Iran is best known as an exporter of terror and mayhem around the Middle East, but its leaders also provide a great example of how not to run an economy. Consider the country’s decades-long dalliance with industrial policy.

The Islamic Republic is big on economic self-sufficiency. The 1979 revolution led by Ayatollah Ruhollah Khomeini was based on a rejection of Western ideals, including globalization. One goal is to grow all its food domestically. Agriculture “must be the basis of everything,” Khomeini said. The problem is, water is the basis of agriculture, and Iran is running out of it.

The country of 90 million people has a mostly arid climate and not much comparative advantage in large-scale farming. The government has tried to create that advantage with fertilizer subsidies and pro

See Full Page