On 23 January 2021, the ACRPS Iranian Studies Unit (ISU) hosted Pooya Alaedini for a lecture titled “Rethinking and Reconnecting Iran’s Social Policy and Development Frameworks.” Alaedini is Associate Professor in the Department of Development and Social Policy in the Faculty of Social Sciences at the University of Tehran. The lecture was moderated by Mehran Kamrava, Director of the ISU and Professor of Government at Georgetown University in Qatar. Alaedini’s lecture draws from his recent books, Social Policy in Iran: Main Components and Institutions (Routledge, 2021), and Industrial, Trade, and Employment Policies in Iran (Springer, 2018).

Alaedini began by emphasizing the importance of the pre-revolutionary period in understanding current developments in Iran’s social policy. According to Alaedini, ten years prior to the revolution in 1979, the increase in Iran’s oil revenues resulted in a rapid rate of capital formation and growth through an import-substitution framework as well as provision of services and subsidies. Despite these developments, inequality in Iran was rising due to the difficulty in reaching the country’s lower strata of society in rural areas. Alaedini cited the founding of a Welfare Ministry and the development of an insurance system as examples of the pre-revolutionary government’s efforts to alleviate growing inequalities. Following the revolution of 1979, however, these efforts came to an end.

Discussing the post-revolutionary development framework, Alaedini remarked that the government inherited the pre-revolutionary period’s oil-based, “investment-oriented,” development framework. The main assumption of the investment approach, according to Alaedini, is that physical capital formation is the primary engine of growth. “It is centered on the goal of increasing investment in the industrial sector, and to pay for the imports, the state resorts to facilitating the export of primary resources, borrowing, and/or attracting foreign direct investment.”

Alaedini further argued that “policy changes made after the revolution accentuated some of the negative aspects of the previous framework, and the development framework has made the Iranian economy more inward-oriented.” More importantly, due to various institutional and political reasons, strategies formulated to foster industrial development have not resulted in even the sub-optimal expected outcomes. In the last forty years, Iran has experienced high inflation, unemployment, and stagnant GDP per capita. Any growth experienced has been negated by an increase in population.

The political system after the revolution established several para-governmental revolutionary foundations, which have become important in the provision of welfare services. There have also been substantial subsidies and transfers (e.g., an unconditional cash transfer), continuous expansion of social insurance, housing programs, and institutional development (e.g., the establishment of the Ministry of Welfare and Social Security, and the High Council of Welfare and Social Security). Alaedini acknowledged the existence of “pseudo-privatization, deregulation, and state retrenchment,” but, he hesitated to label Iran as neoliberal because the government continues to spend a heavily on social welfare activities and has numerous foundations.

Positive changes in poverty alleviation in Iran have occurred as a result of government policies. Following the launch of unconditional cash transfers, poverty rates decreased. The positive effects of the cash transfers vanished, however, because it was poorly targeted and caused high rates of inflation. The rates of poverty also increased due to international sanctions. Inequality has been high, according to Alaedini, but it is not significantly worse than in many other countries in the same economic development category. Iran has a high unemployment rate and low labor force participation rates, particularly among women and youth, which is common throughout the Middle East.

When it comes to policies on education, Alaedini mentioned that Iran has prioritized tertiary education over pre-primary, primary, and secondary education. The government’s expenditure on education as a percentage of GDP is low, but its expenditure on tertiary education is high. Most importantly, Alaedini highlighted that “expenditures overall are low in Iran as a percentage of GDP and the government does not tax the Iranian economy adequately to raise funds to then allocate them to various social services including education.” The state has not connected education policies to its development policy and its literacy movement has been less effective than expected. Some of the challenges confronting Iran’s education system include significant inequality and inadequate resources. Alaedini explained that the government attempted to address these concerns through privatization which exacerbated existing inequalities.

Alaedini stated that Iran’s constitution protects individual rights to education, housing, and employment. On housing, Alaedini indicated that it was only in 2005 that the government recognized the necessity for a comprehensive housing plan with many components and target groups. Despite revisions to the housing plan, it has never been implemented, nor has the government sought to curtail speculative real estate activity through land management and proper taxation, which has resulted in high prices for both purchase and rent in Iranian cities. Instead, the government has emphasized home ownership by launching various plans such as Mehr Housing, National Housing Action Plan, and Housing Leap. However, low-income populations are not targeted in these plans and despite the emphasis on home ownership, there is a decrease in home ownership and housing affordability that has deteriorated over time.

Lastly, Alaedini proposed solutions to Iran’s economic development and social policy challenges. He highlighted that Iran needs to adopt a “capability approach,” with primary goal of creating an environment where capabilities are developed. According to Alaedini, “it requires an ‘embedded’ and ‘autonomous’ state to start the process of capability development, with the discernable results being the enhancement of firms’ capacities in manufacturing, product development, technology acquisition and development, and marketing.”

The goal is to create a capability-enhancing network that includes the state, firms, trade associations, labour unions, universities and research institutions, and local administrative bodies. Alaedini argued that this form of development program necessitates a supportive social policy. “The government should facilitate the reproduction of labour which requires access to quality education, inexpensive health services, social and low-income housing, as well as it needs to manage insurance funds properly.”

Alaedini also underlined the significance of social dialogue and effective poverty alleviation programs that are community based, decentralized, and empowering. Most importantly, Alaedini stressed the importance of international relations and the regional component in economic development, and the need to think in regional terms. Therefore, a framework that prioritizes regional development is critical for Iran and other countries in the Persian Gulf region, as well as Central and Middle Eurasia, where the country is a key player.