IMF & Alef: Social inequality down, standard of living up during Ahmadinejad’s presidency

Iran’s Gini coefficient graph (2004-2010)

Iran’s Gini coefficient graph (2004-2010)

Source: Alef

Date: 16 August 2011

According to the Iran Statistics Center (ISC) during President Mahmoud Ahmadinejad’s two terms in office, social inequality in Iran decreased by a noticeable margin and household access to amenities such as appliances, utilities and vehicles, increased. In a presentation to the Planning and Budget Commission of Iran’s national legislature (the Islamic Consultative Assembly or Majlis), the ISC presented its findings which looked at social inequality as measured by the Gini coefficient, and access to amenities by rural and urban households from 2004/05 – 2010/11.

The Gini coefficient measures the inequality in the distribution of wealth, with 0 being total equality and 1 being total inequality. According to the ISC during the period in question Iran’s Gini coefficient decreased by a total of 0.04 from 0.39 in 2004/05 (the year Ahmadinejad took office) to 0.35 in 2010/11.

A report issued in August 2011 by the International Monetary Fund (IMF), which looked at Ahmadinejad’s Targeted Subsidy Reform, made similar findings. The IMF specifically stated:

“…the Gini coefficient is estimated to have fallen from 0.45-0.40 before the reform to 0.37 after the implementation of the subsidy reform.”[1]

While the Gini coefficient measures relative changes in wealth, it is not a measure of the absolute change in wealth. Thus while social inequality may be decreasing, this does not necessarily imply an overall improvement in living conditions.

According to the news website Alef however, Iranian households’ access to amenities has also increased, implying an improvement in the overall standard of living during the same period. Alef, which is linked to the anti-Ahmadinejad Majlis representative and head of the Majlis Research Center Ahmad Tavakoli, provided statistics which showed an increase in the access to a wide range of amenities including automobiles, personal computers, piped natural gas.

Editors’ note: This article by Alef is notable because of the nature of the source. Alef and its chief backer Tavakoli have been ardent critics of the executive, and have taken a hardline against Ahmadinejad. A positive article by Alef on Ahmadinejad’s economic performance may mean that, in combination with the recent IMF report, the economic situation in Iran may have taken a turn for the better- at least in the short-term.

While this could have several implications, one of the most important may be for the issue of US economic sanctions on Iran which has been a subject of heated discussion in the American and Western press in recent weeks. US economic sanctions since the Islamic Revolution of 1979 have attempted to weaken Iran’s economy in order to reduce its military capabilities, put pressure on its citizens to rise up and pressure Iran to halt its nuclear program. While these sanctions have had a deleterious effect on Iran’s economy in recent years, if Ahmadinejad’s targeted subsidy reform are actually proving successful in reversing this trend then economic sanctions may no longer be as effective as they once were in dealing with Iran.

However the long-term implications of the president’s economic policies still remain to be seen.

Also see:

Beyond sanctions and war: US policy options toward Iran