TEHRAN — AT a rally in a poor Tehran neighborhood mosque before Friday's parliamentary election, Said Rajaie Khorassani addressed a rather thin audience of about 100, praising at length "the advantages of living in a totally Islamic society."
In the Iranian Islamic tradition, men sat on the floor and women stayed behind a curtain on the mezzanine. When the deputy, a supporter of President Hashemi Rafsanjani, finished he faced a slew of aggressive questions.
"How are you going to solve the housing crisis?" a woman asked.
"What is the government doing to slash raging inflation?" a man added.
"Our income comes from oil," Mr. Khorassani repeatedly answered. "For the time being the government hasn't enough money to satisfy all the population's needs. Our priority goes to rebuilding a powerful industrial structure."
Indeed, Iran is in dire economic straits, and Western diplomats here put the monthly inflation rate at 20 percent.
But despite the hardships, early election results yesterday gave Mr. Rafsanjani and his supporters a landslide victory. Of the 30 candidates with the largest number of votes in Tehran, 29 are Rafsanjani moderates, Ministry of Interior figures showed.
Most leading members of the Iranian parliament acknowledge that the economy is the worst it has been since the fall of the imperial regime in 1979.
"Those who claim there is no inflation are talking nonsense," said Mehdi Karrubi, the speaker of parliament, in a speech last week. "Problems are numerous and the low-income [earners] are hard pressed."
A woman at a food market concurs. "Look, three months ago a kilo of low quality fat meat cost 2,000 rials [$1.38]. Last month, it soared to 3,500 rials [$2.41]. And today I was stunned to see a kilo of meat posted at 4,500 rials [$3.10]. Chicken and egg prices are also going up by the day. I can't follow this pace. My husband and I are state employees."
Under the shah's regime no one would have dared to openly criticize. She goes on, "The value of real estate is skyrocketing as well. That means nowadays you can't rent a two bedroom apartment in a middle-class neighborhood for less than 200,000 rials [$137.93] per month.
"I know of women and men who had to divorce simply because they couldn't find a place to live together," she says.
"Iranians have already tightened their belts to the maximum. It can't go on like this for long. People are going to starve or there will be a social explosion."
Basic commodities are still available at specially reduced prices with food stamps. But a few weeks ago the government withdrew chicken and eggs from the list of products available with coupons. Western observers here see this as a sign that Rafsanjani wants, in the long run, to do away with the coupon system entirely.
To alleviate the burden of inflation on the middle and lower classes, the government has given state employees an average salary rise of 30 percent. But this far from matches inflation and many Iranians have to take two or even three jobs to survive.
Of course, not everyone is so financially pressed. Bazaar merchants have, thus far, been the main beneficiaries of the present situation. Western attaches also say university-trained technicians employed by private companies can make salaries 10 or even 20 times above the average.
This uneven distribution is the result of the gradual devaluation of the rial that Rafsanjani has undertaken over the past two years. In the 1980s, the official rate of the dollar was 70 rials, while the black market value was 1,450 rials. Today, all Iranian banks change dollars at the 1,450 rate.
A French businessman, who has lived in Iran for decades, says, "Rafsanjani's policy is basically healthy and courageous. He is tackling problems inherited from the Iran-Iraq war. But he is also solving problems created in the 1970s by the imperial regime. For example, he is step-by-step reducing state subsidies on basic commodities."
A European diplomat adds, "If he [Rafsanjani] can avoid social disturbances he will succeed. New private companies are being set up throughout the country, which shows recovery is near."
An Iranian journalist says ironically, "Western businessmen and diplomats love our president simply because he is a free marketeer and they hope there will be big business opportunities in Iran. I agree that the government's austerity policy is bearing fruit. But the social cost is appalling."
Rafsanjani's policy is sharply criticized inside Iran by radical deputies who in private go as far as accusing him of betraying the ideals of the Islamic regime set up by Ayatollah Khomeini, who always insisted that the government pay the greatest attention to the poorest classes.
In an interview with a small group of Western journalists, Ali Akbar Mohtashemi, a leader of the radical faction, said, "According to Islam, all large industrial conglomerates should be state owned. Medium-size businesses should be controlled by Islamic cooperatives. Private entrepreneurs should only be allowed to run smaller companies. The present government policy is wrong."
Fakreddine Hejjazi, another radical candidate, adds, "Islam doesn't mean capitalism. Islam has its own economic doctrine and we should implement it."