As his reign drew to a close in the late 1970s, Shah Mohammad Reza Pahlavi had few allies. He had persecuted the Communists, thwarted the advocates of liberal democracy, antagonized conservative landholders, and provoked the religious conservatives. Having publically opposed or oppressed almost every group in Iran, the Shah sowed the seeds of his own destruction. When the Islamic Revolution broke out, he had few but his remaining loyal soldiers to turn to.
Mahmoud Ahmadinejad seems unwittingly determined to follow the Shah's path. Having arrayed the military, conservatives, Shiite clerics, and Supreme Leader Ayatollah Ali Khamenei against the reformist Green Movement in the aftermath of the disputed presidential election of 2009, he began his second term as president under immense pressure. If his term was unsuccessful, this coalition would undoubtedly regret its decisions--and without their support, his government might not last. Since the election, however, Ahmadinejad has provoked almost of all of these constituencies. His economic policies have driven up unemployment and caused rapid inflation, upsetting technocrats, economists, and the working poor. His cabinet appointees and domestic reforms have provoked sharp confrontations with the parliament. Most audaciously, he has publicly defied the will of the Supreme Leader himself on numerous occasions. Is Ahmadinejad sowing the seeds of his own destruction, or does he have the clout to survive until the end of his term in 2013?
Iran's debilitated economy--marred by inflation, unemployment, and low growth rates--has been severely strained under Ahmadinejad, whose ungainly combination of populist economics and cronyism has led to inefficient allocation of oil revenues, unsustainable state subsidies, and the highest budget deficit since the Islamic Revolution. Real GDP growth has declined every year since Ahmadinejad took office, reaching a new low of 1.5 percent in 2009. Inflation, driven by the government's swelling deficit, this year reached about 20 percent, while unemployment is currently around 24 percent. This is partially due to Ahmadinejad's policy of tying minimum wage to increases in consumer prices while mandating that interest rates remain below inflation, artificially incentivizing investment in projects centered on capital, rather than labor. Additionally, his continuation of a longstanding policy of pegging the exchange rate of the currency, the rial, to the dollar has driven up imports and crippled domestic manufacturers.
This economic mess has provoked the ire of numerous leading Iranian economists, who have publicly condemned the regime's policies as inconsistent and weak. On the other hand, Ahmadinejad's recent moves to reduce subsidies on energy and food have imposed new burdens on the working poor and middle class, who have responded with protests. As over 70 percent of the government's budget is paid for by oil exports, shrinking demand from China and Japan in 2010 (by 24 percent and 14 percent respectively) puts mounting pressure on the Ahmadinejad administration and exacerbates the country's economic woes.
The Majles, Iran's parliament, has taken notice of these policies; despite being dominated by conservatives, the parliament has gradually become a hotbed of opposition to his rule. Yet Ahmadinejad has repeatedly refused to sign many of its laws and complied with barely half of them as of early 2011. Led by pragmatic conservative Speaker Ali Larijani, the Majles has conducted aggressive inquiries into the affairs of the administration: questioning" the competence and qualifications of Ahmadinejad's ministers, obstructing his legislation, and threatening him with impeachment. Its impeachment of the Minister of Transportation this February was perceived as a targeted blow to Ahmadinejad, who denounced the parliament's move as illegal and has attempted to circumvent it. …