have a good understanding of the structure of Iran’s economy and properly analyze its functions. The main foundation of the economy in Iran and its specific role is a concept known in economics as “crony capitalism”. This term refers to a system in which the government, parliament, and private sector are in constant interaction with each other and form alliances to protect the interests of the members of this triangle, which is referred to as the “iron triangle of rent-seeking”.

Of course, the root of the formation of the rentier economy in Iran must be considered after the discovery and extraction of oil, which was successful in connecting this system to oil revenues; an economy whose main income is derived from the sale of natural resources. However, these resources were not used for economic development or the benefit of the people, but rather to preserve the interests of rentier groups in Iran, and with the extraction of oil, a new phase was taken. Some of the institutions that were formed in this production system were referred to as “extractive” institutions. These institutions are linked to a rentier structure and strive to preserve their interests and shape the administrative system, judiciary, banking system, parliament, and tax system in the country according to this production system. This system serves to preserve the interests of rentier groups and also sees its own survival in a mutually beneficial relationship that is supported by the government.

As previously mentioned, the three main components of this economic system in Iran are the government, parliament, and private sector. However, what we refer to as the private sector in Iran is not actually private, but rather a collection of commercial and financial capital owners who are present in this three-way interaction. Another topic that has been discussed in capitalist circles and has various models, which exist in all parts of the world (except in countries where public institutions provide the possibility of monitoring masses), is the important role of financial and commercial activities in this system. The United States also has a similar formula, although the formation of the American economy has been led by elite groups and banking activists, and after the 1970s when the Western economy was hit by a severe recession, the only areas that remained profitable in these economies were financial and commercial activities, and most industrial activities gradually moved out of these countries.

After the emergence of the neoliberalism movement, which gained momentum in the 1980s in America and England, this movement is gaining much more momentum. There is also a long history of these developments in Iran. The economy of Iran in the past century has been under the control of commercial capital; meaning that the owners of commercial capital, in their intentions and goals, become powerful and influential in decision-making structures such as parliament and governments, and find friends.

Historical Journey of Corruption in Iran

The historical background of corruption and rent in the Iranian economy dates back to two centuries ago. In the 13th century, Iranians used to import their goods such as gold, silver, and jewels, while in recent times, black gold and its rent have replaced yellow and white gold.

The first time the issue of corruption and the need to combat it was raised in Iran was 70 years ago, in the 1930s. During the implementation of the first development plan, which was a 7-year plan, there was so much waste and embezzlement that the officials at the time, just like today, had to address the issue and fight against corruption. A bill was passed in the parliament called “Where did you get it from?” According to this bill, many officials who had gained suspicious wealth during the implementation of the “7-year development plan” were required to be accountable. The next efforts to combat corruption were made during the prime ministership of Dr. Ali Amini in 1961. Corruption had become so rampant in society that the new prime minister made it a priority in his government’s agenda. Before the government was even established, a number of high-ranking military officials were arrested on charges of corruption and others were forced to retire. Throughout the

The decade of the 60s in the solar calendar was a time of revolution and establishment of the Islamic Republic. On the other hand, the sharp decline in oil prices led to a significant limitation and control of rent and corruption. The 70s in the solar calendar, which was adorned with a caricature of the so-called “economic adjustment” and economic liberalization, marked the beginning of a new era of rent-seeking and rent-taking in the Iranian economy.

After the end of the war, what has been praised and supported by technocrats and their affiliates as a free economy is actually a rent-seeking (monopolistic) economy that has hidden behind the mask of a free market economy in order to deceive society and justify itself. What is referred to as competitive development is actually rent-seeking development, and on the other hand, political, social, and economic monopolies have generally hindered the possibility of the emergence and growth of a free economy. In the 1970s and after, because oil rent did not provide enough benefits for the technocrats, under the guise of national development, state-owned and semi-state-owned industrial and economic sectors developed rapidly. “IDRO and IMIDRO” became the industrial and mining giants of the country. Government officials occupied the majority of positions on the boards of directors of economic enterprises. In the midst of this, the private sector was struggling to find its place. Under the guise of industrial growth, monopolistic markets

State; the big machine of distributing rent and status

Systemic corruption in the economy of Iran is not recent, but has existed since the beginning of development programs in the country. Since 1959, when a group known as the “Harvard Consultants” came to Iran at the request of the government to assist with development programs, the economic structure has been more or less the same as we see it now. One of the members of the Harvard Consultants, Richard Elliot Benedick, discusses the problems and challenges of Iran’s economy in his book “Industrial Financing in Iran.”

