WEBVTT - How the Iranian Economy Actually Works 0:00:02.720 --> 0:00:16.480 Bloomberg Audio Studios, Podcasts, Radio News. 0:00:18.560 --> 0:00:21.880 Hello and welcome to another episode of the Odd Lots Podcast. 0:00:21.920 --> 0:00:24.200 I'm Joe Wisenthal and I'm Tracy Alloway. 0:00:24.400 --> 0:00:28.319 Tracy, it's now July twenty eighth, and the Iran War 0:00:28.560 --> 0:00:31.920 continues to go on. And it's sort of extraordinary the 0:00:31.960 --> 0:00:34.199 fact that, you know, in the beginning here was this 0:00:34.280 --> 0:00:37.400 thing that was going to be if it persisted, sort 0:00:37.440 --> 0:00:41.720 of cataclysmic perhaps for the global economy and particularly related 0:00:41.760 --> 0:00:44.040 to oil prices, and yet on a sort of day 0:00:44.080 --> 0:00:48.240 to day basis, it's not even necessarily the biggest headline 0:00:48.280 --> 0:00:50.040 news that most people are talking about. 0:00:50.200 --> 0:00:52.600 People get used to a lot of things very quickly. 0:00:52.640 --> 0:00:55.200 I mean, it still has the potential to be catastrophic 0:00:55.280 --> 0:00:57.360 at some point in time. But you're absolutely right. We've 0:00:57.400 --> 0:00:59.920 gone months now since when did the start in March? 0:01:00.280 --> 0:01:02.200 Yeah, before beginning of market. 0:01:01.920 --> 0:01:05.640 Yeah, months now with a war which technically hasn't even 0:01:05.680 --> 0:01:08.800 been declared a war. It's an operation. Is that what 0:01:08.800 --> 0:01:10.760 the military operation? 0:01:11.360 --> 0:01:13.800 I think it's been a long people talk about, you know, 0:01:13.959 --> 0:01:16.679 the Forever War. I think the last it's been a 0:01:16.720 --> 0:01:19.840 long time since America actually ever acknowledged that it was 0:01:19.880 --> 0:01:21.360 in a capitol w war. 0:01:21.600 --> 0:01:24.880 Very true, but it does kind of beg the question 0:01:24.920 --> 0:01:27.160 about what happens when all of this is over? 0:01:27.280 --> 0:01:27.440 Right? 0:01:27.520 --> 0:01:27.800 Yeah? 0:01:27.920 --> 0:01:31.560 Right, I mean hopefully it ends one day. And I 0:01:31.640 --> 0:01:34.440 have to say so, obviously we talk about oil a 0:01:34.480 --> 0:01:36.920 lot when we talk in terms of economics. I have 0:01:36.959 --> 0:01:40.880 to admit, you know, it's funny. We've done multiple episodes 0:01:40.920 --> 0:01:44.520 about the Iranian stock market, which is a fascinating topic. 0:01:44.800 --> 0:01:48.360 But other than the fact that obviously Iran produces a 0:01:48.360 --> 0:01:50.840 lot of oil, I actually like basically know nothing about 0:01:50.880 --> 0:01:53.520 the economy, like the day to day, what a typical 0:01:53.640 --> 0:01:54.240 middle class. 0:01:54.320 --> 0:01:57.160 There's some things I know. So there's oil. Yes, there's 0:01:57.200 --> 0:02:01.680 Iranian cars, famously, which I would be interested in experiencing 0:02:01.720 --> 0:02:05.480 one day, not necessarily buying, but experiencing pistachios. 0:02:05.520 --> 0:02:08.440 I was going to say, so, like pistachios, like nuts, 0:02:08.520 --> 0:02:11.640 I imagine, But like what this sort of job market is, 0:02:11.720 --> 0:02:14.840 what a day to day what's out there and you know, 0:02:15.120 --> 0:02:18.799 whatever the Iranian equivalent of LinkedIn or indeed dot com is, 0:02:18.880 --> 0:02:22.840 Like what people do, what people what people want career wise, 0:02:23.080 --> 0:02:26.959 all of these things. Because there's an Iranian stock market, obviously, 0:02:27.160 --> 0:02:30.200 you know, presumably there are like startups and companies that 0:02:30.240 --> 0:02:31.880 one day want to list, But I don't know what 0:02:31.960 --> 0:02:34.480 any of them do. I have so many questions I 0:02:34.520 --> 0:02:40.800 guess about, like what a quote normal Iranian it's imagined 0:02:40.800 --> 0:02:43.440 the war ends. And also there aren't sanctions, right, what 0:02:43.480 --> 0:02:44.600 would an Iranian? 