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On the latest episode of GoodFellows, Senior Fellows John Cochrane, H.R. McMaster, and Niall Ferguson, as well as moderator and Distinguished Policy Fellow Bill Whalen, are joined by their Hoover colleague, Research Fellow Abbas Milani, Director of Iranian Studies at Stanford University, to discuss the latest from the Middle East amid a ceasefire and a flurry of diplomatic exchanges.
This conversation guide presents essential insights from one of the West’s leading experts on the Iranian regime.
Quote of the Day
Abbas Milani describes the strategy of the Iranian regime’s surviving leadership:
What makes sense to me is that this regime, in my view, has been beaten militarily badly. They know how badly they have been beaten. They know how their infrastructure has been damaged. They know how their economy is collapsing, and they are trying to make every effort possible to make a deal with the United States to get out of this impasse. But because they’re bullies, because they have ruled as bullies for 47 years, they can’t be appearing to be making concessions. So they want to make concessions but declare it as forcing it down the throat of the US and Israel.
The Central Issue: What’s Going On in Iran?
Abbas Milani on what motivates those currently in charge of the Iranian state:
This is a corrupt ideological regime. They’re now more corrupt than they are ideological. They want to keep property rights [to things] they own. The [Iranian Revolutionary Guard Corps] literally controls at least half of the Iranian economy. Whoever sits in Khamenei’s place, whether it’s the IRGC de facto or de jure, gets their hands on a hundred, at least, billion dollars of assets. They’re not talking about small change. So, this is a mafia-like regime that is going to try to stay in power. But like all mafias, once there is that much money involved, there is infighting.
John Cochrane on the current economic pressures on the Iranian regime, and whether this will be sufficient to bring it down:
Our current strategy is not military. We’re blockading the Strait of Hormuz and hoping that economic pressure does it, which it seems like a step we should have taken a while ago. But on the other hand, that stops their oil exports. But Venezuela, North Korea, [and] Cuba have gone on for a very long time with absolutely rotten economies. So, I wonder whether economic pressure alone will do the trick.
Milani responds to Cochrane’s economic analysis:
I think you’re pointing to a very important issue. I think maybe the critical issue: what. . . will topple this regime is the economy. It is the economy that is their Achilles heel because the economy is on the verge of collapse. The financial system is on the verge of collapse. The banking system, the second biggest bank went belly up a few months ago. . . So I think it’s the economy. Right now, you can’t take more than $7 from your own account in a bank in Iran [from an] ATM. You can’t take more than maybe about $100 from your account. Even that is impossible to get. Unemployment is on the rise. Inflation is at least above 50%. So, there is this remarkable level of incompetence, corruption, and economic challenges, and anger in the people. And the regime knows this.
Key Takeaways
Don’t Expect an Iran Endgame in Days, Weeks, or Months
Milani: “I don’t think [the regime is] going down in a matter of days or months, but. . . this regime in its current form cannot survive. That’s, I think, the difference between this regime and for example, the Nazis. Iran does have a very vast reservoir of people who want to change. They don’t want to make a radical revolutionary change necessarily. They want a society. They want an Iran where they can live normal lives. And [wherein] the Iranian culture, the Iranian economy can reach its full potential.”
What’s Going on With Leadership Changes at the Pentagon?
Former National Security Advisor H.R. McMaster says that with many firings of top brass, Secretary of Defense Pete Hegseth is largely “fighting a rear guard against phantoms.” As McMaster explains: “The problem is that both the advocacy for kind of radical social ideas or political agendas under Biden and the Obama administrations. . . was trying to drag the military into partisanship. We don’t want the Trump administration to do the same thing. Hey, hands off the military. So I just think that [the firing of Army Chief of Staff Gen. Randy George] is a big deal for that reason, but as [Bill Whalen] mentioned, it’s not unprecedented.
And I think it ought to be framed under, ‘Hey, the military’s not partisan.’ I mean, I don’t know any partisan generals or admirals. I don’t know any woke generals or admirals. I don’t know any extremist generals. There’s this kind of crazy narrative out there where the military is being used, like other institutions [are being used], to score partisan points. And the danger is that will diminish maybe Americans’ trust, or some Americans’ trust, in that institution [the US military].”
What is the Significance of Hungary’s Recent Election and the Defeat of Prime Minister Orban?
Niall Ferguson says: “This is a tremendously important development because many people thought that it wouldn’t and couldn’t happen, that Victor Orban had in effect become a fascist dictator and wouldn’t let go of power. This kind of thesis has been quite often aired. But now we know that he’s not a fascist, he’s a populist and therefore can be defeated in an election that was pretty free. Very high turnout, I think close to 80%. Not voting for a candidate of the left, mind you, because the winner is not ideologically very different from Victor Orban. That’s important. The reason that Orban was thrown out, I think was principally something we’ve been talking about already on the show: corruption and the perception that there was a kind of deep hypocrisy to Orban’s populism.”
What Effect Might the Iran War Have on the Trump Administration’s Midterms Prospects?
John Cochrane sees multiple possibilities: “Trump said early in the war, ‘I want America to win wars again.’ If we win this, if by the midterm elections, the Iranian regime is gone, yes, Trump gets a solid win. Anything else? And I think the forces of ‘this is all a mistake, gas prices are high,’ mean it’s a loss for Trump.” Of course, Trump won’t himself be on the ballot this November, but a change in partisan control of Congress could slow or stall the president’s policy agenda.
Recommended Reading
The Wealth of Nations by Adam Smith (1776)
The Great Degeneration by Niall Ferguson (2012)
Parting Wisdom
In honor of Tax Day last week, John Cochrane considers whether the United States could develop a more efficient and user-friendly tax system. He says:
The insane complexity of our tax code, especially as you gain a little bit of wealth, is just a national crisis. But we’re focusing on the wrong question. It’s like people who measure the effects of regulation by the number of pages in the federal register. [What really matters is] the damage that the tax code does economically. The amount of effort that’s put into avoiding taxes, arranging taxes, and so forth, as opposed to building better mousetraps, building better companies and so forth. [It’s] the [extraordinarily] high marginal rates combined with the Swiss cheese of deductions that hurts the economy.”
Niall Ferguson agrees, adding:
I completely agree with John. If we could get back to the principles of taxation enshrined in Adam Smith’s Wealth of Nations, simplify, simplify, simplify, what a blessing it would be and economically hugely beneficial. It’s one of the things I talked about in the book, The Great Degeneration. One of the symptoms of degeneration is excessive complexity of legislation and regulation. So, amen to everything John said.
That wraps up this GoodFellows conversation guide. If you like this companion to the show, or have any recommendations for future conversation guides, please let us know in the comments below.
John H. Cochrane is the Rose-Marie and Jack Anderson Senior Fellow at the Hoover Institution, Stanford University. An economist specializing in financial economics and macroeconomics, he is the author of The Fiscal Theory of the Price Level. He also authors a popular Substack called The Grumpy Economist.
Niall Ferguson is the Milbank Family Senior Fellow at the Hoover Institution, Stanford University. He is the author of sixteen books, including The Ascent of Money, Civilization, and Doom; columnist with the Free Press; founder of Greenmantle; and co-founder of the University of Austin.
H. R. McMaster is the Fouad and Michelle Ajami Senior Fellow at the Hoover Institution, Stanford University and distinguished visiting fellow at Arizona State University. He is author of the bestselling books Dereliction of Duty, Battlegrounds, and At War With Ourselves.