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The government must take effective measures to re-engineer the distribution system of essential commodities so that the vulnerable strata are the biggest beneficiary.
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Many economic experts are of the opinion that poverty is rearing its ugly head in Iran, as the prices of housing, public services (transportation, health), as well as other essential commodities, go through the roof. Under the circumstances, people are no longer able or willing to invest in the production and services sectors, and the purchasing power of households has deteriorated.
As Persian daily Donya-ye Eqtesad reports, poverty has many aspects and includes:
- Lack of material need, typically including the necessities of daily life, like (food, clothing and shelter). Poverty in this sense may be understood as the deprivation of essential goods and services.
- Insufficient income and savings.
- Social exclusion, dependency and the inability to participate in society. This would emanate from lack of education and information.
Difficulties
To resolve the problem and increase peopleÕs standard of living, Iranian governments have granted direct and indirect subsidies for basic products and services, in addition to other supportive measures. This is important because governments have always tried to focus their programs on lowering the costs of living at all levels.
However, inefficient supervision over programs designed to reduce costs have increased public income and at the same time have had inflationary effects. This has also resulted in increasing the volume of liquidity and psychological pressures. All these have worked together to form a vicious cycle of poverty.
In the past, housing was one of the main areas in which households spent a large portion of their income. State policies were designed in such a way that households could not go up the property ladder, let alone invest in the housing market.
And in the absence of economic leverage, people are unable to save, let alone invest in productive activities.
Given their financial means, people usually face two options:
- Participation in activities with quick and guaranteed returns: In this case, most activities are centered on middlemen activities and there is no productive activity in sight. In other words, there are no productive investment activities.
The outcome is further inflation for the national economy. And this is made worse by middlemen activities in commodities such as medicine.
- Purchase of luxury goods: In the absence of an institutionalized culture to save and invest, and also lack of trust and higher risks in the production sector, people tend to purchase luxury goods, which besides being inflationary, is also counterproductive.
GovÕt Measures
The government should devise policies that impact households directly and help strike a balance between their incomes and expenditures. It is also expected to make fundamental changes in its policies and prioritize the amelioration of economic pressures.
The housing sector is where most of the household money are usually spent on. So the government should step forward with policies to make housing more accessible.
The government should act in a determined and active manner to help reduce peopleÕs daily expenditures. To start with, it can proceed by eliminating land prices from the cost of house construction. The policy has been successful in small towns and should be extended to major cities.
In the services sector, the government should organize and devise a specific strategy. For instance, the policy of improving public transportation is high on the agenda of many governments across the globe and should be seriously implemented in Iran, as it reduces expenditures for ordinary citizens and resolves problems related to pollution and public health.
To this end, the government of President Mahmoud Ahmadinejad is expected to pave the way for implementing related policies. The government should also implement policies to reduce the indirect cost of transportation on the prices of basic goods.
Other public services such as inexpensive health and treatment should also be provided, in view of the current high costs. The prevention, treatment and management of illness and the preservation of mental and physical wellbeing is of pivotal importance.
The government must take effective measures to re-engineer the distribution system of essential commodities so that the vulnerable strata are the biggest beneficiary. To start with, it should eliminate middlemen and oversee the distribution of products at reasonable prices, in cooperation with producers and consumers.
Only by providing affordable essential goods and services, boosting income and facilitating social assistance will it be possible for the government to prepare a level playing-field for all strata and put an end to the cycle of poverty nationwide.