December 15, 2008

THE SOVEREIGN'S NEED FOR TAX DOLLARS IS THE ENGINE OF LIBERALIZATION:

The failed Muslim states to come (Spengler, 12/16/08, Asia Times)

Iran's President Mahmud Ahmadinejad controls Iran through a kleptocracy of Central African proportions, dissipating the country's oil windfall into payoffs to an "entire class of hangers-on of the Islamic revolution", as I wrote in June (see Worst of times for Iran, Asia Times Online, June 24, 2008), when oil still sold at US$135 a barrel. What will Ahmadinejad do now that the oil price has collapsed? According to my Iranian sources, the answer is: Exactly the same thing, but without the money.

The point of the joke is that Iran's regime cannot reduce subsidies or raise taxes without losing control of the constituencies that brought it to power. They are the peasants and the urban poor who barely afford shelter and food as matters stand. Despite the oil-price collapse, the government has not reduced energy subsidies that the International Monetary Fund (IMF) puts at more than a fifth of gross domestic product (GDP). A proposed value-added tax was withdrawn last October after strikes in the bazaars, starting in Isfahan and other provincial towns and spreading to the capital Tehran. Iran is eating through its $60 billion of foreign exchange reserves, unable to adjust to a collapse of its only significant revenue source.


It's a nearly ideal moment for democratization: the State wants taxation and the people want representation.

Posted by Orrin Judd at December 15, 2008 8:56 AM
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