Iran takes econ lessons from China

There’s a fascinating story in today’s Wall Street Journal about how some folks in Tehran are looking to Beijing for guidance on how to fix Iran’s disastrous, statist economy:

Iranian officials are looking to China for ideas on solving a riddle that has bedeviled strong-fisted governments the world over: How does a state loosen its suffocating grip on the economy without losing political control in the process?

On a tour of China late last year, a delegation of Iranian officials and members of parliament visited Shanghai and Shenzhen, two boom towns that exemplify China’s approach. Adel Azar, head of the Iranian parliament’s economic committee and a member of the 30-strong study mission, says he was shocked by the contrast between dynamism in China and immobility in Iran, a country with just one-eighteenth as many people as China and much more gas and oil wealth.

The trouble is, Iranian policy makers tend to have terrible ideas about economics. Would-be reformers are going to have to outmaneuver the quacks as well as those who may know better but have a vested interest in the status quo. And as one analyst tells the WSJ, the China model “doesn’t apply because Iran is not a low-wage economy. Therefore, it is not able to export.”

But there’s a bigger problem: the oil curse. Can you think of any large petrostates that have successfully diversified their economies? I can’t. And as the graph above shows, Iran is headed in the opposite direction.