As recent international attention on Iran has focused on domestic unrest and talks over the nuclear program, the government now faces a major economic challenge. Change is in the air. Inflation is at its lowest in many years, the Tehran stock exchange has handled its biggest ever privatization and parliament is discussing the phasing out of universal subsidies on everyday items like electricity, bread as well as medicines. In a highly politicized country like Iran, commentators will assess such changes in terms of the country’s vulnerability to further international sanctions and whether they bolster or undermine the government of Mahmoud Ahmadinejad. But the deeper issue, according to Djavad Salehi-Isfahani, economics professor at Virginia Tech University and an expert in development economics, is whether the government can channel resources away from consumption, including costly subsidies, towards the investment needed for economic growth. To benefit more fully from having the world’s second
