Around twenty years ago, Eastern Europe witnessed tremendous changes to its political and economic structure as the Berlin Wall fell, autocratic rule crumbled and market economics took hold. There have been many theories proposed as to the cause of these profound changes, from the introduction of MTV and the desire to frequent shopping malls to the need for the recognition of thymos. But it is generally accepted that economic mismanagement in these heavily statist economies played a major role in engendering change; less ‘free’ forms of rule, while rarely espoused as an ideal, can often be tolerated – if not indefinitely – if enough financial sweeteners and a functioning economy are provided in lieu of greater openness.
It is in this context which the current price increases for many staple items in Iran appears surprising. Farnaz Fassihi‘s piece in this weekend’s Wall Street Journal quotes figures from the IRNA, the Islamic Republic News Agency, detailing several eye-watering cost hikes, including the following:
1. A 438% increase in the price of household gas;
2. A 300% increase in the per litre price of petrol;
3. An 837% increase in the price of truck diesel; and
4. A 233% increase in the price of lavash flatbread.
These increases – introduced overnight on 20th December 2010 – are part of an officially-termed Smart Subsidy Plan which envisages the phasing out of government subsidies – until now some of the most generous in the region – on the cost of energy and basic good items over a five-year period. The Iranian government estimates that eliminating these will save $100bn annually, but in a country which in 2009 entered the bottom ten nations in the Transparency International Corruption Perception Index and in which unemployment and inflation are already significant problems, this program does not seem to be the most obvious way of encouraging loyalty to the existing system.
With many other countries in the Middle East and North Africa – Saudi Arabia and Egypt are particularly glaring examples – facing similar pressures to rein in gargantuan government programs which suppress the price of food and fuel, and with the Jasmine Revolution having bankrupted the idea that regimes in the region are immovable, Tunis might not yet be the new Berlin, but don’t rule the prospect out entirely.
Mediolana 