0:02:45.000 --> 0:02:48.800 Well, this is because at various points in time previously 0:02:48.840 --> 0:02:52.200 you have had these burths of optimism about the opening 0:02:52.320 --> 0:02:55.320 up of the Iranian economy, the lifting of sanctions. It's 0:02:55.480 --> 0:02:57.760 one other thing I know, again not much, but one 0:02:57.760 --> 0:03:00.440 thing I know is it's a huge economy. Right with 0:03:00.520 --> 0:03:03.880 our previous Iranian stock market guest the size of Turkey, right, 0:03:04.080 --> 0:03:04.600 something like that. 0:03:04.639 --> 0:03:05.680 It's a really big economy. 0:03:05.680 --> 0:03:07.760 It's a big economy. And so what happens if that 0:03:07.800 --> 0:03:10.440 starts to open up? Can it open up? Are we 0:03:10.520 --> 0:03:12.840 going to see what happened previously where it kind of 0:03:12.840 --> 0:03:14.800 starts to open up and then it shuts down again. 0:03:15.280 --> 0:03:15.680 I don't know. 0:03:15.800 --> 0:03:18.080 It was several months ago, Like there was like some 0:03:18.240 --> 0:03:21.160 random night where I was clicking on random Wikipedia links 0:03:21.760 --> 0:03:24.720 and I was like, I wonder what Ahmed de Najad's 0:03:25.200 --> 0:03:28.800 economic policy platform was when he ran for president for 0:03:28.840 --> 0:03:30.639 the first time. I like started clicking out his campaign. 0:03:30.680 --> 0:03:32.360 I was like, I wonder and it was like seemed 0:03:32.400 --> 0:03:34.639 kind of vague, and he had some I wish I. 0:03:34.560 --> 0:03:37.040 Could remember the slogan. It was really good. It was 0:03:37.040 --> 0:03:39.320 something like if we imagined it, we could do it. 0:03:39.320 --> 0:03:42.320 It was like, you know, the most inoffensive sort of 0:03:42.320 --> 0:03:45.680 like domestic policy agenda slogan. And I couldn't really find 0:03:45.720 --> 0:03:48.360 that more specifics. But you know, you have elections, et cetera. 0:03:48.440 --> 0:03:49.720 What are they run on? What do they you know, 0:03:49.880 --> 0:03:50.640 where do they stand on? 0:03:50.680 --> 0:03:53.960 Taxis all these questions about sort of like quote normal 0:03:54.080 --> 0:03:56.120 unquote economic life and Iran. 0:03:56.400 --> 0:03:57.680 Is that your way of saying that you want to 0:03:57.680 --> 0:03:59.880 talk about the political economy of around, I want. 0:03:59.800 --> 0:04:02.200 To talk talk about the political economy and the even 0:04:02.280 --> 0:04:05.320 regular economy of Iran. Anyway, I'm very excited to say 0:04:05.560 --> 0:04:08.280 we do, in fact have two perfect guests on who 0:04:08.320 --> 0:04:10.040 will teach us much more about this. We're going to 0:04:10.080 --> 0:04:13.240 be speaking with Jegana Torbodi, Iran correspondent for the New 0:04:13.320 --> 0:04:16.479 York Times, as well as Bisorgham Sheriff Fodding. He's the 0:04:16.520 --> 0:04:19.919 head of Digital at Iran International. So both of you, 0:04:20.000 --> 0:04:21.560 thank you so much for coming on online. 0:04:21.760 --> 0:04:23.880 Thank you so much for having me, Thanks for having us. 0:04:23.960 --> 0:04:25.800 Oh, and I should of course have mentioned that they 0:04:25.800 --> 0:04:28.600 are the co authors of a brand new book, Stolen Revolution, 0:04:28.800 --> 0:04:32.240 Betrayal and Hope and Modern Iran. So again, thank you 0:04:32.279 --> 0:04:34.080 both so much for coming out. Why don't we just 0:04:34.160 --> 0:04:36.400 start What is the premise of this book? Why was 0:04:36.440 --> 0:04:38.960 this an important book to write? Or what endeavored do 0:04:38.960 --> 0:04:40.080 you to go on this project? 