According to Benedict’s perspective, the government in Iran is nothing but a tool for the power of financial and commercial assets, and what is referred to as the “big machine of distributing status and rent” in Iran. Corruption, inequality, and one-sided distribution of power are the result of capitalist friendship. The issue that arises from this is that corruption becomes an inherent part of this system; an economic system in which natural resources are given to large institutions. In this economy, intergenerational resources – which belong to all generations and the future – only go into the pockets of a particular group, and this is the main source of inequality in Iran. Inequality has always been the source of all social evils; gross inequalities have played such a role throughout history and have been the main topic of discussion for all historians. Wherever there are social movements, the main goal is to fight against inequalities, and the corruption that arises from the functioning of the economic system becomes an inherent problem.

Benedict also points to another point and says, “In recent times, there has been a shift in consumption patterns towards the accumulation of large assets through imports and real estate. The main source of income in Iran is the distribution of oil rents. Production in Iran is not logical and imports are the source of wealth. Iranians allocate a portion of their income to importing luxury goods, European trips, and villa construction. Real estate has an advantage over industrial investment and investing in this sector is less risky in terms of economic and political fluctuations.” As an example, in the early years of the revolution, the 28 Mordad coup or even the occupation of Iran during World War I and II, we see that even a merchant is not executed, but industrial capitalists suffer serious damages. Benedict continues, “It is often said that land or real estate are the main attractors of capital. As long as there are easy profits, it is unlikely that industrial production will take place in Iran.”

Friendship Capital Functions

“I am grateful to you.”

This special economic system has several key functions; one of them is the central role of the bank in this system. For this reason, when oil revenues increase (similar to the situation in the ninth and tenth governments, which had the highest oil revenues in Iran’s history), we saw the creation of political blockades and the highest number of newspaper closures in the country during these eight years. The atmosphere became more closed and a type of unity was formed among different institutions such as the parliament, government, and judiciary, which supported specific policies. During this period, we have witnessed an unprecedented growth of financial institutions, although the groundwork for this was laid in previous years. In 1999, the discussion of granting licenses to private banks was approved. This crony economy distributes bank credits among its own friends, which allows some to achieve a hundred years’ worth of progress in one night. The outstanding debts of the banking sector are indicative of the growth of this sector in the ninth and tenth governments.

The second function of this system is to allocate exclusive and semi-exclusive opportunities. This division of points is done in a nepotistic manner, bringing unprecedented and immense incomes for a certain group.

The third action of this system is price manipulation, and they are only interested in increasing prices. In this system, a part of the media affiliated with the corrupt private sector constantly beat the drum for this. Some of the country’s newspapers and economic media are also part of this group; media that are created with dirty money and enter various sectors with the money they have. Now one of the discussions that is raised is the issue of increasing the price of gasoline and energy carriers again. At the same time, this system of decision-making, which was raised in 1389 during the Ahmadinejad government, which was supposed to distribute energy carriers fairly, at the same time increased the price of diesel needed by farmers by 360%. (4)

In the opposite direction, the economic system begins to give privileges to its relatives; in such a way that the gas that was sold to steel, cement, and petrochemical companies was priced at 3 cents. This gas was considered both a feed and a commodity. At the same time, the government sold this gas to Turkey for 20 cents, and this difference was a profit that was received as a rent. In February 2013, after two years and with numerous protests from a group, the parliament approved an increase in gas prices from 3 cents to 13 cents. As a result of this decision, the stock market collapsed because more than 50% of the profits from stock distribution in the Tehran Stock Exchange were related to petrochemical companies. This collapse happened because that profit was not the result of innovation, creativity, or efficiency, but rather the result of the difference between three and twenty cents. The stock market did not recover until the eleventh government was pressured enough

A cancer that cannot be treated with medication!

“The Islamic Republic system has been struggling with institutionalized corruption for decades. Corruption exists in the country and unfortunately has grown to reach some high-ranking officials. These statements are not from an ordinary person or even a university professor or journalist, but rather words that have been acknowledged by the former president and his first deputy. It is clear that these words carry the scent of incompetence and failure.”

The question that is being raised here is why, despite all the concerns about corruption, the government is so ineffective in fighting it? If we are a little realistic and look at successful experiences of fighting corruption in other countries, the answer to the above question is very simple. The incomprehensible and somewhat deliberate neglect of the root causes of corruption is the main reason for the current ineffective fight against corruption.

