University of Arkansas System
Type of paper: Thesis/Dissertation Chapter
Iran, or what is formally called as the Islamic Republic of Iran, has a rich culture starting out since 8000 B.C. (Ladjevardian par. 2). The historic trends that transpired since then up to the present has had a lot to do with the political turmoil which the country has experienced. The economy and the culture of Iran were greatly influenced by these changes; wars within and outside the country were also great factors to the country’s history.
The beginning of the 20th century had positive changes for Iran after centuries of different dynasties. The Pahlavi Dynasty during the 1920s, which was also the last dynasty to rule Iran, constructed road infrastructures and initiated land reforms; education was also opened for women during this time. In 1946, Iran had a taste of freedom from the Soviet Union and in 1951, passed a law to take the Oil industry from the British control (Ladjevardian par. 73). The country experienced a sudden economic growth in 1963-1973 and during this time that public and educational institutions were further improved. By 1973, Iran was earning about $20 billion a year (Ladjevardian par. 76) from its Oil revenues.
The Supreme Leader’s determination to modernize Iran instantly, backed up by the rapid economic growth, created pressure on the administration which eventually led to economic turmoil such as inflation, corruption, and increase authoritarianism by the Supreme Leader. Moreover, numerous social and political problems continued to emerge that needed to be dealt with. In 1978, the economic growth of Iran slowed down; the Supreme Leader was overthrown and since then, the government of Iran became a theocratic republic; from 1980-1988, Iran fought against Iraq.
The economic loss due to the war caused a lot of problems to Iran. Furthermore, the population of the country increased tremendously and has resulted to increase in unemployment. Communication and transportation and education and public institutions were also needed to be recovered.
Iran’s Economy and Resources
Iran remained to be a country dependent on its oil industry; its earnings comprise the 70% of its government revenues (Economy of Iran par. 1). Its Gross Domestic Product (GDP) increased from 34M Iranian rial in 1990 to 1.7B in 2005, partly due to said industry’s earnings. The oil industry’s role to the economy of Iran proves to be of utmost importance since this is the main export of the country. It includes petroleum, chemical and petrochemical products; other exports of Iran are from their agricultural and service sectors products such as fruits and nuts, cars, carpet and technical services.
Though Iran’s GDP increased tremendously over the years, the country’s economic problems such as inflation and unemployment remain to be the two most impediments to the country’s growth.
Khalaji (par. 3) reports that inflation in Iran reached 19% in 2008. This figure was reportedly to have been due, in part, to the increasing corruption in the country. This puts the country in a difficult situation as inflation translates to increase in goods’ prices and corruption leads to more political and social chaos. The increase in the goods’ prices lead to more importation as goods from other countries appear relatively cheaper.
Inasmuch as the said problem makes the country’s situation appalling, the unemployment problem further worsens it. This was due to the increasing population which has not been backed up with increase in job offerings. Iranians pursue to work outside the country instead leading to the reportedly brain drain.
It has been said that the historic trends in Iran was greatly affected by the political turmoil in the country, and that economic and cultural changes were also affected by it. The economic issues in Iran have then put the country in a social dilemma. The oil industry is not enough to sustain the country’s needs. Iran’s lack of resources to provide for its citizens sustenance require importing from other countries. This is where the importance of trade comes in.
Gross Domestic Product
GDP of a country is an indicator of the economic growth. The national currency of Iran is Iranian Real (IRR). Since 1990 it has increased, with an average annual growth rate between 1990 and 2005 of 2.5% as seen in the figure 1. (Economy of Iran par. 1) It means that as time has passed, the economic growth of Iran improved. There were several factors that affected the growth of the Iranian economy. The paper will dwell more on the economic indicators on how the economy of Iran rose. The highest GDP growth rate was recorded into 2002, when there was a 7.1% growth rate. Its oil abundance is considered to be the main source of its growth. Being one of OPEC’s cartel members, it has the privilege to gain higher returns for its oil products. A big contributer to Iran’s GDP growth would be its strong domestic demand benefited the non-oil and manufacturing countries.