Rising Economic Inequality in Iran

The 1979 Islamic Revolution promised a more equitable distribution of Iran's oil wealth to the poor. Throughout the revolution, Ayatollah Ruhollah Khomeini inspired many people at home and abroad with his calls for social justice. However more than thirty years later, the Islamic socialist dream is yet to be realized. Although economist Salehi-Isfahan (2006) finds that the Islamic Republic has most certainly improved circumstances for the rural and urban poor, inequality in Iran today is still rife, perhaps even rivaling the injustices of the United States. The below article provides a snapshot of those Iranians with access to financial resources, and the disgusting and irresponsible ways in which they spend their money.

Iran’s Rich Eat Ice Cream Covered in Gold as Poor Struggle to Survive

By Thomas Erdbrink
The Washington Post
August 5 2011

TEHRAN — Gold-flecked ice cream wasn’t part of the picture that Shiite Muslim clerics painted during the Iranian Revolution, when they promised to lift the poor by distributing the country’s vast oil income equally across society.

But more than three decades later, record oil profits have brought in billions, and some people here are enjoying that decadent dessert. The trouble is, it’s just a small group of wealthy Iranians. Despite the promises of the revolution, many here say the gap between rich and poor has never seemed bigger.

Iran’s new wealthy class has succeeded in tapping the opportunities provided by a vast domestic market, sometimes aided by corruption and erratic government policies. It includes children of people with close connections to some of Iran’s rulers, as well as families of factory owners and those who managed to get huge loans from state banks at low interest rates. The trickling down of the oil windfall — nearly $500 billion over the past five years — has also played a central role in establishing this small group that is visibly enjoying its profits.

Both supporters and critics of President Mahmoud Ahmadinejad say some of his economic policies designed to counter inequality are actually making things worse for many. And although some statistics show the gap between the Islamic Republic’s rich and poor has been stable over time, scenes of the rich flaunting their wealth have left many Iranians complaining.

The new wealthy are buying Porsches, getting caviar delivered to late-night parties, and eating $250 ice creams covered in edible gold at what’s billed as the highest rotating restaurant in the world.

From the top of Tehran’s 1,427-foot-high Milad Tower, Iran’s poor are reduced to tiny dots, swarming in the streets below.

“We provide a calm and luxurious atmosphere, away from Tehran’s daily problems,” said Ahmad Talaee, one of the owners of the Crown restaurant, as he received guests in the VIP section, with room for nearly 300 to enjoy $280 fixed-price menus, golden ice cream not included.

Construction workers in worn-out shoes waited in the hallway one recent afternoon to make final fixes at the restaurant, which opened in June, as a young couple in designer clothes fed each other shrimp flown in from the Persian Gulf. “As you can see,” the owner said, “we are re-creating the fairy tales of the legendary stories of ‘1,001 Nights’ right here in Tehran.”

But that ritzy lifestyle, set against a backdrop of increasing economic hardship for millions of ordinary Iranians, is leading to open criticism.

People are writing open letters complaining about the rise in inequality. Influential conservative blogger Amir Hossein Sabeti wrote last month that the shift in the way Iranians conduct themselves in public, increasingly ignoring the soberness that the revolution prescribed, is a bigger threat to Iran’s ideology than the United States or Israel.

“How can we discuss decency, simplicity and support for the oppressed when we have this culture of ostentatiously showing off wealth?” he asked. “Woe unto us the day that our policies stop supporting the needy, but support the wealthy,” he wrote, quoting famous words from the late founder of the Islamic Republic, Ayatollah Ruhollah Khomeini.

The popular resentment over inequality has a strong political dimension in Iran. During his two election campaigns, Ahmadinejad attacked a group influential clerics connected to former president Ali Akbar Hashemi Rafsanjani, accusing them of using their positions to accumulate vast wealth. But some of his closest aides are also accused of corruption. The public attacks have left the impression that many who lead the country have been unable to avoid temptations to tap the vast oil wealth for personal use.

Iranians’ sense that they had been left out of the oil boom was a key factor in the downfall of Western-backed Shah Mohammad Reza Pahlavi, experts say.

“Anger over inequality had been the main motivation for people to join the 1979 revolution,” said Hossein Raghfar, an economist who recently quit his post as an adviser to Ahmadinejad’s government because, he said, he disagreed with its policies. “But after the dust settled down, we quickly witnessed a marriage of power and wealth in Iran. Now we are no different from the United States.”

Although Ahmadinejad declared recently that inequality is on the decline, Raghfar disputed government statistics. He also stressed that, particularly in a society so strongly based on ideology, perception matters a lot. Reports that some 2.5 million children are working rather than attending school, and, he said, even an increase in legal kidney sales — along with a recent price drop, from $10,000 to $2,000, because so many people are selling their organs for cash — all give people the clear idea that they are sliding into poverty.

The financial pressures on Iranian society can be seen everywhere, he said. “There is a rise in crime, prostitution and an underground economy thriving on corruption,” Raghfar said. “Believe me, this is not what we expected when we joined the revolution.”

The way wealth is distributed in the Islamic Republic is a growing concern for Iranian leaders. In a keynote speech during Iran’s New Year ceremonies in March, Supreme Leader Ayatollah Ali Khamenei urged officials to act, saying the disparities were intolerable and not accepted by Islam.

Ahmadinejad’s 2005 campaign promise to establish ‘social justice’ was one of the main reasons that Khamenei said he supported his candidacy. But now some of the president’s supporters say that many of his policies meant to redistribute wealth have had adverse effects.

In December, Ahmadinejad implemented a radical overhaul of the way state subsidies are handed out. By directly giving the money to the poor, he said, justice would be established. At the same time, however, prices of food and utilities have been allowed to rise to market levels, at times tripling or more.

Now, more than 60 million of Iran’s 70 million citizens receive monthly handouts of $40, while inflation has risen 26 percent compared with the same period last year, according to figures released in July by the Iranian Central Bank.

Although the scheme did not lead to the popular unrest that many predicted, its long- term consequences are not yet clear. But plenty of Iranians are unhappy.

Several state-run newspapers printed a rare open letter in June from a housewife from a remote province who said she could no longer afford to feed her family.

Masoumeh Kamali said she voted for Ahmadinejad to help him reduce inequality. “But now,” she wrote, “meat has gotten so expensive that we must banish it from our lives. Mr. President, the increased prices have broken the backs of the people.”

The official Jomhuri-e Eslami newspaper followed with an editorial declaring that Iranians “are tired of false promises, of the cost of living, poverty, unemployment and injustice.”

At the Milad Tower, ordinary Iranians can buy $20 tickets to ride an elevator to the main observatory, with dramatic views of the capital, and, through tinted double glass, a close-up of the restaurant’s VIP section.

Inside, the expensive menu was a source of pride. “We work hard here,” said Talaee, as he asked a waiter to describe the ice cream, which also includes edible silver and caviar. “People have the right to do what they want with their money. That has nothing to do with politics.”