Imagine a disease where, due to the presence of cancer in the body, the person experiences fever, nausea, headaches, fatigue, and so on. Apart from cancer, which is the main cause of the disease, external symptoms like fever and headaches are all side effects of the disease and not the cause. If we only focus on reducing the pain with injections and painkillers, although it may have a positive effect in the short term, ignoring the root cause of the disease, which is cancer, and adopting a wrong treatment approach, it is possible for the patient to be sent to their death due to excessive use of local painkillers.

The current fight against corruption in Iran is exactly similar to the above example, while the root of corruption is the excessive size of the government (government in a general sense, not just the cabinet) and the lack of competition in the country’s economy, almost all the efforts and struggles against corruption are focused on harshly dealing with corrupt individuals.

In recent days, loud voices have been heard from officials, Friday prayer leaders, religious authorities, and some people, recommending harsh measures such as “therapeutic execution” against corrupt individuals. It is clear that there is no trace of the roots of corruption in their words. They do not ask themselves the very simple question of where the root of this volume of corruption lies. When the boiling sources of corruption are busy producing mass corruption, what important impact will imprisoning and executing corrupt individuals have? Similar to drug trafficking, which has a high profit in its cycle, traffickers are always willing to accept the risk of imprisonment and execution and not turn away from this high profit. Imprisoning and executing thousands of traffickers does not stop drug trafficking, therefore as long as there is rent in the economy, there will be corruption.

The roots of corruption and its treatment, contrary to the mistaken understanding of our officials and lawmakers, have a well-known cause and cure. However, due to our ignorance and incorrect understanding of the causes of corruption, and sometimes benefiting from the continuation of the current situation, effective measures to combat corruption have never been on the agenda. In other words, we have made a cognitive error in dealing with the issue of corruption and have focused on the victim instead of the cause of corruption. When the government controls more than 80% of the country’s economy, the private sector cannot become efficient and independent. When the economy is based on rent-seeking instead of competition, we should not expect anything other than the production of corruption from rent-seeking. For example, today’s non-competitive environment has led to an army of inspectors and auditors monitoring the distribution of fuel, cars, mobile phones, bread, tea, rice, medicine, and dozens of other goods. With the expansion of rents and the slipping of

Buttocks

There is no doubt that our country is suffering from deep and structural corruption that has expanded in its volume and scope. The problem of corruption is like cancer, which cannot be cured with temporary methods and short-term solutions, but rather requires deep and structural surgery.

Confronting corrupt individuals is a small part of the fight against corruption, and it is at the end of the corruption chain. However, by taking a small step in the process of fighting corruption, officials have consciously and unconsciously created the conditions for its “systematic” spread. Delaying surgery and allowing infection and corruption to spread within the government has only one reason: fear of structural surgery and the cost that comes with it, which benefits certain individuals. Reducing the size of the government and making the economy competitive are the main costs of fighting corruption. However, even in countries with small and competitive governments, the possibility of corruption is still likely. In addition to the aforementioned factors, the presence of free media and transparency, which can openly expose corruption without any restrictions, and an independent judiciary that punishes corrupt individuals regardless of their status, are the four exclusive tools for fighting corruption.

Unfortunately, there is no sign of a fundamental and systematic fight against corruption as it should be. Therefore, it is natural that the volume of corruption increases day by day. The government not only does not become smaller, but also day by day becomes more powerful in various forms, including the development and empowerment of government organizations, becoming richer, and the spirit of competition in the economy is also decreasing.

Despite its loud outcry, the current irrational fight against corruption not only fails to eliminate corruption, but also, by insisting on an unprincipled approach, leads to the spread of rampant corruption. If there is no fundamental change in this fight, corruption will become so deep-rooted that it will ultimately result in the collapse of the system.

Notes:

1- Special Inspection Announcement by the President/ Corruption Case of Tea Discovered by This Government, Tabnak Website, 12 December 2023.

2- One roof and two airs, Tomorrow’s Trade Weekly, 1 Dey 1397.

3- Industrial Financing Book in Iran, Harvard Consultants Group, Darayian Website, 2 Esfand 1395.

4- New prices of energy carriers announced, Radio Farda, 28 December 2010.

5- Structural corruption has built a parasitic economy, Etemad newspaper, 5 Shahrivar 1396.

6- Text of the President’s speech at the conference on improving administrative health, Presidency Information Center, 17 December 2014.