Sanctions of Iran: A Paradox between Political System and Economic System in the Finance Capitalism Geography and Reflections on Political Economy

Document Type : مقالات علمی -پژوهشی

Authors

• Isa Piri
• Leyla Hashemi

University of Zanjan

https://doi.org/10.22067/pg.v2i8.69868

Abstract

Extended abstract

Introduction

Sanction is conceptualized as the restricting trade and economic activities of a society or political unit in order to put it under pressure in the course of compliance and control. Gilpin (2003) maintains that economic sanction means intervention in economic relationships with a political import. To put it another way, economic sanction is the hegemonic action of a higher power against a subaltern country, and a reaction to a behavior undesirable of the hegemonic player. In the context of finance capitalism and transformations of a globalizing economy, the US and the EU are the main players and activists in the geography of central capitalism and usually make use of economic sanctions as a means of changing the political behavior of countries Geography of capitalism as the role model of socio-economic order emanated from the free market economic system, and also from the hidden hand of supply and demand of goods, services, and desirable price entails inequality and a win-lose game. In other words, center-periphery capitalism results from a hierarchical system of economic power. Economic sanction thus indicates the non-coordination of the political and economic spheres of neo-liberalism in the foundations and principles reflected over by political and economic groups in the course of moving from governmental capitalism and Keynesianism toward unorganized capitalism and neo-liberalism in the 1980s.

Theoretical Framework

The transformation of capital circulation’s nature from production spheres of goods and services to finance capitalism, fanatic stock trading, and so forth is rooted in neo-liberalization of economy and political governance, indicating deregulation, privatization, a minimum interference of state in the market, and an increasing appreciation of private ownership institution. Shrinking government means leaving more room for private sector and multinational companies, which more than ever employ political sovereignty. Nation-state hegemony was achieved through investing public resources in the course of marketing of their own products and also producing a new geography for company’s capital circulation. The advent of neoliberal theory in 1947 owes to Mont Pelerine Society spearheaded by Friedrich August von Hayek and the membership of renowned scholars like Ludwig von Mises, Frank Knight, George Stigler, Karl Popper, and Milton Friedman (Harvey, 2005). Neo-liberalism maintains that maximizing the range of transactions’ achievements based on market and increasing such transactions’ number would maximize community benefit; hence, it makes an effort to engage all human actions in the market domain. One of the main paradoxes of finance capitalism is the systemic risk whose proportions could be extended and made more comprehensive by the economic sanction challenge. Systemic risk reflects the fundamental paradoxes of capital accumulation. 

Method

Concerning the four main methodological paradigms of the humanities, it should be asserted that the present study is critical. Therefore, it adopts an explanatory approach with a documentary and library study design.

Results and Discussion

The transformation of capital circulation’s nature from production spheres of goods and services to finance capitalism, fanatic stock trading, and so forth is rooted in neo-liberalization of economic, political governance, indicating deregulation, privatization, a minimum interference of state in the market, and an increasing appreciation of private ownership institution. Neo-liberalism is basically a reaction to contemporary welfare-promoting government, especially in the power structure constructed by trade unions and governmental bureaucracy which are caused by destructing market system (Hettne, 1995). There was an increase in the OPEC oil production in the wake of Arab oil embargo of 1973 and also the accumulation of the capital generated from the petrodollars of oil-exporting countries in the US banks that provided the U.S. and U.K. banking system with a vast resources of wealth, which were desperately in need of new opportunities for investment and consumption markets beyond the crisis-stricken borders of welfare-promoting government and Keynesian geography. The capital circulation in the international setting and free trade, which ultimately culminated in the replacement of the GATT[1] with WTO was, thus, rooted in the same need of big and multinational companies. The establishment of the EU in 1991 in Maastricht, the Netherlands, the legal system of visa, Schengen citizenship, and the policies of the International Monetary Fund (IMF) and the World Bank were intended to encourage and promote neo-liberalism in socialist or social-democratic East European or Latin American countries in the 1980s in a way that it serves to extend the circulation of company capital geography and globalizing financial asset. However, the economic sanction of Iran reveals the paradox of the political system and economic one in the context of such a geographical resolution. In our view, the subject marking sanction, in general, and the Iranian sanction, in particular, as a representation of the paradox of two political and economic systems in finance capitalism is the issue of capital circulation.

Conclusion

To address the innate drawbacks and move away from the systemic risk and periodic crises of capital accumulation, national and international neoliberalism were suggested by a set of politicians (Margaret Thatcher Ronald Reagan, and Richard Nixon, 1980s), Homo Academicus (Mont Pelerin Society spearheaded by Friedrich August von Hayek and the membership of renowned scholars like Ludwig von Mises, Frank Knight, George Stigler, Karl Popper, Milton Friedman, and The Chicago Boys), urban spheres scholars (David Harvey, who was designing neoliberal spaces in urban planning in New York in 1960),  Bankers like Lewis Powell (a strong band of investor bankers of New York who refused to extend the installments pay up and its liquidation, asked by the federal government in 1975, following their announcement that they would only withdraw their refusal upon the establishment of new institutions in the city’s budget), international institutions (such as the World Bank, FMI, and Bank for International Settlements), institutional tactics (deregulation, privatization of public services, shrinking government maneuvering space, and the vast financialism of economic activities), and fundamental thoughts like protecting Wall Street in the face of main street. Main Street means usual, ongoing, and public economic activities and functions of the city. By the way the neoliberals believed in the case of any problem arising from the relationship between the Main Street and the Wall Street, the government should take the side of the Wall Street. The fundamental principles of neo-liberalization were deregulation, privatization of public sphere services and national economy, financialization of capital, shrinkage of action sphere and jurisdiction of nation-states, etc. It is worth mentioning that all such efforts were intended to circulate capital freely and avail of the vast potential consumer market in the neighboring countries of Latin America, Asia, and Africa. The free circulation of capital and removing political, economic, cultural, and geographic obstacles seem to fall short in the face of periodic crises as it is the case in the Iranian economic sanction representing the fact that besides other innate paradoxes challenging neo-liberalism and finance capitalism, there seems to be some type of non-coordination deep-seated in the political system relationships and a capitalist economic system. Whilst economic system seeks to open more geographic territories and borders for free circulation of capital and earning more benefits from far-off geographic areas, political system, imposing economic sanction on Iran, closes the opened borders to transnational companies and also fuels and deepens the debt crisis and stock market crash of the Wall Street and real estate crisis mostly emanated from the formation of investment bubble.
 
[1] General Agreement on Tariffs and Trade

Keywords

• Sanction
• Paradox
• Debts crisis
• financial capitalism
• geography of core- periphery
• system risk

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