Amirreza Angaji has analyzed the economic challenges of Iran and the delay in economic reforms. He examines why price reforms, especially the increase in gasoline prices, remain stalled for years and ultimately lead to shock therapy with greater social costs. This article, with an approach based on new political economy, analyzes the technical and social dimensions of this issue.
The Necessity of Economic Reforms and the Challenges of Cost Distribution
In a situation where the Iranian economy faces financial imbalances, budget deficits, and energy shortages, implementing economic reforms seems inevitable. However, reaching an agreement on how to distribute the costs of reforms among social and political groups is one of the main challenges. In this regard, the government seeks to secure its necessary resources through tax increases or subsidy reductions, each of which has its own specific distributional consequences.
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Political Bargaining and the Protracted War Among Groups
In this context, a political bargaining issue arises. All groups are aware of the necessity of reform, but none want to bear the main cost. This conflict between the necessity of reform and the disagreement over cost distribution leads to delays in economic stabilization. In fact, this situation can be likened to a protracted war among political groups, each trying to resist longer so that the other group is discouraged from continuing their resistance.
On the other hand, each period of delay in reforms incurs costs for the economy. The budget deficit and energy imbalance are exacerbated, and the costs resulting from the non-implementation of reforms increase. Therefore, this balance is shaped by the interaction of two forces: the increasing cost of delay versus the potential benefit of avoiding the cost of reform.
The delay in economic reforms also has its complexities due to the ignorance of the behavior of other groups. Each group does not know how much the other parties can bear the costs of continuing the crisis. For this reason, decision-making about continuing resistance is based on expectations and beliefs about the behavior of other groups.
As a result, the delay in economic reforms becomes a complex process in which political and social actors gradually acquire information about each other's characteristics. This information, in turn, influences the decisions of the groups and may lead to either surrender or further resistance.
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