Now that they’ve had their bloody crackdown, the next step for Iran’s mullahs is economic reform. That, after all, is the “China model” they’ve been talking about in Tehran for years. If we give the people a taste of the good life, it will take their minds off political freedom and we’ll get to keep our authoritarian regime. The problem is, there is very little evidence that Ayatollah Ali Khamenei and Mahmoud Ahmadinejad have any clue how to reform and open up their economy the way Beijing’s mandarins did after 1989. Or that they want to even try.
Ahmadinejad, in fact, did the opposite during his first term, embracing socialism and a blinkered populism that devastated the Iranian economy. He strong-armed the Central Bank into driving down interest rates artificially, risking hyperinflation; shifted back to a command economy by slowing privatization; and misused much of the nation’s $60 to $70 billion windfall oil revenues, doing little to ease unemployment. Ahmadinejad’s policies hurt “a lot more than the international sanctions,” which are generally seen as a nuisance that merely drives up the cost of doing business, Saeed Shirkavand, a Tehran University economist, told me in 2007. Shirkavand was one of 59 economists who signed an open letter to Ahmadinejad criticizing his policies back then.
While many Iranians recognized that Ahmadinejad has deepened their country's international isolation with his outrageous and unnecessary comments on Israel and the Holocaust, most of the criticism of him focuses on his mishandling of the domestic economy. Hence, if as expected the protests are silenced with force, the discontent isn’t going away. Ahmadinejad’s base is Iran’s poor, but they’ve been as hard-hit by inflation and the tail-off in oil revenues. Now that Khamenei has shown he has clay feet spiritually, and his confederate Ahmadinejad has stumbled economically, it’s hard to see how the China model works for these guys much longer.