WSJ: "Mr. Ahmadinejad Is Emerging as an Iranian Version of Venezuela's Hugo Chavez"

The Wall Street Journal agrees with me on one thing: "Mr. Ahmadinejad is emerging as an Iranian version of Venezuela's Hugo Chavez" (Bill Spindle, "Burning Oil -- Behind Rise of Iran's President: A Populist Economic Agenda; Ahmadinejad Wins Power Promising Lavish Outlays; Inflation Is a Major Worry; Crunch Time at Biscuit Factory," Wall Street Journal, Eastern ed., 22 June 2006, A.1) . . . except, of course, the WSJ, as well as Iranian neoliberals, doesn't like the fiscal and monetary policies of the Ahmadinejad administration:

In recent weeks, he has proposed a $4 billion national school-renovation program and has raised not only salaries for workers in Iran's vast, government-controlled industrial sector but also the minimum wage for everyone else. He doubled government grants for newlyweds and forced banks to lower interest rates by several percentage points.

Mr. Ahmadinejad is emerging as an Iranian version of Venezuela's Hugo Chavez: a pugnacious politician, buoyed by oil money, whose anti-elite message and defiance of the West is causing his popularity to soar. Mr. Ahmadinejad isn't nearly as powerful as Iran's Supreme Leader, Ayatollah Ali Khamenei. But his policies, which interrupt Iran's tentative stabs at economic liberalization, have helped him wield more influence than many thought possible for an Iranian president.

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In the late 1990s, under a series of reform-minded governments, Iran tried to emerge from the economic and political isolation that followed the Islamic revolution and eight years of war with Iraq. In 2001, the government adopted a 20-year plan to boost imports and exports by lowering trade barriers. The ultimate goal was to join the World Trade Organization.

One key to that plan was diversifying an economy heavily dependent on oil revenues. That means implementing a long list of free-market recommendations, including freeing up labor markets and phasing out subsidies.

Mr. Ahmadinejad's policies are rapidly reversing that tentative economic liberalization. In addition to his spending plans, his government has spurned foreign investment and recently raised tariffs on mobile-phone handsets by 60%. Another plan: doling out shares -- he calls them "Justice Shares" -- of government-controlled companies to the poor.

In Ghavart, a conservative, working-class town of 9,000 near the Jey industrial center, Mr. Ahmadinejad's pay raises and subsidies have provided relief -- for some. Hamid Kachoui, a grocer, says he's noticed customers buying extra chicken or meat recently.

"It's much better. People don't have to scrape by," said Mr. Kachoui, 18 years old, standing by a storefront stall packed with rice, bread and other staples. Many food basics are heavily subsidized by Iran's government, using oil money to bridge the gap with international market prices.

Mr. Kachoui credits the improvement to Mr. Ahmadinejad, whom he says nearly everyone in the village supported in last year's election. "With President Ahmadinejad, things will get much better," he says.

Down the road in Jey's industrial center, private biscuit maker Esfahan Farkhondeh Co. has been thrown into a crisis. Last year, the 14-year-old company produced 6,500 tons of biscuits, the kind served with tea and coffee at almost every social gathering in Iran. A few months ago, new laws pushed up the minimum salary for most of the industrial bakery's workers by nearly 50%. The others got 22% raises, according to Mohammed Reza Vaez Shoushtari, an owner and manager.

Meanwhile, the government lowered subsidies on sugar and flour bought by industrial bakers, a nod to Iran's designs on joining the WTO. "Biscuits are not a necessity for people," says Mr. Shoushtari, suggesting a reason why his industry was singled out. The government left subsidies for retail consumers unchanged.

The decision pushed up the price of the two main ingredients in the company's biscuits. The company's bank tightened loan requirements after government-mandated interest-rate cuts and now won't extend additional money to keep the company operating.

Pinched, the biscuit concern informed buyers it would raise prices by 15%. They immediately cancelled about 80% of their orders, Mr. Shoushtari says. He figured most were delaying purchases to see if the government will reverse its decision on the subsidies. Without the ability to fire workers, he plans to wait, hoping the business climate stabilizes.

"When the president changes, the country always becomes a bit chaotic," he says.

For the year that ended March, 2006, Iran is projected to have earned about $49 billion selling oil and natural gas, more than double its take of four years ago, primarily because of rising prices. Much of the president's spending is coming from Iran's Oil Stabilization Fund, which is supposed to pay for long-term infrastructure projects or to buoy the country if oil revenues falter. Iran has dipped into the fund almost every year to fill holes in the government budget. Last year, it spent $7.7 billion from the fund, much of it for government subsidies on basic products, from wheat to gasoline.

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Few things appealed more to Iranian voters, especially the working poor, than Mr. Ahmadinejad's promise to "put the oil revenue on the dinner table of every Iranian." Since being elected, he's made frequent trips to Iranian provinces -- political barnstorming previously unheard of in Iran's aloof theocracy. He encourages supporters to write with their requests and has promised funds for thousands of local projects.
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Indeed, Mr. Ahmadinejad's standing among the poor and working class has allowed him to challenge domestic foes, including many in the clerical establishment, throwing Iran's political establishment off balance in ways few expected. With 17-hour workdays and a reputation for rectitude, Mr. Ahmadinejad has refashioned a post with few formal powers. The parliament, more representative of Iran's conservative establishment, has tried to parry Mr. Ahmadinejad's activism, rejecting three of his candidates for oil minister as well as nominees for other important economic portfolios.

But he's stunned Tehran's political elite by winning many battles. He has replaced several senior clergymen in the Ministry of Culture with non-clerical allies, apparently with the blessing of the Ayatollah Khamenei, a senior cleric himself. While less important than the Supreme Leader, Iran's president holds considerable influence over economic and social policies through his ability to nominate the heads of government ministries. He also appoints the head of the central bank.

To outsiders trying to penetrate Iran's opaque political system, it's still unclear whether the president remains under the control of the clerical establishment or whether this is a genuine bid for power.

"Everybody's too busy just trying to catch up with him," says Nasser Hadian, a political science professor at Tehran University and childhood schoolmate of Mr. Ahmadinejad. Although he disagrees with many of the president's policies, he grudgingly admires the way he has shaken up Iran's political culture. "He's challenging the entire spectrum of society, from the super-secular to the super-religious." (Spindle, 22 June 2006)