0:04:40.320 --> 0:04:42.120 Yeah, well, thank you so much for having us. I mean, 0:04:42.279 --> 0:04:45.120 we started on this project around five and a half 0:04:45.200 --> 0:04:47.880 years ago, so late twenty twenty, and I think our 0:04:48.000 --> 0:04:51.520 vision was at first we were very focused on kind 0:04:51.520 --> 0:04:54.039 of trying and explain as you sort of mentioned, Iran's 0:04:54.080 --> 0:04:57.320 political economy and in particular sort of the roots of 0:04:57.360 --> 0:05:01.640 corruption and sort of state control influence over the economy 0:05:01.680 --> 0:05:05.280 over the past forty fifty years. And then, of course 0:05:05.279 --> 0:05:08.080 as time went on and since twenty twenty, a lot 0:05:08.160 --> 0:05:10.760 of things have happened in Iran and our focus both 0:05:10.800 --> 0:05:13.880 broadened and I think deepened. But sort of throughout our 0:05:13.920 --> 0:05:19.000 book is sort of this continuous thread of the promises 0:05:19.080 --> 0:05:22.640 that the current government, the Islamic government came to power 0:05:22.680 --> 0:05:25.960 on in nineteen seventy nine, particularly around social justice and 0:05:26.000 --> 0:05:30.400 how it might redistribute Iran's really immense resources and sort 0:05:30.440 --> 0:05:33.920 of what that has actually led to in practice today, 0:05:33.960 --> 0:05:35.640 which is far from those promises. 0:05:35.920 --> 0:05:36.160 Yeah. 0:05:36.200 --> 0:05:39.920 So you describe the Islamic Republic as evolving into this 0:05:40.000 --> 0:05:44.520 sort of mafia like state, and I guess there's a 0:05:44.520 --> 0:05:49.200 difference between an authoritarian government and a corrupt one, although 0:05:49.240 --> 0:05:53.120 they often go hand in hand. How did Iran kind 0:05:53.160 --> 0:05:59.160 of evolve from the authoritarian Islamic Republic to a place that, 0:05:59.279 --> 0:06:03.960 in terms of it it's economy was actually extracting value 0:06:04.160 --> 0:06:05.160 from its people. 0:06:05.720 --> 0:06:08.880 Yeah. I think maybe it's good to define what do 0:06:08.920 --> 0:06:11.560 we mean by a mafia state. What's the difference between 0:06:11.560 --> 0:06:15.520 a mafia state and a normal totalitarian government. I think 0:06:15.839 --> 0:06:20.280 in a normal society, all citizens are equal and they 0:06:20.360 --> 0:06:23.599 benefit the same from the government and the wealth of 0:06:23.640 --> 0:06:27.800 a nation. But in a mafia state, you should imagine 0:06:27.839 --> 0:06:34.320 a layered society and citizens are rewarded based on their 0:06:34.480 --> 0:06:38.280 loyalty to the system. So the more loyal you are 0:06:38.920 --> 0:06:42.520 to the government and the state, the more you will 0:06:42.560 --> 0:06:47.200 benefit from the resources. So that's how the Islamic Republic 0:06:48.000 --> 0:06:53.320 was from the beginning, and it excluded its critics and 0:06:53.440 --> 0:06:58.240 it rewarded people who were loyal and it was an 0:06:58.240 --> 0:07:02.200 ideological government. People who believed in the values of the 0:07:02.279 --> 0:07:06.479 Islamic Republic were rewarded. But as we move forward, we 0:07:06.560 --> 0:07:10.760 see that this trend was reflected more and more in 0:07:10.840 --> 0:07:15.000 the economy. You see that how evolutionary guards and other 0:07:15.080 --> 0:07:18.760 religious foundations they come and take over a big chunks 0:07:18.800 --> 0:07:21.920 of the economy. And I can say that this mafia 0:07:21.960 --> 0:07:26.760 state and the layered society is even reflected in Iran's 0:07:26.800 --> 0:07:32.240 foreign policy. So in the eyes of Iranian state, maybe 0:07:32.400 --> 0:07:37.520 a Hegebolagh member in Lebanon, or who the militia in Yemen, 0:07:38.040 --> 0:07:42.560 they are more loyal to the Islamic Republic than let's 0:07:42.600 --> 0:07:46.000 say a professor at Tehran University, so they should benefit 0:07:46.120 --> 0:07:49.040 more from the wealth of the nation. So that's why 0:07:49.080 --> 0:07:52.160 we have had all these discussions within the Islamic Republic 0:07:52.280 --> 0:07:57.920 that while the Iranian government can't afford to provide free 0:07:58.000 --> 0:08:02.000 milk at schools, it has the money to give to 0:08:02.200 --> 0:08:06.400 its proxies in the region to kind of reward their loyalty. 0:08:06.760 --> 0:08:09.440 Right, maybe I should back up even further at this 0:08:09.520 --> 0:08:12.760 point and ask the Iranian Revolution how much of that 0:08:13.120 --> 0:08:16.200 was about economic grievances on the part of the people, 0:08:16.240 --> 0:08:18.960 the idea that, as so many revolutions are, you know, 0:08:19.160 --> 0:08:24.640 things need to get better, versus just the clergy basically 0:08:24.800 --> 0:08:25.640 seizing power. 