Ahmadinejad the Weak

Casual Iran-watchers were captivated last week by the intrigue around erstwhile nuclear spy Shahram Amiri and his successful homecoming. But the Islamic Republic was likely keeping closer tabs on the Tehran bazaar — where shopkeepers and traders were on strike for more than seven days — than on Washington’s Iranian interest section, where Amiri awaited departure. The bazaar protests had little to do with the nuclear impasse or the Green Movement, but they are a sign of popular economic discontent and a likely harbinger of further turmoil to come.

Iran’s traditional covered marketplaces earn their reputation as objects of historic and architectural interest, but they aren’t just tourist destinations. They are still-active trading posts where small peddlers hawk their wares, and some of the country’s most wealthy import-exporters and wholesalers conduct their business. The immense, covered complex in downtown Tehran, for example, is home to tens of thousands of would-be entrepreneurs. The bazaars are not quite as central to Iranian life as they used to be — in the past 30 years, many of the most prominent bazaaris have either moved their headquarters to new business centers in Tehran and Dubai, while the Islamic Republic has carved out a privileged position in international and domestic markets for government foundations — but they are still at the heart of the national economy. The bazaaris are an interest group keenly aware of the leverage they wield, and unafraid to use it.

Last week’s protests were spurred by the national government’s attempt to increase the merchants’ annual income tax by 70 percent. Even though the government quickly adopted a conciliatory tone, the strikes persisted. The announcement last Monday that the government and the Guild Council, the bazaar’s official representatives, had negotiated a modest 15 percent tax increase made no difference: The shops remained shuttered, leading to clashes between bazaaris and government security forces. It was only this past weekend that traders agreed to again open their businesses.

The government is right to be concerned. The Iranian capital’s marketplace has proven among the most reliable catalysts of political upheaval in the country’s long history. Bazaaris have used similar methods of resistance to channel opposition to rulers and show support for larger political movements.  Bazaari dissent was instrumental to the successes of Iran’s constitutional movement of 1905, the nationalization of the oil industry in the 1950s, and the overthrow of the monarchy in 1979.

With those historic resonances, it’s no surprise that the Green Movement and its sympathizers have paid such keen attention to the marketplace rebellion. And the merchants’ implicit message of "no taxation without representation" fits broadly with the Greens’ liberal defense of civil rights. But expanding the already unwieldy and battered Green Movement tent to include the bazaaris may be a case of wishful thinking. There is little evidence that the bazaaris’ actions of the past week were anything more than a defense of their economic interests and profits. A revolutionary coalition is probably not in the making.

But even if the bazaar protests weren’t part of a larger political front, they do reflect deep tensions in Iran’s political economy that can’t and shouldn’t be ignored. Negotiations between the guilds and the government over taxes are nothing new, but these debates rarely spill over into the alleyways of the bazaar or lead to physical confrontations with security forces. The fact that in 2010 they have is a symptom of the perilous state of Iran’s broader economy and polity.

The macroeconomic data on Iran is not encouraging. Though the government has proudly touted that inflation has gone down to single digits, this is probably a product of economic recession and the cooling of the housing market rather than a sign of fiscal health and economic stability. The economic sanctions passed by the United States and Europe will also soon take their toll. Ordinary Iranians will probably pay higher prices at the cash register, but the sanctions will have implications for the commercial networks that import, export, and distribute consumer and other goods. Sanctions will bolster the position of shadowy transnational networks and middlemen, as well as the role of politically powerful actors, such as members of the Islamic Revolutionary Guard Corp, who are best equipped to skirt these regulations. Iranians are also bracing themselves for the impending radical reform of the subsidy system, which will replace broad price controls on basic goods with cash payments.

The combination of high unemployment, political turmoil, and continued threats of a military attack will soon lead to a drop in consumer spending and a cut in bazaari profits. Already, there’s reportedly been an epidemic in Iran of bounced checks. The bazaaris’ stance during this year’s tax negotiations was no doubt informed by the ominous economic horizon.

More generally, the clash between bazaaris and government agencies also reflects the public’s deep and longstanding lack of trust in state institutions — a situation that predated, though was no doubt exacerbated by, the disputed 2009 election and its aftermath. Two years ago, when the bazaars of Tehran, Isfahan, Tabriz and other cities banded together for a similar protest, the issue was a proposed Value Added Tax that would have required businesses to open up their accounting ledgers to government tax collectors. The bazaaris refused, largely out of fear of what else the government might do with the information. According to recent reports in Iranian newspapers, this year’s protests were also motivated by the state auditor’s insistence on having more control over bazaar receipts.

The new strikes and the government’s reaction underscore just how badly the government’s authority has eroded and how dependent it is on coercion when seeking the public’s compliance. What Iran’s recent protests have in common is their challenge to the regime’s sincerity. In the summer and fall of 2009, the government’s intent to conduct a fair election was at issue; this summer, the bazaaris were questioning the government’s good faith in establishing a basic quid pro quo of taxation in return for public goods and social services. The bazaaris’ hesitancy to accept the settlement between the government and the Guild Council suggests that many traders do not identify with their own state-recognized "representatives"; perhaps their recognition by the state is enough already to discredit them.

Finally, the inability of the government to extract taxes from the bazaaris is a symptom and symbol of President Mahmoud Ahmadinejad’s own lack of authority among the greater public. It is yet another example of the president having to backtrack from an openly stated policy to increase the government’s tax receipts. Ahmadinejad wanted revenue to establish a more efficient bureaucracy that, among other things, can better manage the economy. But Iranians who don’t feel bound to their hard-line president by a social contract have refused to back his reforms of the state.

Forced to compromise on the tax rate, the president has projected personal weakness, which may inspire future protests. Indeed, however demonized he is by the West, at home Ahmadinejad is seen as eminently vulnerable. Over the last year his government has faced open challenges from all sides: from ordinary citizens who have marched in street rallies, and conservative parliamentarians and newspaper pundits who openly rebuke his policies and question his commitment to the constitution. Meanwhile, workers have engaged in isolated, but regular protests against work conditions and lack of pay, and industrialists last week complained that their factories have not been receiving enough electricity.

The bazaar protests did not exhibit coordination with major civil organizations, nor did they rely on the kind of solidarity across socioeconomic groups that could truly threaten the regime. Yet, in a situation as politically fluid and economically brittle as Iran’s, minor events can embolden groups and undermine the most confident of rulers. These latest bazaari protests have not yet earned their place alongside the major Iranian protests of the 20th century, but they are pregnant with potential. Indeed, Tehran’s jewelers, textile sellers, and carpet merchants may ultimately have more to say in determining Iran’s future than the country’s nuclear scientists.