Essay About Irans Economic Growth And Long Term

Development of Iran
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Irans economic growth in the past century clearly shows that it has not yet
entered the path of sustained and expediential growth. For the last thirty years Iran has been
experiencing boom and bust cycle rather than sustained growth. The close association between
per capita income and per capita oil revenues suggests a reason for the fluctuating level of
income. Both per capita GDP and non-oil GDP increased steadily during 1960-76 while oil
income was rising (Sewer). The decline in per capita oil revenues which started in the mid 1970s
slowed the economy, but is not entirely responsible for the one-third decrease in per capita GDP
in 1977-82 (Sewer). Disruptions due to the revolution and the war with Iraq no doubt also
contributed to economic decline. In the post-revolution years we again observe a close association
between oil and per capita income. This pattern of boom and bust is not peculiar to Iran and is
shared by other oil-exporting countries of the Middle East (Sewer) In contrast, the fast growing
countries of similar characteristics based their growth not on exports of fossil fuels but on human
capital. Replacing oil with human capital as the engine of growth in Iran would be a precondition
for long term, stable growth.
It is clear that Iran is a troubled country. They are currently troubled by international war
and civil unrest within there own country. Oil embargos and standers of exports also play a
critical role in why Iran has a hard time competing in the global market and practicing
international trade. Iran has had a troubled history, from rebellions to removal of political parties
from power. However in this paper I examine the necessary conditions for Iran to take full
advantage of its positive demographic trends that I believe will help move the country into a more
stable economic position. I identify the two most important preconditions for this to be a sound
educational system and a flexible labor market. A flexible labor market would provide parents
and teachers with signals of what individual traits and skills are most needed and rewarded in
production. The educational system should then emphasize the acquisition of the same productive
skills like including creativity, attitude toward work, and technical know-how. For their part,
parents will focus on a strategy for raising a family which will be based on fertility control and
instilling values and skills in their children that will ensure their success in the labor market.
Changes in size and distribution of population have caused a profound influence on Irans
recent economic and social development and will be even more influential in the coming decades.
The vast movement of the rural youth to urban areas affected the 1978-79 social upheavals, as did
the youthfulness of the population affect the rise of the democratic reform movement which
started with President Khatamis election in 1997 (Barlow). The Islamic revolution of 1979
encouraged a rise in fertility in the early 1980s (Barlow),which nearly reversed the path of Irans
fertility transition. A rapid decline in fertility since 1985 transformed the countrys demography
and now promises to shape the path of its future economic growth (Barlow). In this paper I argue
that Irans demographic transition has entered a critical phase in which the role of the family may
shift from procreation to production of human capital. I show that with the right social and
economic conditions, this shift can propel the country onto the path of continuous growth.
John Caldwell an economic development researcher has described the most significant
change that takes place when a country moves from an underdeveloped to developed status in
terms of the intergenerational transfer of resources. Caldwell shows how parents residing in
underdeveloped countries draw upon their children to improve their own standard of living.
Because these countries generally lack social insurance and old age support for the elderly,
parents prefer high fertility to insure enough surviving children to provide for them in their old
age. Where labor markets are undeveloped and family labor is prevalent, some of the
intergenerational transfer takes place while their offspring are still young, working in the farm or
family business when they could be in school learning (Caldwell). These conditions foster a
preference for large families, and particularly for male children.
Gary Beckers (1960, 1991) view of the economics of the family also presents a similar
division of demographic outcomes based on a countrys level of development. He frames the