0:08:26.480 --> 0:08:28.120 I think it was sort of a mix of a 0:08:28.120 --> 0:08:30.960 few different things. The working classes and sort of the 0:08:30.960 --> 0:08:34.800 lower socioeconomic classes did not really jump in to be 0:08:34.920 --> 0:08:37.720 part of the revolutionary coalition until quite late in the 0:08:37.760 --> 0:08:40.560 game when they really started to suffer from some of 0:08:40.720 --> 0:08:43.439 the Shaw's economic policies, kind of towards the very end. 0:08:43.800 --> 0:08:45.920 Really at the beginning, it was more kind of like 0:08:46.040 --> 0:08:49.840 the middle classes and the intellectuals who were sort of 0:08:49.880 --> 0:08:52.920 forming this kind of revolutionary coalition from a bunch of 0:08:52.960 --> 0:08:55.920 different impulses. There were some who wanted kind of an 0:08:55.960 --> 0:08:59.960 Islamic government. There were others who were communists and were 0:09:00.040 --> 0:09:03.480 kind of more anti us, anti imperialists, and there were 0:09:03.480 --> 0:09:06.880 others who just wanted kind of a secular, liberal democracy 0:09:06.920 --> 0:09:09.760 and felt that the Shah was trampling on people's rights. 0:09:10.080 --> 0:09:12.600 All of those people kind of joined in. But what 0:09:12.640 --> 0:09:16.000 we see, especially kind of towards the end of the revolution, 0:09:16.080 --> 0:09:19.000 as we're getting to nineteen seventy nine, is that the 0:09:19.080 --> 0:09:23.000 leader of the revolution, Ruhala Homani, who then became the 0:09:23.080 --> 0:09:25.440 leader of the new government, he wanted to kind of 0:09:25.720 --> 0:09:29.079 co op some of the most effective sort of leftist 0:09:29.320 --> 0:09:32.360 arguments because he wanted kind of their young people, they're 0:09:32.400 --> 0:09:35.360 their supporters, to sort of also support him, and so, 0:09:35.640 --> 0:09:38.760 you know, these arguments of kind of the bourgeoisie versus 0:09:38.760 --> 0:09:42.200 the proletariat. You know, Homiani kind of adopted some of 0:09:42.240 --> 0:09:45.760 those terms with an Islamic tinge, and therefore sort of 0:09:46.120 --> 0:09:48.680 he promised and then in the first few months, especially 0:09:48.679 --> 0:09:51.120 of the revolution, he also promised that, you know, we 0:09:51.200 --> 0:09:53.240 are going to provide for the poor. We're going to 0:09:53.280 --> 0:09:57.240 provide free electricity, free buses for the poor, We're going 0:09:57.320 --> 0:10:00.680 to build housing. And I think the government's wanted to 0:10:00.720 --> 0:10:04.520 present itself as being on behalf of some of those 0:10:04.559 --> 0:10:07.160 the kind of the lower classes of society, and presented 0:10:07.200 --> 0:10:10.040 them kind of as its base. As time goes on, 0:10:10.240 --> 0:10:12.560 what we see, especially kind of in the last ten 0:10:12.559 --> 0:10:15.440 to fifteen years, it sort of turned its back on 0:10:15.480 --> 0:10:17.680 a lot of those promises to where it's not even 0:10:17.760 --> 0:10:21.000 really even pretending anymore that that is kind of what 0:10:21.080 --> 0:10:23.120 it's aimed at. And we can kind of talk about 0:10:23.200 --> 0:10:25.600 some of the turning points there, but it really was 0:10:25.760 --> 0:10:29.920 kind of a gradual shift over time, and then especially 0:10:29.960 --> 0:10:35.840 since twenty seventeen, you really see this growing dissatisfaction amongst 0:10:36.400 --> 0:10:39.160 not just middle class Iranians but also people who are 0:10:39.200 --> 0:10:42.960 poor and struggling against what this revolution has brought to them. 0:10:43.200 --> 0:10:48.600 Okay, everyone's ability to derive wealth or income or is 0:10:48.679 --> 0:10:52.520 somehow linked to where they stand in this hierarchy of 0:10:52.960 --> 0:10:55.600 supporting the government or supporting the. 0:10:55.600 --> 0:10:57.240 State in some way or another. 