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How US and Iran are trading economic places

HDN | 7/29/2011 12:00:00 AM |

It is an era when old notions about who in the world is on top fall routinely. Our heads hardly turn anymore when a Mexican industrialist rescues the New York Times, an Indian buys out Jaguar or Turkish Airlines becomes Europe’s carrier of the year. Globalization means lots of trading places.

It is an era when old notions about who in the world is on top fall routinely. Our heads hardly turn anymore when a Mexican industrialist rescues the New York Times, an Indian buys out Jaguar or Turkish Airlines becomes Europe’s carrier of the year. Globalization means lots of trading places.

But it is still hard to get used to the United States headed toward financial default as the U.S. Congress remains hostage to escapees from the Flat Earth Society, otherwise known as the Tea Party. This is all the more striking as the new poster child of financial probity and reform is none other than Iran.

Basically, the U.S. and Iran have the same problem – out-of-control spending. The U.S. spends $250 billion annually just on debt interest. The highly public fight over the “debt ceiling” is really tactical, the longer-term strategic challenge unresolved. U.S.’s Republicans, acting more like Iran’s Republican Guard ideologues, want to impose their own true faith, in which taxes are the Great Satan. As of Friday the intransigence was still pushing the country’s economy toward collapse.

Iran’s problem is about $60 billion in annual spending it can’t afford, to date largely on subsidized energy.

The world’s media has been captivated by this high stakes standoff between Barack Obama and the more unruly Republicans. But a bit of ink has also been dedicated to Iran. For Iran’s Mahmoud Ahmadinejad is winning global accolades for his deft handing of spending cuts. He is ending subsidies that encourage energy waste, setting aside as a result more oil for export and buying off political protest with a $40-a-month check to poorer households.

Iran’s new prudence began last December. In April, the IMF issued its first public praise. Since then none other than that icon of global capitalism, the Wall Street Journal reported: “In the face of mounting international sanctions, [Ahmadinejad’s] government has embraced over the last seven months what the IMF calls one of the boldest economic makeovers ever attempted in the Middle East.”

Hardly a pushover when it comes to Iran’s theocracy, Britain’s Economist also chimed in: “When a mission from the Fund cheered the Islamic Republic’s economy earlier this month, heaping praise on the policies of its ruthless government, eyebrows spiked upwards as in a comic scene in a Persian miniature.”

So there you have it. Another great trading of places. The country that invented the IMF and the World Bank, the nation that hosts the planet’s reserve currency, is playing a fool’s game. By the end of next week it could well have a Moody’s rating on par with that of Panama.

Meanwhile, the leader of a country who frequently rails against the evils of capitalism is doing just the opposite and winning plaudits from the world’s Lords of Finance just as they wring their hands over the U.S.’s incompetence. It’s all the more ironic that Iran has reached this pinnacle of prudence thanks to the U.S.-led, anti-nuclear sanctions. Those sanctions have hardly steered Iran in a new nuclear direction but they are surely easy to blame for the pain associated with Iran’s reforms.

Republicans, meet the Republican Guards.

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