Economic explanation of the Islamic Republic of Iran

Author :Mehdi Rahbari

Abstract

Economic factors such as other factors have had an important role in occurrence of the Islamic revolution. The writer of this article is intended to test this hypothesis that, what provided the way for economic collapse of the regime and the revolution, uneven economic development along with the great class distance which seems to be as result of the unfairly distribution of wealth corruption of the ruling class, lack of genius gathering for development model , reaction of traditional economic forces against the regime's economic performance, intensified Immigration and fragile state of rural migrants to the cities are military and economic consequences and finally the economical crisis of the regime's life. (2) Each of these issues in turn has been followed with discontent and reactions among different social and classes groups and altogether has also been effective for making revolution as well as accelerating the process of revolutionary mobilization.

Introduction:

The purpose of economic theories is to study relation between economical phenomena and theories of revolution and economic tried to analyze the economical conditions of the pre-revolution pays. The economic conditions are conditions that provide rapid changes in the population's loyalty to the government in a short-time and causes public dissatisfaction by main section of the population. In terms of economic theorists, since public movement requires general mobilization, economic crisis conditions which affect the public, provides revolutionary crisis. From their points of view, in countries where the political and social construction are prone to political variations, worsening economic crisis increases in the years of conflict. Based on the conducted research, economic factors such as sudden deficiencies, unemployment, rising of prices and declining wages are related to the outbreak of political violence and revolutions. In different samples such as French revolution, riots of lower classes of Mexico in 17th and the United Kingdom 17th, 18th centuries, violence of car breakers in England in the 19th century, labor unrest in the United States in the 19th and 20th centuries and peasant's uprisings in Japan at the end of the Tokugawa period this link has been observed. Generally, from the viewpoint of economic theorists of revolution, areas where the population's loyalty to the regime have been found effective have Included the financial crisis of government, the pressure on the population through increased financial resources to collect taxes, stop the growing economic prosperity, declining economic status of the population, especially the pre-capitalist classes in the social and economic reforms and modernization, rapid economic growth and so on. In France, agricultural production has considerably declined in 1788, as a result prices increased vice versa, wages decreased and the rate of unemployment also increased so, one year before the French Revolution, the country faced with a significant increase in unemployment rate and economic stagnation. The political crisis in Germany after the First World War took place in the context of the economic crisis. With outbreak of the great depression in 1929, the number of unemployed in the country increased sharply. This crisis had a major role in increasing the Nazi party members because the party had promised to eliminate discrimination, control of the economic crisis, unemployment and development and finally, could meet the fate of their country. In the eyes of some theorists, most of the pre-revolutionary governments have faced a financial crisis and have tried to varying degrees, particularly through tax reform and higher taxes to improve their financial situation. In this paper we try to examine the effect of economic issues in an occurrence of revolutionary crisis and the collapse of Pahlavi regime. Our main question is that with regard to improving the overall socio-economic status during the late 15 years the revolution due to rising oil prices and the subsequent increase in GDP, and per capita income and that the Iranian government was accounted as the most stable regimes in the region or even the whole world, what happened that Iran's political system suddenly faced with an immense political crisis and then faced with fall? After the Islamic Revolution, many researchers and theorists have sought to answer this question. Some of them focused their attention towards religion (2) policy (3) culture (4) and so on …. . And some others as the consistories (6), Askachpvl (7), Lonnie (8), etc. offered economical analysis of the causes and conditions of the Iranian revolution However, economic aspects causes and areas of the Islamic revolution still require further investigation. Here in this article, some of the issues and factors will be discussed.

The first talk - the strategy of unbalanced growth

In definition of economic development, it is said that economic development is the permanent growth of the manufacturing sector in living situation and welfare of the population that these variations by its own causes economic structures, cultural, social, political and scientific changes of the country ,too. Economic development have principles and characteristics that distinguish it from economic growth so, by comparing these features, we would go on with the regime's economic performance in decades of 1340 and 1350. Because according to the author, failure in strategy of the growth or following strategy of uneven economic development will created a sort of structural heterogeneity , as result it caused great difficulties for economic system in happening of the Revolution, as one of the economic factors.