0:10:57.880 --> 0:11:02.160 Let's talk about where the government mint gets its resources 0:11:02.200 --> 0:11:06.760 to make these allocations, whether it's housing, whether it's electricity, 0:11:06.800 --> 0:11:11.120 whether it's obviously munitions for various groups, et cetera. Obviously 0:11:11.160 --> 0:11:13.200 we know oil is a big part of it, but 0:11:13.280 --> 0:11:16.800 what are the main How would you big picture decompose 0:11:17.000 --> 0:11:19.960 what the Iranian economy sort of basically looks like. 0:11:20.400 --> 0:11:22.440 So I think, of course, yeah, oil is a big one. 0:11:22.520 --> 0:11:25.880 It has kind of this huge resource that's very valuable 0:11:25.920 --> 0:11:27.800 and that it can kind of use the fund itself. 0:11:28.120 --> 0:11:31.680 But also Iran has a pretty diversified economy in terms 0:11:31.760 --> 0:11:34.960 of its industrial base, and that is partially as a 0:11:35.000 --> 0:11:37.360 result of kind of the Shaw Zone policies. But then 0:11:37.880 --> 0:11:41.280 also sort of this idea that took root after the revolution, 0:11:41.760 --> 0:11:44.160 that we need to provide for ourselves, we need to 0:11:44.160 --> 0:11:46.720 be self sufficient. This was a very important kind of 0:11:46.840 --> 0:11:50.800 part of both the ideology of kind of present in 0:11:50.840 --> 0:11:54.800 that moment. In general, this sort of like twentieth century 0:11:55.040 --> 0:12:01.079 sixty seventies backlash against interference by world powers in the 0:12:01.120 --> 0:12:04.199 internal affairs of Iran and of other countries. So there 0:12:04.400 --> 0:12:08.000 was kind of this very strong idea, especially among Iranian 0:12:08.120 --> 0:12:10.800 leftists and including you know, some of the clerical class, 0:12:10.920 --> 0:12:14.160 that we need to kind of establish our own industries 0:12:14.200 --> 0:12:18.280 and be independent. So Iran has a car industry. Iran 0:12:18.440 --> 0:12:21.920 has steel plants that were built after the Iran Iraq 0:12:22.000 --> 0:12:24.600 War and it became operational sort of after the iron 0:12:24.679 --> 0:12:28.960 I Rock War that produce you know, huge amounts of steel, 0:12:29.120 --> 0:12:31.479 you know, kind of leading the Middle East in that industry. 0:12:31.920 --> 0:12:35.439 And these industries are maybe not necessarily the most efficient, 0:12:35.840 --> 0:12:37.840 and they don't have a ton of foreign investment, but 0:12:38.360 --> 0:12:42.720 they provide employments. Iran has a huge agricultural sector, that is, 0:12:42.760 --> 0:12:45.280 which is an enormous source of jobs in Iran, which 0:12:45.280 --> 0:12:48.520 has been very important as it's been under sanction. Of course, 0:12:48.559 --> 0:12:51.120 the agricultural sector has a lot of other costs, including 0:12:51.280 --> 0:12:54.960 overuse of water, which Iran has been facing, but it 0:12:55.080 --> 0:12:57.720 was sort of it's an important at least source of 0:12:57.800 --> 0:13:00.560 jobs in the economy. So these are all these major 0:13:00.640 --> 0:13:04.720 industries that kind of first start out after the revolution 0:13:05.080 --> 0:13:08.840 being very much under the purview of the formal states 0:13:08.920 --> 0:13:11.560 kind of what we in the West would recognize as 0:13:11.640 --> 0:13:15.960 a government, including and a ministry, you know, a ministry 0:13:16.000 --> 0:13:19.440 that is answerable to parliament, that oversees, for instance, the 0:13:19.480 --> 0:13:23.280 steel industry or the minds in Iran. Over time, and 0:13:23.320 --> 0:13:25.080 we can we should kind of talk about this more, 0:13:25.840 --> 0:13:30.080 the control over those industries moves away from sort of 0:13:30.120 --> 0:13:33.480 the recognized parts of the state into kind of this 0:13:33.640 --> 0:13:36.720 shadow state, you know, which is sort of much more 0:13:36.760 --> 0:13:40.960 linked to the security forces and to these entities that 0:13:41.000 --> 0:13:43.280 are kind of controlled by the clerics but aren't really 0:13:43.320 --> 0:13:45.440 accountable to the rest of the government. 