A Ramezani
15 October, Al-Monitor
Social justice is not merely about distributing cash handouts among people, as the Iranian government has done under its subsidy reforms since 2010, but it means that authorities should ensure that every citizen fulfills his or her societal role and receives what is due from society. Even if one assumes that the defective practices in Iran — where handouts are given to most of the country's 78 million citizens — have brought about positive consequences for the vulnerable, no academic study has been conducted on the issue to confirm this assumption.
In the past couple of years, the administration of President Hassan Rouhani has been complaining that the controversial subsidy program has hurt the Iranian economy, costing the government 1.9 quadrillion rials ($54.8 billion) since its implementation. The cash payments amount to 455,000 rials ($15) per person per month. While the sum may appear insignificant, it is particularly welcomed by large families in the provinces and the working class districts of the capital, Tehran. For many members of these social classes, average monthly salaries run around 10 million rials ($330) or less, meaning the subsidy payments sometimes constitute a major portion of incomes. Many believe that despite the cash payments, a just distribution of wealth has yet to be secured. Liberal economists are urging the government to be brave enough to abandon the program, while even conservative lawmakers agree that it needs to be revised. Indeed, on Sept. 21 a group of parliament members introduced a double emergency motion to encourage the Rouhani administration to cut the cash handouts in a phased manner by the end of the next Iranian fiscal year, which ends on March 20, 2017. However, they abandoned the proposal under rising pressure from hard-liners.
The Rouhani administration and the parliament both seem to have come to the conclusion that the program is too costly to keep afloat. Yet, neither wants to face the political consequences of an actual decision on this matter. As key parliamentary elections approach, one cannot expect the government to unveil a clear-cut plan on the issue before February, when the vote is scheduled to be held. Indeed, observers say the centrist president could receive a crushing blow if he reveals a possible plan to cut cash subsidies, given the administration’s shortage of influence over the media. The state broadcaster as well as Friday prayer leaders and dozens of newspapers and websites, all run by rival groups, would likely grab the opportunity to launch attacks against the administration if it announces that a plan is being considered to cut the cash handouts. Yet, some economists still believe that the president should finally make a tough decision and face the political and social consequences.
Prominent economist Mousa Ghaninejad has made a guesstimate that despite the political limitations, the administration will halt monthly payments by the end of this fiscal year, which ends March 19 — soon after the parliamentary elections. He argues that if moderates and pro-reform candidates win the elections, the administration will do the job with more confidence. “In that case, only the poor listed by the two main charities Imam Khomeini Relief Foundation and State Welfare Organization will remain eligible to receive the handouts,” Ghaninejad told the economic weekly Tejarat-e Farda.
Some other economists, however, believe that the Rouhani administration is really piling on the agony, as the budget allocated for the program is considered tiny when compared with 2010, when the previous government had to pay higher energy subsidies. Al-Monitor contributor Djavad Salehi-Esfahani, a US-educated economist, said in a recent interview that the government can still afford to pay cash to every citizen, warning against any rush in cutting the handouts. He said many families are still desperately in need of the monthly payments.
Thousands of families living in rural areas might be unable to survive should the cash subsidies be abruptly cut. Many carpet weavers, for instance, who live in remote villages, have stopped or cut back on weaving in recent years because they were paid too little by their employers, one rug market expert told Al-Monitor. “Carpet weavers are paid 40-50 rials per node. Given the 3,000 nodes that a professional worker may weave on average per day, a worker must work almost every day throughout the year to make a living. With 455,000 rials to be paid now to each family member, life is easier to enjoy,” Rozita Aliha, an inspector of Tehran Carpet Weavers Union, told Al-Monitor.
To avoid bringing harm to vulnerable populations, both of the above-mentioned economists suggest that the government halt a lengthy struggle to identify those who are well off. Instead, it can use the charities’ lists of the poor to make the program more just. About 10-12 million people are reported to be living below the poverty line in Iran. Almost all economists, regardless of their political and economic affiliations, are urging the government to maintain monthly cash payments to these people. This could be a short-term solution to make a revision to the subsidy program in a way that does less harm to ordinary citizens.In the longer term, however, the government should take more serious measures.
The first and foremost step that should be taken is the creation of an organized and integrated online database that provides the government with a mechanism to have access to the financial information and status of citizens, including that of the rich. This could end up in an optimal taxation system, with a progressive consumption tax. It could also mean that the government should consider planning a mechanism to tax energy consumers — another way to bring Iran ever closer to securing social justice for all of its citizens.