The share of the government in the economy:

The most important feature of Iran's economy or the main problem, has been the government much interference in economical affairs. This sort of excessive government intervention, which was due to excessive power of the government, usually resulted insecurity of the country's economy while, the initial conditions of economic development is economic security and investments. First, the nature of the government's power increase goes back to the authoritative history of the country and, secondly, to the increase oil income which had caused massive economic power for the government, in a sense that, it turned to one of the largest investors. As oil revenues and independence in the decades of 40 and 50 began to increase, the government could play an important and dominant role in the economy. The government could not only use it's dominate in the rapid economic development but also, used it in controlling various social groups and thus increased autonomy of the country through this strategy. During those decades the country dominated on economy by three major ways. First, the country entered a large share of their income directly, as investment to the state sector. Such investments have concentrated on highly sensitive and dynamic sectors of the economy and governance and exerted a widespread control over them.
Second, the state has offered immense capital to the specialized banks, and therefore could control the banks. Third, the government created a high level of public consumption and thus increased its ability to control the economy and financial applications. Also, widespread business activities of the royal family and the mechanisms involved in regulating a wide variety of formal and informal provided more tools for the government to control the economy. The main conclusion which can be made of the government's power as well as its intervention, in the economic field, is economic insecurity in the past and today it acts as a barrier to development. According to the economists, capital is like a dove which scape the trap. Capital investor, invest only where to be confident about its long-term benefits otherwise, they simply do not jeopardize their capital. Of the other results of the economic dependency to government is the continued existence of capital. It means that capital and capitalism, or if there will continue to exist until the government is being existed. In third world countries that one can not be hopeful to the life of any private power and at any time there is danger of war, coups and revolutions and never relying on the government is not wise or is followed with suicidal sentence. Economic trends of Iran acted quite unlike the west in the considered years. Industrial capitalism, arose in Iran by the government itself, but in the West it was natural a spontaneous process. And even it played a major role in formation of an absolute state and the feudalism's destruction, and ultimately, it impeded the exercise of power and continuity of absolute government. But in Iran, this is the government that created industrial capitalism, supported, nurtured and ultimately by destroying the regime is destroyed. As though there was nothing before. This problem with the economic crisis and inflation since 1354 was quite obvious. Regime to maintain its legitimate and lost power and maintaining it with intervening in the economy, to control inflation, it caused imprisoning the capitalists, merchants and shopkeepers through which simplified the process of missing most of these capitals (13) and this issue by its own, added to the expansion of the crisis and inflation ass well as the community problems of economic discontent. So one of the basic principles of economic development, which is undermining the economic role of the government and increasing power of the private sector is completely ignored therefore, opposite to this issue which means undermining the image of the private sector we witness increasing economic role, especially in later life gradually.

The consensus of the elites and society:

Of other important conditions for economic development, it is consensus between the elite and the people on the need for development, especially consensus of the elite on the way of development. In the period we discussed the second one was more prevalent and there was consensus among elites and regimes on the way of development, and there was consensus between regime's elite regarding development method. Since, either, the king's decision was decisive and the nobles of the country were dependent or the goal of the king was capitalist mode of economic development, thus it was clear that the elites have the same believe, as well. The main problem, in fact was lack of consensus of the groups and people on the need for development and its way. Economic development and industrialization, especially in foreign investment have numerous economic, political and cultural consequences and economically, industrialization will conflict with traditional methods of production. For example, the entry of mechanic carpets which had imported in to the markets of Iran in high speed, faced with tough responses from the dealers of hand- made carpets. Although the carpet of Iran in a short time has proven its superiority over the machine carpet, its monopoly in the domestic market was lost due to higher price. On the other side, the regime's support of the emerging capitalism and putting pressure on commercial capitalism inevitably caused the reaction of the latter group. Of course, this main point should be considered that the conflict between tradition and modernism has been especially in transitional societies, and there is no hesitation for it however, we can minimize the conflict by a wise approach as well as properly manageable one in order to reach achieve a sort of balance in economical benefit. But the impact of the cultural consequences of industrialization is huge and even more important than economic ones. Before the arrival of foreign investments, if it is not accepted by the people and political groups, there will be very severe consequences. First, foreign investors have their own culture which will strongly contrast with native and especially religions ones, and second, the influential factors and foreigners are considered because they seek to undermine the country's capital outflow. In countries that the entry of foreign capital does not justify as well, especially the latter one, which is exporting of funds from inside or economic imperialism, is the first reaction that occurs for these capitals. Especially when a government's legitimacy is questioned, and by the help of foreigners come to power, then, the entry of foreign capital as a common conspiracy by the government and foreigners appears to loot the national capital. When foreign investments occurs in line with the policy of interest as well as control over their activities and a legitimate government, its public justification will be easier. Any way, the regime of Shah never could create the consensus of people and the elite regarding economic development because first, the regime's legitimacy since the coup of 28 of Mordad 1332 and especially 15 of Khordad in 1352 ,for them ,was out of control and any attempt by the regime such as foreign investments, were considered as a joint conspiracy by the government and foreigners, and secondly, , creating consensus and gathering can never happen by military force and the weapon, something that the regime committed against traditional society and tribes. Thus, there was no consensus, either among people or the traditional economic groups, on the need to methods development.