0:13:45.720 --> 0:13:47.800 If I add a bit to that, because if you 0:13:47.840 --> 0:13:50.280 look at the history of the Islamic Republic, well, of course, 0:13:50.320 --> 0:13:55.480 the revolution started with this massive wave of nationalization the 0:13:55.559 --> 0:14:00.800 state to control of the major industries shipping, mind banking, 0:14:00.920 --> 0:14:04.920 and many more. But gradually, as we come forward, after 0:14:05.520 --> 0:14:10.559 a decade or two, the Indian state decided the privatization 0:14:11.040 --> 0:14:15.079 of these major industries. But I think the main problem 0:14:15.200 --> 0:14:19.680 was the corruption that we didn't see real privatization. So 0:14:19.960 --> 0:14:24.680 usually people who were close to centers of power, they 0:14:24.840 --> 0:14:29.280 came and took over these industries, and they like they 0:14:29.320 --> 0:14:32.120 took them over with a very low price. Like imagine 0:14:32.160 --> 0:14:36.200 factories that were owned by the government, they were taken 0:14:36.320 --> 0:14:40.400 over by elements very close to the security forces. And 0:14:40.920 --> 0:14:44.040 so after that, many of these factories they didn't come 0:14:44.120 --> 0:14:49.680 back to production. The machinery was sold and the land 0:14:50.120 --> 0:14:56.200 was turned into maybe a residential place to build apartments. 0:14:56.440 --> 0:14:59.640 So we saw that that level. But still, as Y'regana mentioned, 0:14:59.680 --> 0:15:02.600 we have private sector in your own you know, the 0:15:02.800 --> 0:15:07.600 problem with private sector is that if a business becomes 0:15:07.800 --> 0:15:13.080 successful and it passes a certain threshold, you will see 0:15:13.080 --> 0:15:16.560 the security forces coming and knocking on your door and 0:15:16.600 --> 0:15:19.800 they want their share. And that's again it's like in 0:15:19.840 --> 0:15:22.280 Mafia stated, which you can imagine if you have a 0:15:22.360 --> 0:15:25.560 restaurant in I don't know, in mafia movies, if you 0:15:25.560 --> 0:15:28.080 have a successful restaurant, they would come and they want 0:15:28.200 --> 0:15:31.360 their share from these businesses. And as we showed in 0:15:31.440 --> 0:15:35.880 the book, one of the major new sectors was the 0:15:35.960 --> 0:15:40.680 startup sector. Of course, this sector was started by many 0:15:40.680 --> 0:15:44.320 Iranians who came back from abroad to launch this sector. 0:15:44.400 --> 0:15:49.120 But they saw that how the security forces came and 0:15:49.640 --> 0:16:03.720 forced them to give up these firms. 0:16:07.680 --> 0:16:11.240 Just in terms of the state like becoming more intertwined 0:16:11.560 --> 0:16:15.040 with the private sector. I learned two new words, or 0:16:15.040 --> 0:16:17.600 I guess terms from your book, and I'm going to 0:16:17.640 --> 0:16:20.240 mispronounce the first one because I've only ever read it. 0:16:20.280 --> 0:16:27.040 I've never said it aloud, But bonyads, is that right? Bonyads? 0:16:27.160 --> 0:16:27.480 Okay? 0:16:27.560 --> 0:16:30.640 Bonyads? And then invisible ports. Can you talk a little 0:16:30.680 --> 0:16:34.240 bit more about those two things as sort of examples 0:16:34.400 --> 0:16:38.760 of how the state becomes intertwined with the private sector 0:16:38.880 --> 0:16:39.960 or the general economy. 0:16:40.320 --> 0:16:45.640 Okay. So again, these religious religious foundations there were launched 0:16:45.680 --> 0:16:48.920 at the beginning of the revolution and they're very interesting. 0:16:49.000 --> 0:16:52.520 So like one of them was this massive foundation that 0:16:52.720 --> 0:16:58.040 was established to distribute the wealth among the poor, and 0:16:58.720 --> 0:17:03.120 it seemed quite a noble cause. And of course we 0:17:03.160 --> 0:17:07.080 had other foundations to look off the families of markers 0:17:07.119 --> 0:17:11.320 of Ivanivok war and the veterans of the war. So 0:17:12.200 --> 0:17:16.920 these massive foundations, they were established by the order of 0:17:17.560 --> 0:17:21.600 the founder of the revolution ALCHMENI and the heads of 0:17:21.640 --> 0:17:26.679 those foundations, they had massive power. So we show in 0:17:26.680 --> 0:17:30.160 the