Iran's Underground Economy

The Iranian Student Movement Up to the Minute Reports ^ | September 8, 2003 | Middle East Economic Survey

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Iran's Underground Economy

September 08, 2003 Middle East Economic Survey By Jahangir Amuzegar

In the following article for MEES, Jahangir Amuzegar, a distinguished economist and former member of the IMF Executive Board, analyzes Iran's underground economy.

A highly distinctive feature of Iran's Islamic Republic is the relatively large size of its underground economy. Alternately called informal, parallel, unofficial, unregistered, gray, and a host of other labels, the underground economy refers to activities - both lawful and unlawful - that elude taxation or escape registration in the country's gross domestic product (GDP). The size of any country's underground economy normally depends on the burden and complexity of its tax system, the severity of its penal code, the enforceability of its financial regulations, and its society's tolerance for official corruption.

Iran is not alone in this dualism. But what sets the Iranian case apart from most others is that its underground economy is not an aberration, but a natural offshoot of its "Islamic" ideology and its unique political structure. It reflects a symbiotic relationship between the ruling theocratic oligarchs and their business supporters in the bazaar. Unlike the case in advanced liberal democracies where such unregistered activities are closely watched and the unlawful segment diligently dealt with, Iran's politico-judicial authorities knowingly or otherwise spawn and nurture them by either tolerating or only selectively punishing some of their glaring indiscretions. And, while often widely reported in the press, and publicly deplored by all political factions, these activities have rarely been seriously scrutinized or sufficiently exposed due to the power and influence of their principal beneficiaries.

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