Iran’s Wretched Economic Policy

September 26, 2022 by Dan Mitchell @ International Liberty

The people of Iran are protesting against their tyrannical government. The trigger for the anger and unrest is the murderous brutality  of the nation’s so-called Morality Police.

I can’t help but wonder, though, whether there’s also national discontent because of bad economic policy.

According to the latest edition of Economic Freedom of the World, Iran has one of the world’s most repressive governments. Of the 165 jurisdictions, only Libya, Argentina, Syria, Zimbabwe, Sudan, and Venezuela rank lower.

In other words, the Iranian government restricts economic freedom just like it restricts political freedom.

And that has very adverse consequences for the prosperity of the Iranian people, notwithstanding the fact that the nation has abundant energy resources.

Here’s a chart, derived from the Maddison database, that shows how Iran has fallen far behind Bahrain when measuring per-capita economic output.

I picked Bahrain because that’s the nation in the Middle East that ranks highest for economic liberty (#39).

This gives us another example of the “anti-convergence” that occurs when two nations have big differences in economic freedom.

The bottom line is that Iran has a horrible government for more reasons than we’re seeing in today’s headlines.

P.S. Here’s a comparison of economic liberty over time in both Iran and Bahrain.

P.P.S. Western sanctions against Iran obviously undermine prosperity, just as similar sanctions hurt places such as Cuba, North Korea, and Venezuela. I like when people make this point since it shows they (at least implicitly) are making the case for free trade. But I disagree if they want people to believe that such sanctions explain more than a small fraction of the problems in those nations.