The growth of Services

The most important problem of Iran's economy is outgoing of the service sector from the industry. Those who were known as industrial capitalists in these years, mostly, they were a handful of dealers who due to financial and political support of the regime and the profitability of the business, have spent their assets instead of industry for commerce. the policy of Industrialization, have only been to the interest of a particular group, however, important activities in industrial sector was done which is valuable to note but, industry sector and industrial capitalism verses capitalism and business services sector is less in number.
(16), thus one of the other economic conditions development that which is the productive economy growth rather than trade was ignored during these years. We can even observe servicing of capitals concerning international companies. The trend of international capital into unproductive economic activities in Iran (despite the productive tendency of these capitals in the South East Asian countries), can show this style of deviation in all economy. Anthony Parsons, for example, the last Britain's ambassador in Iran's during Pahlavi's government, among collection of English merchants, has suggested them in this way ".
The first thing you do here is that to sell your goods as far as you can and invest only if you have no other way than selling them therefore, If forced to invest, try minimum investment and choose those material which is imported by the UK industry, in this area, I believe that Iran is one of the best markets you can find to sell your goods among the third world countries. (17)" Daftari and Bargaei explains regarding foreign investment and other aspects of this trend. Foreign Investment in Iran has not much regarded to job and adaptation to industry with the country's need because, Iran has lesser suffered the third world's classic problems and by the hands of oil's incomes, the huge state bureaucracy, and activities related to construction, these problems have been solved in addition to, the government did not show any tendency to investment ,in domain of research and development which is necessary for technology transfer as well as adaptation to native consequences. It was under the influences of this outlook that international assets were pulled toward trading light industry and since year of 42 up to 57, which they benefited annually averagely 40 percent annually.

