Oil and state in the political economy of Iran, 1942-1979

Abstract

In Iran, the regime of Mohammad Reza Shah deeply influenced the country's economic, political, and social life. Everything either began or ended with the state. The state was the most important institution in the country and enjoyed a significant monopoly in political and economic decision-making, trade, etc. It enjoyed autonomy from social pressures and pursued its own policies, whilst controlling political groups. Therefore, to analyse the function and behaviour of the state and the economic development of the country, I have used a political economy approach. To this end, a model has been constructed to describe the political structure of the Iranian state and to map the country’s political and economic development. It has been argued that: 1. The political structure of the regime was authoritarian-bureaucratic, based on the three pillars of the state bureaucracy, the security machinery and the armed forces, and the network of court patronage. A parallel to this structure can be seen in the Safavid dynasty whose pillars of power were the same.2 The decision-making process and exercise of power was manipulated by, and depended upon, the Shah and the ruling elite. This manipulation depended substantially on the degree of state autonomy from social and economic groups.3. The state acted as the engine of economic growth and the main source of capital accumulation. Thus, the political system became the main economic decision-making body who dictated economic policies for more than the market. In spite of this direction, the state never questioned the essence of private capital accumulation.4. Oil revenues, both by increasing the magnitude of resources at the disposal of the state and by easing structural constraints, substantially increased the capacity of the state to intervene in economy and society to pursue its own policies, and5. Oil revenues provided a new kind of economy, built on rent and heavily reliant on the export of a single raw material, the production of which required little contact with the rest of the economy. It brought spectacular growth, yet at the same time engendered dependency on volatile markets. In the long run oil also created new international interdependencies as the state relied on foreign markets for capital, labour, and goods. Furthermore, Iran had no independent technological capacity and had to import semi finished goods to meet its industrial needs. Therefore, a process of 'dependent development' was shaped during the 1960s and 1970s.