Durham E-Theses Oil and state in the political economy of Iran, 1942-1979 Mousavi, Mohammad Ali How to cite: Mousavi, Mohammad Ali (1996) Oil and state in the political economy of Iran, 1942-1979, Durham theses, Durham University. Available at Durham E-Theses Online: http://etheses.dur.ac.uk/5391/ Use policy The full-text may be used and/or reproduced, and given to third parties in any format or medium, without prior permission or charge, for personal research or study, educational, or not-for-prot purposes provided that: • a full bibliographic reference is made to the original source • a link is made to the metadata record in Durham E-Theses • the full-text is not changed in any way The full-text must not be sold in any format or medium without the formal permission of the copyright holders. Please consult the full Durham E-Theses policy for further details. Academic Support Oce, Durham University, University Oce, Old Elvet, Durham DH1 3HP e-mail: [email protected] Tel: +44 0191 334 6107 http://etheses.dur.ac.uk UNIVERSITY OF DURHAM The copyright of this thesis rests with the author. No quotation from it should be published without the written consent of the author and information derived from it should be acknowledged. OIL AND STATE IN THE POLITICAL ECONOMY OF IRAN, 1942-1979 A THESIS SUBMITTED TO THE FACULTY OF SOCIAL SCIENCES IN CANDIDACY FOR THE DEGREE OF DOCTOR OF PHILOSOPHY CMEIS By MOHAMMAD ALIMOUSAVI MAY, 1996 \ - • v.. 1! (3 OCT 1997 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 far 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, and 5. 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. ii Copyright: 1996 by Mohammad Ali Mousavi "The copyright of this thesis rests with the author. Any quotation and information derived from it should be properly acknowledged". iii To my wife, Heshmat iv CONTENTS Pages Acknowledgement ix List of Tables and Illustrations x Abbreviations xiii Introduction 1 CHAPTER 1. THEORETICAL FOUNBATION 6 1.1. The Theoretical Basis for Model Construction about the Modern State: Internal Aspects 7 1.1.1. Liberalism and Marxism: juxtaposition of the theory of the state 7 1.1.2. Weberian-Hintzean perspective: distancing from reductionist approach 9 1.2. The Theoretical Basis for Model Construction about the Modern State: External Aspects 12 1.3. The State and Theory of Imperialism 12 1.3.1. Classical theory of imperialism 13 1.3.2. New theories of imperialism 15 1.4. Dependency Paradigm 16 1.4.1. Postimperialism 18 1.4.2. The concept of dependent development 20 1.5. The State and the World-System Perspective 22 1.5.1. The concept of the semiperipheral state 24 1.6. The State's Internal and External Behaviour 27 1.6.1. The concept of state autonomy 27 1.6.1.1. Oil revenues and state autonomy 33 1.6.2. The concept of interdependence 33 1.7. A Model for the Semiperipheral Capitalist State 3 6 1.7.1. Method and techniques 43 CHAPTER 2. THE MODERN STATE FORMATION W MAM, 1500-1941 47 A.- The Safavid Dynasty (1500-1722): 2.1. The Safavid Modern Centralised State 47 2.1.1. The Safavid administration and military establishment 50 V 2.1.1.1. The administration 50 2.1.1.2. Provincial administration 55 2.1.1.3. Military function of the Safavid state 56 2.1.2. The economy and trade under the Safavids 58 2.1.2.1. Internal and foreign trade 60 2.1.3. The fall of the Safavid dynasty and the period of transition 62 B: The Qajar Dynasty (1796-1925) 2.2. The Qajar Weak State 64 2.2.1. The Qajar administration and military establishment 65 2.2.1.1. The administration 65 2.2.1.2. Provincial administration 68 2.2.1.3. The Qajar army 69 2.2.2. The economy and state revenues 70 2.2.2.1. Foreign investment 72 2.2.2.2. Foreign trade 73 2.2.3. The Constitutional Revolution and the rise of Reza Khan 76 C: Rem Shah and the Pahlavi Dynasty (1925-41) 2.3. The State under the Rule of Reza Shah 11 2.3.1. From the 1921 coup to the Pahlavi dynasty 77 2.3.2. The autocratic regime of Reza Shah 79 2.3.2.1. The army 80 2.3.2.2. The administration 81 2.3.2.3. Court patronage 82 2.3.3. Bureaucratic reforms 83 2.3.4. Economic policies 86 2.3.4.1. State industrialisation policy 88 CHAPTER 3. THE IRANIAN AUTHORITARIAN BUREAUCRATIC REGIME 92 3.1. The Bureaucratic Establishment of the Pahlavi Regime 96 3.1.1. The political orientation of the bureaucracy and its structure 97 3.1.2. The executive power 100 3.1.3. The legislature 103 vi 3.1.4. Political parties 106 3.2. The administrative role of the bureaucracy and its failures 108 3.2.1. Failure of the administration 112 3.3. The Authoritarian Regime 114 3.3.1. The military forces 115 3.4. The Security Forces and Political Repression 123 3.4.1. SAVAK 124 3.5. The Monarchy-Centred Nationalist Mythology 126 CHAPTER 4 STATE AUTONOMY AND SHAH-ELITE RELATIONS 129 4.1. Dual Personality of the Shah: Grandiose Versus Passive Personality 130 4.1.1. Grandiose years and the Shah's policy priorities 133 4.2. The Shah by the Grace of the US 135 4.2.1. US-Iran relations restructured 137 4.3. The Shah and his Regional Concerns 138 4.4. The Shah, the Dominant Political Actor 140 4.4.1. The ruling elite 141 4.4.2. The Shah-elite relations 145 4.5. Control Through Economic Power 146 4.5.1. The state's economic power and the non-ruling economic elite 148 4.5.2. The Pahlavi Foundation: a conduit for loyalty 149 4.6. The Shah and the Autonomous State 152 CHAPTER 5 THE STATE, OIL REVENUES, AND ECONOMIC DEVELOPMENT 156 5.1. The Impact of Oil on the Economy, 1910-50 157 5.2. Oil and Government Fiscal Policy, 1950-77 158 5.3. The Impact of Oil and the Public-Private Sector Relations 163 5.4. The Impact of Oil Revenues on Development Programmes, 1950-77 167 5.4.1. Thefirsttwo Seven-Year Plans, 1949-1955; 1956-62 168 5.4.2. The Third and the Fourth Plans, 1963-67; 1968-72 169 5.5. The Revised Fifth Plan, 1973-77 174 vii CHAPTER 6. DEPENDENT DEVELOPMENT IN BRAN 186 6.1. Centrality of the State in the Development Process 189 6.2. The State's Industrial Strategy 192 6.2.1. The private sector: the weaker partner 196 6.2.2. Foreign finance, a directing element in the industrialisation process 199 6.2.3. State's industrialisation strategy and the agricultural sector 201 6.2.4. The transnational corporations 204 6.3. Foreign Trade 209 6.4. The US-Iran Relationship 214 Conclusion 219 The State Structure 221 The State and the Process of Capital Formation 223 The State, Oil Revenues, and Economic Growth 225 Theoretical Findings and Methodological Considerations 229 Notes 232 Appendices 250 A. Wealth of the Shah 251 B. Tables (A1-A32) 260 Bibliography 283 viii Acknowledgements It is a pleasure to thank the many people who helped and supported me during the research and writing of this thesis.