book, for example, that's how the head of one 0:17:30.160 --> 0:17:36.040 of these foundations, he wanted to import some wheelchairs into 0:17:36.080 --> 0:17:40.440 the country to give it to the veterans of war. 0:17:41.080 --> 0:17:45.159 But at that time, the Minister of Industries he was 0:17:45.200 --> 0:17:47.840 against the import because he believed that the imports of 0:17:47.960 --> 0:17:53.000 German wheelchairs will be undermining the domestic production. But the 0:17:53.080 --> 0:17:56.720 head of foundation, he was an MP at that time, 0:17:56.800 --> 0:17:59.160 member of the parliament, so he went to the parliament 0:17:59.240 --> 0:18:04.360 and paused to allow the foundation to import anything they 0:18:04.400 --> 0:18:09.520 want without any government supervision. And he wanted to do 0:18:09.600 --> 0:18:14.199 that to maintain the revolutionary nature of the foundation, and 0:18:14.280 --> 0:18:18.399 he didn't want to be constrained by bureaucracy and red tape. 0:18:19.160 --> 0:18:23.840 It's interesting that the same person decades later, he becomes 0:18:23.880 --> 0:18:27.640 the speaker of the Parliament during the reform movement, and 0:18:27.800 --> 0:18:32.399 he found these invisible ports or invisible jetties. How is that. 0:18:32.440 --> 0:18:35.840 So we see that these foundations and the revolutionary guards, 0:18:36.160 --> 0:18:40.879 they had massive power to import anything they wanted without 0:18:41.000 --> 0:18:45.639 audit and without taxation, and this character of the book. 0:18:46.200 --> 0:18:49.639 Decades later, he goes to southern ports of Iran, and 0:18:49.720 --> 0:18:54.600 he saw a dedicated port that belonged to the Revolutionary 0:18:54.600 --> 0:18:58.840 Guards and they could import anything they wanted without any 0:18:58.920 --> 0:19:01.720 supervision of the God. So in a way, you see 0:19:01.840 --> 0:19:07.919 how this mafia state was formed gradually, how the revolutionary 0:19:08.000 --> 0:19:12.479 nature of the foundation forced them into creating a system 0:19:12.480 --> 0:19:15.880 which was not transparent from the start, and later on 0:19:16.800 --> 0:19:19.520 the same system turned into a mafia state. 0:19:19.720 --> 0:19:22.800 And you sort of see how there is some good intentions, right, 0:19:22.920 --> 0:19:27.120 like the idea of importing higher quality wheelchairs from abroad 0:19:27.560 --> 0:19:30.120 to help veterans of the war who had been injured. 0:19:30.400 --> 0:19:34.520 You know, that is a laudable intention. But you know, 0:19:34.600 --> 0:19:36.960 this character, this person that we're talking about, Matthew cawdou Be, 0:19:37.000 --> 0:19:39.399 he sort of in that decision in the nineteen eighties 0:19:39.800 --> 0:19:43.639 establishes this idea that these foundations, and it wasn't just him, 0:19:43.680 --> 0:19:46.320 but this was just one example. These foundations are above 0:19:46.359 --> 0:19:50.879 the law and they get special dispensations and special privileges 0:19:50.920 --> 0:19:54.199 because they're kind of associated with the revolutionary state. Private 0:19:54.240 --> 0:19:57.240 companies don't get those rights. Entities you know, that are 0:19:57.280 --> 0:20:00.320 disconnected from the government don't get those rights. But he 0:20:00.720 --> 0:20:03.719 establishes that and that same thinking, you know, as it 0:20:03.760 --> 0:20:06.800 continues and is not challenged over the years, sort of 0:20:06.840 --> 0:20:11.119 grows into eventually these invisible ports and many other abuses. 