Those frequent companions on the world stage, Iran’s Mahmoud Ahmadinejad and Venezuela’s Hugo Chavez, share much in common — virulent anti-U.S. rhetoric, an inflated sense of their importance in the world, a boorish manner that alarms even their friends. And the two share something else: Neither is much of an economist.
How tough can it be, one may ask, with oil at nearly $100 a barrel, to run countries that are literally awash in oil money?
Plenty tough for these two, it seems. Both countries have spiraling inflation.
Iran’s official inflation rate is close to 17 percent, meaning that last year the currency by the government’s own admission lost close to one-fifth of its purchasing power. The actual inflation rate could be as high as 30 percent.
Senior clerics, including supreme ruler Ali Khamenei, who installed Ahmadinejad in power, are said to be losing patience. He took office promising to attack Iran’s intractable poverty and unemployment, and both have grown worse. His government faces a major test in March 14 parliamentary elections.
Chavez faces similar problems, although his are of his own making.
He faces an inflation rate of 23 percent. To boost his popularity, Chavez has pumped his substantial oil revenues into the economy, driving up prices. To rein in price increases, Chavez imposed price controls, which had the predictable result of creating shortages and further driving up prices. And his attempt at manipulating the currency means that there’s a black market in that, too.
Chavez has had one rebuff at the polls when the people rejected his proposed constitutional changes that would have given him dictatorial powers for life. He likely will remain popular as long as he has oil revenues to spend, but even that cash machine may be slowing down.
In his budget projections for Iran’s fiscal year, Ahmadinejad predicted that the price of oil might drop as low as $39.70. We can only hope he’s a better forecaster than economist.