March 7, 2008
On March 4, the Los Angeles Times reported the UN Security Council approved imposing a third set of economic sanctions against Iran in response to controversy over its nuclear program.
I shall address the unethical and counterproductive nature of the sanctions at the end of this article. First, while highlighting Iran’s current economic problems, I want to turn readers’ attention to a less-noticed and internal source of its economic woes: the bonyads.
…used in Islam in the meaning of holding certain property and preserving it for the confined benefit of certain philanthropy and prohibiting any use or disposition of it outside that specific objective. This definition accords perpetuity to waqf, i.e., it applies to non-perishable property whose benefit can be extracted without consuming the property itself. Therefore waqf widely relates to land and buildings. However, there are waqf of books, agricultural machinery, cattle, shares and stocks and cash money.
Historically waqfs (awqaf in Arabic) were private financial institutions that sustained an entire class of Muslim religious jurists. These jurists, who were the chief interpreters of Islamic law, acted as both a very important check on State tyranny and non-state extremists. This same dynamic has extended to Iran and global Shi’ism. However, nowadays in much of the Muslim world, including Iran, the State controls the financial endowments, religious scholars and seminaries are under government control, Statist tyranny and non-state extremism are a political menace to Muslims, and Islam is suffering from a crisis of religious authority.
Setting aside issues of religious authority, let’s take a look at the bonyads and their effect on Iran’s modern politico-economic context. Unlike its historical role as separate from the State, bonyads after the 1979 Revolution became a mechanism of the regime, jettisoning much of its civil society role. Although bonyads continue much of their traditional social support services, their other non-traditional activities and new relationship vis-á-vis the State resulted in some severely detrimental effects on the Iranian people.
According to Forbes reporter Paul Klebnikov,
…for a decade or so [after the Revolution], the foundations shelled out money to build low-income housing and health clinics. But since Khomeini’s death in 1989 they have increasingly forsaken their social welfare functions for straightforward commercial activities.
These bonyads, which have strong political connections to the regime, use their leverage to escape transparency (a problem within the larger Iranian economy), exempt themselves of taxes that affect other businesses and crowd out other private sector investment and competition. As Dr. Abbas Bakhtiar, a management consultant and Iranian economics researcher notes:
They are involved in everything from vast Soybean and cotton fields to hotels to soft drinks to auto-manufacturing to shipping lines to….. These foundations represent vast economic empires that are neither taxed nor are directly under government control.
It is unclear how much impact they have on the economy, however estimates on much these foundations consume from Iran’s total GDP range conservatively from 10% to as high as 40%. Rather than fostering healthy competition, they hinder it, reinforcing a floundering hyper-Statist economy that encourages a costly “brain drain”, continues inefficient and poor long-term business practices and fails to efficiently exploit its important oil resources.
Yet, as bad as this is, the problems with the bonyads are not only economic, they’re also political. People connected to these organizations are also the same people who are involved in, and help fund, some of the most hard line elements within Iranian State, like the Revolutionary Guard. Entities like the Guard are responsible for crackdowns on independent media and human rights activists and not surprisingly have a strong financial interest maintaining the Western boycott against Iran. Less trade and business competition ultimately means the thuggish Guard and their ilk can maintain the political status quo by continuing to pull many of Iran’s economic strings.
All of this brings me to the concluding analysis of my blog. While some analysts made oddly tout greater sanctions as a means of enacting Iranian political via an outside imposed “regime change”, a cursory examination of bonyads’ role Iranian politics (and the larger issue relationship between its hyper-Statist economics and its authoritarian policies) clearly demonstrates this would be counterproductive. Sanctions only further entrench authoritarian elements while harming ordinary Iranians. If the United States and other Western nations are truly interested advancing liberty in Iran, they should tone down their confrontational policies and instead engage them diplomatically and economically. Economic liberty is the best way to political liberty in Iran. The mullahs’ greatest fear is not the power of a bomb; it’s the power of the bourse.