SCOTT SIMON, HOST:
President Trump has rejected an offer by Iran to end the mutual blockade of the Strait of Hormuz, separating it from nuclear negotiations. The president told reporters on Wednesday...
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PRESIDENT DONALD TRUMP: Now they have to cry uncle. That's all they have to do, just say, we give up. We give up. But their economy is really in trouble. You know, it's a dead economy.
SIMON: What exactly do we know about Iran's economy right now? Djavad Salehi-Isfahani is a professor of economics at Virginia Tech, and he joins us now. Professor, thanks so much for being with us.
DJAVAD SALEHI-ISFAHANI: Thank you for having me.
SIMON: Iran's economy was struggling before this war. There was high inflation, currency devaluation, mass demonstrations in the streets. What about now?
SALEHI-ISFAHANI: Well, it's got to be much worse because of - you know, 30-odd days of bombing has destroyed much of the industrial capacity. But it hasn't quite affected living standards or, at least, hasn't caused hunger, which is something you get during a revolution. But we anticipate that when the war is over, there's going to be a lot of unhappiness and be more information about what's going on. All we see now are prices that are rising very rapidly, and we wonder how it's affecting the consumption of the poor.
SIMON: What - Iran's deputy labor ministry said at least a million jobs have been lost since the start of the war, perhaps another million lost in the informal economy, and some estimates put that number closer to 4 million. Do those numbers, plus inflation, the loss of millions of dollars daily in trade - is that enough to make Iran say the uncle President Trump wants?
SALEHI-ISFAHANI: It's going to make life very miserable, but I don't know if it'll go far. Iranians are proud folk, and they have withstood eight years of war against Iraq, which was, by the way, partially aided by United States in the 1980s. The economic conditions were worse at that time than they are now. So I don't know where is the so-called breaking point. The unemployment numbers that you mentioned are probably on the mark. I would suspect that 2 million is the minimum of the number of jobs lost. And it's a ticking clock because job losses lead to more job losses because it cuts demand. More industries can go under. So they are looking at a fairly bleak situation in terms of jobs.
What they are doing now to maintain living standards or consumption standards is put cash in people's accounts. That's something that they came up with 15 years ago, and it's very effective. Every Iranian family has an ATM card and has a bank account that the government can deposit money into it instantaneously. The problem is that the money isn't backed by production. So the more money they put there to help the poor maintain their consumption standards, the higher will be the prices the next day. And I don't know how long this can go on. It all depends on the inventories of food they have. You know, in some sense, what we are observing is a race between two inventories - inventories of food supplies inside Iran and inventories of gasoline, fertilizer, other goods in the rest of the world.
SIMON: Yeah. Economists often see the circumstances of conflicts and upheavals coming before the rest of us do. If this situation continues, do you see the possibility of civil unrest, even an uprising in Iran fomented by the war?
SALEHI-ISFAHANI: Well, that's a very difficult question, but we do know that Iran has changed as a result of the war. Before the war, sanctions were hurting individual consumption very seriously. We know from their report that Iranians publish every year that calorie intake, protein intake dropped by one-third in the last 15 years under sanctions. Now, what's interesting about sanctions is that people didn't quite believe it was sanctions. Sometimes, or often, they believe - they blame the government, its corruption, its mismanagement. The war has changed that because now they can see that the difficulties are quite related to this aerial bombardment by United States and Israel.
So I think the government is kind of a little bit off the hook in terms of blame for why the situation is so bad, unless they are willing to say that Iran was unreasonable and should have accepted the terms. And unfortunately, the language that President Trump uses is so against Iranian sense of nationalism that it's very hard for Iranians to think that their government should surrender completely to outside forces because of the war. I don't think that will happen.
SIMON: Well, and let me try and underscore what you just said. If the United States had hoped to make Iranians rise up against the government, the result of the war so far has been to make them depend more and support the government.
SALEHI-ISFAHANI: Yes. That's true. And I think what is happening is that the government is who - which was blamed for economic conditions and for repression in general, is now appearing as a savior, is trying to protect the people. Every day, they're announcing there's more money being deposited, we are doing this, we are doing that, and I think that has made the population, which at the beginning may have been interested in the invasion, thinking that it would - regime change and it hasn't happened.
SIMON: Thank you, Professor Djavad Salehi-Isfahani.
SALEHI-ISFAHANI: Thank you for having me. Transcript provided by NPR, Copyright NPR.
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