Distribution of revenues and class distances

The Calculate of incomes' concentration coefficient and order share of incomes show that distribution of income among individual has been unequal and this inequality, during 1347-1352 has been intensified. Ginny's concentration ratio from 47 percent in 1347 has reached to 51 percent in 1352 also, the share of 20 percent of population with revenue equal to 7/52 of total percent ,during 1347-52 , increased to 57 percent in proportion to total incomes . Regarding the distribution of incomes during the years 1353 to 1357, due to the economic crisis and before that rising of oil income and other economical and political reasons, there is no enough information so, we point to the share of job potential in national pure production. (20) The calculation of the share of labor potential in GDP, according to Central Bank calculations, show that income distribution in Iran ,during 1348-56 ,has been intensively unequal in a sense that ,apparently 60 percent of the population possesses 27 of GPD in average, on the other side, if we deduct the share of labor from paid salary averagely , 20 percent of GPD gets to 60 percent while, the increasing number of employees ,by assuming share of labors fixed in GPD, announces the worsening of incomes, however, the decreasing share of labor potential in some years of ( 1352,1353,1354 ) intensifies inequality. (21) thus, as it can be seen, although a significant improvement in the life of many Iranians made, but, this improvement have not been universal and increasing poverty had overcome some social groups. Of the main effects of industrialization policy, is raising expectations. In Iran, industrial policy and structural changes in the economy had caused widespread demands, until the beginning of renewal policy, in generally appearance of all people life was more or less similar. Even, the traditional investors who were considered as the dominant economic class were adapting themselves up to a high level with lifestyle as well as the public. But, with the arrival of new industries and the beginning of modernization, the society divided into some classes apart, which their treatments and beliefs were a part, too. Newly appeared capitalists by car, housing, clothing and superior way of behavior, and planted the ambition of an ideal and free-stressed life in to the hearts of each Iranian people thus, discrimination and class difference ,as one of the factors of increasing expectation , was appeared. Increasing expectations among Iranians have had various factors that deeply unequal distribution of income and deep class distance was one of the main factors. In In these years, especially in the 50s, class distinction was so obvious that no evidence was needed to prove it. Some people's wealth was so increased that even they sought identity for their own apart from the identity of others, especially rural migrants who, in the villages, only their bosses were superior and distinctive than them, In cities, they were exposed to a variety of masters , chief, engineers of the company, and the plant municipal police officers therefor, when compared their position, they felt a sort of depression. Of course we can never deny that between 1352 and 1355, considerable improvement in the life of many Iranians, especially the staff and students were made but, first, by the decline in oil revenues in 55-1354, this improvement faced with serious threats and no longer was prevalent secondly , as mentioned , this relative improvement was accompanied with sever class distance which its result was increased expectations and further distance of the class that led, the group forget ,even this relative improvement , and attack to the factors of these distinctions and distances. The important thing is that, what had been made them understand these inequalities, was growing awareness of community and the impact of the mass media and education. Educational programs such as the movement knowledge and the expansion of schools through the city caused the literate numbers of 15.4% the population in 1335, to reach 47/1 per cent in 1355, following it, the number of students from 67,000 in 1349 reached to 154,000 persons in 1355. (22) other factors, such as spread of TV networks , domestic and foreign travels, increased the intense of inequalities in society, between years of 55 to 1345, the percentage of television receivers from 3.8% to 69% percent , and the numbers of traveling abroad get to 100 people in year (550 000 people) . (23) These developments were providing obvious manifestations of wealth and poverty, the upper and lower classes, for a wide range of social groups. Whatever in times of revolution crisis and after the revolution prosperity, as the simple life and preaching was raised in fact, was a reaction to the sharp class distinctions and distances which was practiced by their opposition groups , who were mostly from middle classes ,was felt. Under the influences of Islamic talks, people compared Shah with the nobles and the Imam with the infallible imams as result, one with hundreds followers spend in luxury and service and the other is also satisfied free bread. Islamic ideology and leadership delivers a pattern in which simplified comparison. All presentations by leaders and activists of the revolution, such as religious clerics of the mosques during religious month like Muharram and the intellectuals like Shariati which was given, people were invited to have simple life, eliminate class differences, modesty, and living among people, based on the life of the holy imams. This discussion's, by their own, is showing the great distance and class distinction that had been created during the second Pahlavi. In the conclusion of these talks, we can achieve this important conclusion that, what is advertised as a great economic leap by the regime, has only been economic growth not its development so, Islamic revolution is symbol of its vagueness. None of these preconditions and consequences of economic development was not created in this period, unless we can talk about economic growth as well as heterogeneous growth which involve all economic features of 1332-1357. Political structure, authoritarian and extra-legal, political and economic instability, a superior economical power of the government to the private sector, weakness and dependency of the private sector and emerging industrial capitalists to the regime's economic and political power, capital flight due to political instability and lack of the government's control over importing and exporting capitals, lack of economical collection of government as well as community , failure in eradication of absolute poverty and reducing relative poverty ,government corruption and finally making a huge class distance , all and all have been a prove of lack of economic development during 1342-1357 which have had crucial role in Islamic revelation occurrence.

Second talks - Cultural anomaly

Durkheim, Smelser and other thinkers of social cohesion school focusing on the first point and seeking the factors of cultural revolutions in entrance of industrial culture and labor division. (24)In Iran , the growth of individualism, secularization and consumerism against collectivism, group-wide links, tendency toward the second world, and lack of being extravagant, has rooted in the Islamic culture of Iranian, and has been a natural current ,derived from seeking industrialization. These factors do not caused revolution crisis by their own, but, it is exaggerating in them and lack of matching them with local conditions that is followed with reactions and on the other side, the change in the attitude of society should be slow , gradual, and especially consciously. What happened culturally in Iran during in the 40 and 50, has been cultural break which is due to opposition to his own culture and promoting those of others which have had widespread speed. The national Islamic-culture of the country which has been current for hundreds of years never can be changed easily and overnight, cultural affairs are complicated and needs too much skill. Unfortunately, in those years was given to persons who lacked such complicated understanding as well as required capabilities and, only recognized the appearance of the West. In fact, this is the same event which is known as incomplete renaissance or semi- renaissance. Modernism or renaissance contains powerful thinking features which are stem from reasoning and intention or, in other word; all modernization is summarized into reasoning and freedom.
What activities had happened in decades of 40, and specially 50, has not been quite reasoning, in other word, has been a mere imitation. The growth of oil's revenues ,in decades of 40-50 , and following it the liberty of government from community , provided the way for Shah to proceed his plans and his socio - cultural propensities in fact, the plans activities which did not reflecting needs and benefits of the community. Priorities such as rapid economic growth, improving life standards of the ruling class, advancing western and Iranian customs (before Islam) and ignoring the role of religion in Iran, constructed the priorities of Shah. This severe contradiction existed between upper and lower class of society with growing gap through values and social practices of these two classes. Often it was assumed that the top class and especially the royal family are non-Muslim and corrupted. Disgusting stories about the sexual habits of Shah and his sister, Ashraf and other members of the royal family is recounted. People believed that the royalty and the upper class were habited to opium smoking, gambling and other illegal activities such as selling drugs and etc. Either, Contact with the west, also led many high-class and middle-class to take actions which is intensively different from Iranian values and customs, including consumption of alcoholic beverages, unveiling hijab, sexual liberty, western clothing, music and Western art verses the Islamic culture. At the same time, many people from different classes of particular classes, especially high class, took the distance away from Islam and even openly adopted degrading behavior against the clergy and religious people. The government was also promoting the anti-religious values, whether by displaying them or, certain policies, such as making casinos, entertainment complex like Island of Kish, holding celebrations of Jamshid bed and Islamic calendar and etc. (25) And this issue caused community response as well as religious forces of society.

