مطالعات اقتصاد سیاسی بینالملل (Feb 2021)
Iran's Political Settlement and Challenges for Effective Industrial Policy
Abstract
In recent years, the framework of political settlement to understand the differences in the performance of institutions in different contexts has been considered by researchers and policy makers around the world. Contrary to conventional analysis, which limits the failure of institutions to the capability of the state or cultural factors, this framework holds that the distribution of power determines the effectiveness of an institution. The distribution of organizational power of stakeholders determines whether these groups support, resist, or distort a particular policy or institution based on their "interests" and "capabilities." Thus, by understanding the distribution of organizational power, one can understand the reasons for the not so successful performance of a policy or an institution in a particular political context. In this study, by examining the developments of Iran's political settlement, an attempt was made to examine the challenges of using industrial policy in the political and economic context of Iran. The macro-implications of the Iranian political settlement show that the short-term horizon and low executive capacity of the government, which is the result of a competitive patron-client political structure alongside influential companies, have greatly increased the risk of policy capturing. Setting precise, specific and conservative goals can increase the chances of industrial policy success to some extent. Supporting wholly privately owned enterprises with less political influence can also be another way to reduce the risk of protectionist policies to be captured. Finally, it should be noted that in the current political settlement of Iran, the capture of government supportive policies by SOEs and para government companies is likely to be very high, and therefore any supportive policy should be formulated according to this policy trap.
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