0:20:11.400 --> 0:20:15.000 It's so striking like listening to this because you I mean, 0:20:15.160 --> 0:20:18.960 on the one hand, obviously or on very distinct story, 0:20:19.440 --> 0:20:21.639 but on the other hand, you know, so many of 0:20:21.640 --> 0:20:25.399 these themes we've already discussed, you see, like echoes of 0:20:25.440 --> 0:20:28.399 them or versions of them in all sorts of developing 0:20:28.480 --> 0:20:32.520 states or whatever. You know, obviously when you talk about, oh, 0:20:32.560 --> 0:20:35.240 here is the still factor or some industrial facility, and 0:20:35.280 --> 0:20:37.840 then it's been reproposed in some way for some non 0:20:37.920 --> 0:20:41.560 vital thing. You sort of think about late era Soviet Union, 0:20:41.720 --> 0:20:44.520 for example, it's like, here's the company that wants to 0:20:44.520 --> 0:20:46.919 make bread, but they just sell other parts abroad for 0:20:47.440 --> 0:20:51.320 hard cash and then don't actually serve their purpose. Were 0:20:51.320 --> 0:20:54.840 there ever any forces in government that tried to keep 0:20:54.880 --> 0:20:57.840 some of these entities in line. I assume there must 0:20:57.920 --> 0:21:01.520 be like some conflict or efforts to sort of maintain 0:21:02.160 --> 0:21:06.040 this thing where you have something that resembles industry has 0:21:06.119 --> 0:21:09.919 some perverse incentives to maybe like take some shortcut for 0:21:10.000 --> 0:21:14.080 the personal gain of whoever is the controlling entity. Were there, ever, 0:21:14.160 --> 0:21:19.280 attempts to build in mechanisms such that these perhaps public 0:21:19.320 --> 0:21:23.200 resources couldn't be expropriated in some way, for sure. 0:21:23.240 --> 0:21:26.560 I mean there were definitely people who, maybe too late, 0:21:26.680 --> 0:21:29.560 sort of saw the errors of some of the ways 0:21:29.560 --> 0:21:32.360 that the government had acted, including people who had been 0:21:32.440 --> 0:21:35.320 part of the problem, you know, earlier on in their career. 0:21:35.400 --> 0:21:38.679 So like for example, Matthy Caderby who he mentioned, who 0:21:38.800 --> 0:21:40.960 is a cleric who an MP. He led one of 0:21:40.960 --> 0:21:44.280 these one yards, but then later on becomes part of 0:21:44.320 --> 0:21:48.880 the reform movement and rises to great power and tries 0:21:48.920 --> 0:21:53.280 when he's in parliament to establish some standards of transparency 0:21:53.480 --> 0:21:57.520 for these entities, these one yards and other institutions that 0:21:57.680 --> 0:22:02.000 answered directly to Iran Supreme Leader, and he's unsuccessful. By 0:22:02.040 --> 0:22:04.879 that point, which was the late nineties early two thousands, 0:22:05.280 --> 0:22:08.680 these entities and the Supreme Leader himself were just far 0:22:08.720 --> 0:22:12.760 too powerful for the elected government to really put a 0:22:12.840 --> 0:22:15.800 check on. There's another anecdote that we talk about at 0:22:15.840 --> 0:22:18.439 length in the book, which was in two thousand and 0:22:18.440 --> 0:22:21.960 four when Iran was opening a new airport. And this 0:22:22.040 --> 0:22:24.959 is a big moment for Iran. It had been planning 0:22:24.960 --> 0:22:27.760 this airport actually since before the revolution. Of course it 0:22:27.840 --> 0:22:30.199 was delayed, you know, because of that and because of 0:22:30.200 --> 0:22:32.040 the war. But this was going to be kind of 0:22:32.080 --> 0:22:34.440 this big moment when Iran was going to have an 0:22:34.480 --> 0:22:38.159 airport to kind of rival Dubai and Istanbul. On the 0:22:38.240 --> 0:22:42.520 day that it's being opened, the Revolutionary Guards drive armored 0:22:42.600 --> 0:22:46.600 land cruisers onto the runway and prevent the first plane 0:22:46.640 --> 0:22:49.679 from landing. They have to be begged by the Transport 0:22:49.720 --> 0:22:52.800 Minister before they allow it to land. When the second 0:22:52.840 --> 0:22:55.640 plane wants to come in, they scramble a fighter jet 0:22:55.680 --> 0:22:59.720 and threaten it and it has to divert south to Esfahan. 0:23:00.320 --> 0:23:03.440 And why did this happen, the Transport Minister later revealed 0:23:03.640 --> 0:23:06.840 in a series of interviews, because the Guards had wanted 0:23:06.880 --> 0:23:10.840 the contract to operate that airport, but they hadn't provided 0:23:10.880 --> 0:23:14.119 the best price, and so the government had given it 0:23:14.160 --> 0:23:18.520 to a Turkish Austrian firm and the airport was shut down. 0:23:18.640 --> 0:23:21.199 It was basically a no fly zone for months, and 0:23:21.240 --> 0:23:24.960