The third talks: rural migrants

Most of analysts accounted flying migration of the villagers to the cities as one of the crucial factors for revolution against the Shah. They believed that migrating of rural people to the cities (which considerably increased in last decades of his regime) was, because first they thought of themselves as lower than urban people and secondly, were involved in a type of social degrading. According to sociology, rural migrant in cities suffered from a type of socio- cultural alienation (self strangeness by feeling homesickness) . According to these writers, the migrants' financial problems as well as their social problems, from another side, had caused them to turn into an explosive bombing and, proactively have had a crucial role in in revelations of 1356-1357. Niki kedi , in explaining religious tendencies believes that ,although due to life and educations of urban people ,most of Iranians no longer had tendency to religion any more but their position were replaced by migrant villagers who were so-called religious. By putting doubt on Kedy's comments and emphasis on the above discussions, we can describe the life of rural migrants in cities in order to understand the real economical reasons of joining them to revolution. According to John Kouran , in decades 1340-50 , a new group called rural migrants was added to the deprived urban people who were the symbol of Iranian cities from ancient time settled in poverty areas of the city. The number of those who went to the cities in searching of work, from 30,000 in people in the decade of 1310 to 130 reached 1320-1335, 250,.
One million of them, were working as construction workers and 900 thousand of them (about 10% of labor force) in those years, were unemployed in 57-1356. Some of them were occupied either as, badger, temporary workers, porters, carrier or waiters, and joined to the class of the urban fringe. (17) It was the time, when life of rural migrants became as tough as those who were living in urban slums so, according to the statistic regarding low-income immigrants in 1345; the average income of a household's head was $ 9 per month. In 1348, out of 46% of working population of Tehran in average, each person received 50 per month. With the height of the oil revenues in 1350 the income Farhad Kazemi, an Iranian professor at New York University draws the situation of this class at desperately low level. from 3780 , a migrant family which he surveyed , 1/55 percent lived in slums ,9/32 percent in furnaces of brakes ,8/9 percent in tents and few numbers were living in symmetries , caves and dirty places. According to him, constructing workers in Tehran were settled usually near their projects in tents or half- built construction. Few numbers of the suburban had water supply and sanitary sewage piping or electricity. Drug addiction, prostitution and crime was common among the slum dwellers of south of Tehran and other cities. According to Kazemi, diet typically included bread and tea (breakfast), bread and fruit (summer lunch), bread and cheese (winter lunch) and the broth (dinner). (29) Hoagland also points out that although rural migrants in their previous life, in villages, did not used electricity, sewage and running water, they could benefit these advantages, and had accessed to education, health services and sports. However, most of them were living in brick working shelters, unfinished buildings, tents or slums. (30) catouzian ascribes a painful picture of the life of the suburban people, too .
31) By such situation and improving class awareness of this, along with observing class distance, we can promise Increasing demands and nature of urban problems, joining them to opposition group, and Islamic ideology which by that we can get rid of the problems.

Continues…..

References :
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2- This article is in fact, a summary of the book of the Islamic Revolution in Economics and comparison of economic theories of revolution that has been written by author of the article and soon, will be published by the center of Islamic Revelation documents, so
In this paper, in order to shorten the pape ,we were forced not to mention a lot of facts and figures
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Source article
Group of authors (1385), ideology, leadership and the process of the Islamic revolution, Tehran: the Institute of Compilation and Publication of Imam Khomeini (Rahma allah), second edition