Governance Deadlock and Economic Crisis in Iran

Governance Deadlock and Economic Crisis in Iran
September 2021
Stanford Iran 2040 Project

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Iran is currently undergoing its deepest economic, governance, health, environmental, and social crises since the inception of the Islamic Republic in 1979. After more than four decades of the regime’s rule, over half of the country’s 85 million people live in poverty, net capital formation—which has undergone a secular decline for two decades—is now in negative territory, groundwater resources have been largely depleted (which in turn increases the risk of hunger and internal conflicts among different regions), the massive wealth embedded in hydrocarbon and mineral resources has been exhausted without being replaced by enduring financial or physical assets, two-thirds of the working age population are unemployed or are out of the workforce, about half of the population window of opportunities has passed with no savings made to support the largest cohorts of population that will reach retirement in the coming decades, political and administrative corruption is among the highest in the world, and the massive flux of brain drain and capital flight is depriving the country of the elements sine qua non  for future growth. This paper provides a brief overview of Iran's current economic crisis and explains its link with the Islamic Republic's dysfunctional institutions and political decay.