Tuesday, April 24, 2007

Housing problems and the headman of Masouleh

One immediately recalls the story about the headman of Masouleh [a small area in northern Iran] after listening to the speech of Amir Mansour Borghei, the head of Iran’s Planning and Management Organization, who explained the behind high inflation in the housing market. Mr. Borghei argued that state-owned banks should have monopoly over issuing housing loans, implying that private sector loans were responsible for driving housing prices up.

The headman of Masouleh is the man who asked his villagers to help him build a small entrance gate on the road adjacent to his house. The villagers thought to themselves, this poor headman, he had become weak and feeble from working hard all his life, and now desired a gate, so they accepted. After the gate was built, the headman ordered all other roads to be closed, so the villagers closed them. The villagers asked why other roads were being closed. The headman responded, what was the point of working so hard to build the gate, if you were not going to pass through it? The villagers said, but we have to walk farther if we must pass under your gate. The headman said, this road is better anyway. The villagers said, we have heavy loads to carry. The headman responded, you will get used to it. Soon after, the headman announced that whoever refused to pass under the gate would not receive anything from him. He also brought the village doctor and cleric to the house next door to his; whoever wanted to get married or get a death certificate, or had stomach pain, had to pass through the gate.

Soon things got so bad that if someone unknowingly used another road to feed his cattle, or to take a chicken to his ill neighbor, or to give wheat to another neighbor, the next day the headman would a report that so-and-so has done something wrong and such is his punishment. The villagers were confused at to what this was all about.

The end of the story of the headman of Masouleh is clear. People either destroyed the gate or removed the headman from his post. But the story that Mr. Borghei has created requires attention. He claims that loans issued by private banks are the reason behind inflation in the housing market. Mr. Borghei’s story makes one laugh. Even if we accept his claim that banks seek profit, then that is a good thing: a private sector that seeks profit is a good private sector. Everybody should seek profit. People are tired of hearing about justice and love and see the ones who talk about it make the most profit out of anyone. So let us seek profit. The government should just keep an eye on things in a society where everyone is seeking profit. Actually, it is better if the government sought profit in its international and regional relations as well.

With the high inflation in the housing market, even the 180 million rial [about 20 thousand US dollars] loans issued by the Maskan Bank are not of much use when it comes to purchasing a house, since this amount comprises only a small portion of the house’s price. The loans are thus good for a quick buy-and-sell to make profit, not for purchasing a house.