Document Type : Research Paper

Authors

• Yavar Ahmadpour Torkamani ¹
• Parviz Mohammadzadeh ²

¹ Ph.D. Candidate in Institutional Economics, Faculty of Economics and Management, University of Tabriz, Tabriz, Iran

² Professor of Economics, Faculty of Economics and Management, University of Tabriz, Tabriz, Iran

Abstract

Over the past three decades, the repeated failure of structural adjustment policies in Iran has cast doubt on the effectiveness of imported shock therapy models in addressing the country’s economic and political challenges. The current study, drawing on the art of economics as the methodological framework, aimed to explore the economic origins of the persistent implementation of the failed shock therapy policies. It evaluated their impact through the lens of eight key factors that shape the emergence and consolidation of democracy: civil society, crises and shocks, income sources, intergroup inequality, political institutions, the middle class, globalization, and the Internet. The analysis revealed that shock therapy undermines democratic capacities and facilitated undemocratic decision-making. The study argued that such policies endure only within undemocratic governance structures. To support a transition toward participatory economic governance, this research concluded by  recommending a set of strategic measures, such as recognizing and responding to crises, fostering community-based policymaking, learning critically from international experiences, and empowering civil society.

Introduction

In Iran, proponents of economic shock therapy have consistently advocated for structural adjustment programs as the ultimate solution to the country’s economic, social, and even political issues. Characterized by market liberalization, privatization, subsidy removal, and trade deregulation, these programs have often been implemented without sufficient regard for the local context. Consequently, they have contributed to poverty, unemployment, stagflation, and social unrest. Despite repeated failures, the continued adoption of these policies over the past three decades suggests that they are deeply rooted in Iran’s institutional and ideological decision-making structures. In this regard, the present study tried to answer the following research question: Why are failed economic policies repeatedly adopted despite substantial evidence of their failure? The analysis aimed to explore the institutional, ideological, and structural origins of such undemocratic policies, with a particular focus on how the economic outcomes of shock therapy impact democratic development, and on the institutional conflicts and barriers that hinder democratic transition in Iran.

Materials and Methods

This study used the art of economics as the methodological framework. The art of economics is a problem-oriented approach that emphasizes contextual and institutional analysis rather than abstract quantitative modeling. Unlike the traditional dichotomy between positive and normative economics, the art of economics focuses on the practical application of theory to real-world problems in a given sociocultural context. In addition, the research relied on a combination of secondary data and empirical observations with theoretical insights from key scholars in political economy and institutional development—including Douglass North, Robert Dahl, Joseph Stiglitz, Manuel Castells, and others. Their theories converge around eight core factors that influence the emergence and consolidation of democratic structures, namely civil society, crises and shocks, income sources, intergroup inequality, political institutions, the middle class, globalization, and the Internet. Drawing on this composite framework, the study examined how structural adjustment and shock therapy policies undermine the democratic foundations in Iran. The objective was to demonstrate how the repeated application of such policies contributes to the weakening of democratic capacities and the entrenchment of undemocratic structures.

Results and Discussion

The findings indicated that the implementation of structural adjustment and shock therapy policies in Iran significantly undermine the core foundations of democratic development. These policies have weakened civil society, deepened income inequality, eroded the middle class, and constrained participatory political institutions-ultimately steering the country away from a democratic path. The resulting economic crises (e.g., inflation, unemployment, and stagnation) have intensified public dissatisfaction, yet have largely led to social disillusionment and lack of trust rather than organized collective action. The analysis of the impact of such policies on the eight core determinants of democracy revealed several critical issues. Civil society suffers from a lack of institutional support and limited capacity for mobilization, while shocks and crises have led to societal fragmentation rather than unity. Income sources have been captured by unproductive rentier elites, reinforcing extractive systems that deepen inequality. In addition, the widening intergroup inequality has exacerbated social conflict. Political institutions remain monopolized by elites, excluding the broad participation of different groups and individuals. The middle class has been marginalized, losing its vital mediating role. Furthermore, globalization-in the lack of effective state-led protection-has intensified both inequality and instability. Finally, the Internet and digital platforms, subjected to censorship and political control, have failed to become vehicles for democratic mobilization. Overall, the findings suggest that shock therapy has not only failed to deliver economic success but has also functioned within-and reinforced-an undemocratic political structure. This reproduction of authoritarian policymaking poses a significant barrier to democratic governance and participatory reform.

Conclusion

This study, grounded in the framework of the art of economics, critically examined the continued implementation of structural adjustment and shock therapy policies in Iran. It argued that the persistence of these failed approaches is not merely a technical error but is rooted in the country’s undemocratic institutional and political structures. Such policies have systematically undermined eight core determinants of democracy, thereby hindering the country’s democratic development. Nonetheless, meaningful reform remains possible, provided there is a shift in policy orientation and an attempt to foster participatory institutional foundations. Recommended pathways include recognizing and responding to crises, fostering community-based policymaking, learning critically from international experiences, and empowering civil society to overcome the free-rider problem. Furthermore, any successful transition must be grounded in a nuanced understanding of the logic of natural states and limited access orders. Only by addressing these structural constraints can a more participatory, sustainable, and equitable model of governance emerge.

Keywords

• Undemocratic Policymaking
• Shock Therapy
• Crisis
• The Art Of Economics

Main Subjects

• Institutional economy