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Tom Kirkman

Will Trump Finally Rid Iran Of 46 Years Of Dutch Disease?

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From the Financial Tribune, a non-governmental newspaper in Iran.

Amusing that this Iranian business broadsheet is hoping for Trump to fix Iran's oil curse.

Will Trump Finally Rid Iran Of 46 Years Of Dutch Disease?

The Dutch disease is when a government earns lots of easy foreign currency from oil exports and the economic and political disruption it causes to the country. Many believe the 1979 Revolution to be a result of a severe case of Dutch disease contracted by Iran in 1975.

Symptoms of the Dutch disease reemerged in Iran’s economy in 1984-85 when oil exports jumped to $50 billion. Yet again, between 2002 and 2012, the country fell for oil revenues hook, line and sinker. And the last time windfall gains of natural resources misled an Iranian government was after the JCPOA nuclear deal in 2015. The populist nature of political structures is believed to be the cause of this disease and that is not just exclusive to Iran. Economists show that when a country develops the Dutch disease, the traditional export sector (manufacturing and agriculture) gets dumped for cheap imports. In 1975, Petrodollars in effect wreaked havoc on all political and social structures of the country. Economically, massive inflation hit the country, creating an inequality substantial enough to lead to a national breakdown. The Islamic Revolution saved Iran’s economy, as there was no recovery within the rigged old economic system. Again between 2001 and 2012, the country was afflicted by the same old problem but thanks to the far bigger economy, it recovered from the shock in time and escaped a crash.

Governments’ access to oil resources makes them less dependable on tax revenues. They become distributors of oil revenues. They display an attitude of superiority and power toward people, as they play the role of a giver toward the people receiving the largesse, oil money paves the way for the involvement of the government in all sectors, becoming bigger but losing its policymaking capabilities. The oil revenues incites many producers to opt for easy ways to earn more by asking government for a cut from oil revenues that would ultimately lead to institutionalized rent-seeking behaviors (cronyism, corruption). A significant number of economic enterprises supplying goods or services in actuality owe their existence to the allowances they receive from oil money. Unrealistic public expectations about oil revenues is another negative impact of oil on the society. So much so that they believe that the government must deliver all goods or services at very low prices. The government’s failure to do so is usually blamed on its inefficiency and corruption. People then tend to ignore all services offered by the government. Such an exaggerated image often results in weak tax compliance and legitimization of tax evasion.

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Here is some background about the newspaper which wrote the article. 

Before posting unhinged TDS comments, please read the About Us section, for some perspective:

About Financial Tribune

Financial Tribune rose to the demand of economic wisdom in 2014 after having pooled minds for a year on how best to help rebuild Iran's economic ties to the outside world.

We are committed to providing news, views and analysis from distinguished Iranian economists, opinion-makers, academia and analysts.

As such, our readership includes economic stakeholders, policy and decision-makers, investment firms, bankers and university instructors. We cater to the needs of people who have influence and can make a difference.

Given the role and influence of the energy sector around the world, we have a special page for the domestic/global news and analysis on the oil, gas and power industries.

The objective of accurate and timely reporting on prices of all listed commodities and shares, both Iranian and international, is demonstrated in our three full 'Market Monitor' pages every day.

English-speakers interested in Iran's economic agenda are held in high esteem by our staff and those who contribute to our pages.

The Financial Tribune believes in and contributes to responsible and transparent reporting related to economic Iran and international economic, energy, trade, industrial and financial developments.

Building and promoting the long-awaited chemistry between key international players in the West and Asia with the new, mature and emerging Iran is our priority.

Our parent company, the Donya-e-Eqtesad Taban Co. also publishes the Persian-language Donya-e-Eqtesad newspaper, which enjoys the authority and credibility compatible with its status as the leading economic daily in the country. For over 14 years it has commanded the respect of its readers.

After all, the Tribune and Donya-e-Eqtesad have, as a matter of policy, helped potential businesses and foreign investors make informed choices and decisions when it comes to working in and with Iran.

We have earned their trust thanks to transparency and unvarnished and non-promotional news reporting.

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