Ways to Deal with Absolute Poverty!
The statistics released by the MRC indicate an increase in the
population below the absolute poverty line.
Why the number of people living under the poverty line has doubled?
In response to this question, Davoud Souri, economist, says: “The reason for
the spread of poverty obviously relates to us and our economic policies.
Instead of promoting the policy of economic boom, developing the economy and
creating employment and income, we have stifled the economy and would not
allow its growth and development.”
Souri, a university lecturer on economics, says: “Oil export has been our
only channel of income generation over the past years. This incorrect
internal policymaking has caused all external pressure and threat to affect
the main source of our economic revenues, disrupt the flow of wealth and
income to the country and bring a new shock to the economy.” He says that in
these economic fluctuations, the first group to suffer is wage earners and
the salaried employees of the private sector because the business
environment directly affects all activities in this sector.
In contrast, the public sector wage earners and salaried employees are less
likely to be affected by economic shocks. In other words, the government
disrupts the business environment with the main harm inflicted not on public
sector employees but on the private sector, he says, adding that currently
one out of two persons in Iran lives under poverty line. “The statistics are
worrying and set a record in the world class and even in our own economy.”
He emphasizes that the key to solving the problem of poverty is not a golden
and miraculous key and the solution to reduce poverty is not simple. What
follows is an interview with Souri:
The Majlis Research Center (MRC) recently released a report showing that in
1396 (2017/18) 16 percent of the population lived below the poverty line but
the figure reached 23 to 35 percent a year later. What has caused the number
of people living below the poverty line to double in about one
The poverty line has several definitions and is examined from multiple
perspectives. But what the MRC considers as the basis in its report is the
absolute poverty line and its income concept. That is to say households
should have enough income to meet their least needs. Minimum needs too are
determined according to community standards. Namely, with due attention to
the consumption model of the community and the household size, it is
determined how much minimum living standards are and on that basis absolute
poverty line is determined. This line means that people under the line do
not have the minimums of life and the health of these people is at risk.
The statistics released by the MRC indicate an increase in the population
below the absolute poverty line. But in reviewing these numbers, we should
consider two points. First, the last available statistics on households’
budget relates to the calendar year 1396. As a result, what is said about
poverty statistics this year is based on statistics of 1396. But the
statistics for the year 1397 (2018/19) can be predicted. It means that the
poverty rate has been predicted through the previous information and
examination of indicators such as inflation, exchange rate, unemployment and
economic growth rates.
The target rate in 1397 is between 23 and 35 percent, and the figure
projected for 1398 (2019/20) is about 50 percent. It is said that about five
deciles will go below the poverty line. An increase in inflation and a drop
in the economic growth rate are two variables that clearly show the poverty
rate will increase.
What happens that in just one year, the population under absolute poverty
line is doubled?
It is true that population has doubled under the absolute poverty line in
one year, but the process of poverty deterioration is not a sudden and
one-year process. This shows that the society has become poorer. If we
assume that the population of 80 million is above a line, over the past few
years, the concentration of these people has risen around the poverty line.
It is true that in the year 1396, only 16 percent were under the absolute
poverty line, but many more people were around this line and were not
considered poor, but by implementing some policies and changing the
indicators, they have gone under the poverty line as well.
Why the society gets poorer? Some consider the sanctions to be responsible
for our economic problems as they have affected the climate of the economy,
while others believe that sanctions have less effect and wrong government
policies are the main factor.
In the past few years, the status of our economic indicators has not been
favorable. Inflation has increased and this trend is expected to continue.
In the meantime, the economic growth rate for 1397 and 1398 is projected to
be negative and there is little hope for growth. On the other hand, although
the economic growth rate has been positive in the past few years, it has not
been at a level to increase wealth and household incomes. Since the
beginning of the 2010s, only in one or two years our growth has been
acceptable thanks to oil revenue not generation of wealth. As a result, it
has not been able to affect the well-being of households. You are asking why
the society has become poorer and I believe that nothing new has occurred.
We have been experiencing similar economic problems for decades, and our
economy has always followed a downward trend and this decline has been more
severe since the 2000s. Some believe external pressures are the main factor
and some blame internal policies.
The reason for poverty creation and aggravation is a combination of all
these factors. The problem is that we were not able to create an employment
process in our country. Over the past several years, our only revenue
channel has been oil sales, and our sole economic operator has been the
government. This inadequate internal policy has caused all external
pressures and threats to affect the main source of our economic income and
disrupt the flow of wealth and income to the country and bring a new shock
to the economy. The reason for the development of poverty obviously relates
to us and our economic policies. Instead of applying a policy of thriving
economy and economic development and creating employment and income, we have
stifled the economy and have not let it grow and develop.
Which long-term and short-term policies have led to escalation of poverty in
The most important factor that leads to rising poverty is that markets do
not operate properly and the business environment is inadequate. If you look
at the composition of poor households, these households are the ones that
directly affect the economic situation of the country. Most of them are
private sector wage earners and salaried employees and any change in the
economic situation will directly affect them. This is while government wage
earners and salaried employees enjoy more stability. Economic fluctuations
do not affect the government’s income and those of the wage earners and
The fluctuations in the economy and any tension in this area directly affect
the lives of the wage earners and salaried employees of the private sector.
That’s why these problems will continue until we can lead the business
environment towards wealth creation and distribute this wealth among its
producers. But instead of creating a business environment for wealth
creation, the government has tried to earn revenues over the years - mainly
from the sale of oil - and divide it among people, and tries to fight
poverty in this way.
According to statistics, in calendar year 1397, the government has paid
2,170 trillion rials to supply basic goods that is more than three times the
This is the wrong policy the government has adopted. Instead of preparing
the environment for creating wealth, it disrupts the business environment.
The budget that must be spent on infrastructure and creation of employment
is spent on distribution of rents for import of essential goods. This is the
wrong policy the government adopted and implemented and now everyone is
admitting it was incorrect. It is wrong for the government to think that it
can reduce poverty by distributing resources. This is a view that was
exercised in a different form by different administrations. One government
spent the resources to import goods at low price foreign exchange. Another
offered low-cost loans and yet another cheap supportive packages. Followers
of this view think they can create well-being and jobs through such
spending. But the right solution is that the government spend these
resources on investment and development. In this way people could be
employed and these huge resources could be paid to them in the form of wages
Statistics show development of absolute poverty in the society. What are the
consequences of poverty spread?
Poverty is a major problem and has many consequences. It can lead to social
unrest, people’s disability; by depriving the people from education it can
reduce the possibility of future income generation and plunge the society in
poverty trap. In this way, we are caught up in the poverty trap, and this is
very costly for the society. The face of poverty is not a nice face, and
half of the society cannot afford the minimum costs of living; this can be
the root of many adversities.
We are always looking for solutions to problems. But can we provide a
solution to reduce poverty?
You see, there is no golden key to improve the economy and eliminate poverty
once and overnight. There is no middle way and miracle to improve the
business environment. This is a long process. Iran’s economy needs two to
three decades of economic stability and a vision that focuses on the
creation of wealth. The production of wealth is achieved by employing
manpower, existing capital, allowing innovations and creativities and
thriving market. It is only with this method that we can generate wealth in
the next two to three decades and eradicate poverty. Our society has not
become poor all of a sudden and to save people from poverty cannot be done
once and needs time. Solving poverty and economic problems is not easy.