the politics of economic restructuring in post-khomeini iran

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Ehteshami, A. (1995) The politics of economic restructuring in post-Khomeini Iran., Working Paper.University of Durham, Centre for Middle Eastern and Islamic Studies, Durham.

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University of DurhamCentre for Middle Eastern and Islamic Studies

The politics of economic restructuringin post-Khomeini Iran

byA. Ehteshaml

University of Durham

CMEIS Occasional Paper No. 50July 1995

I S ' " IS


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CMEIS Occasional PapersISSN 1357-7522No. 50CMElS Occasional Pape,"",are publi shed by theCentre for Middle Eastern and Islamic StudiesUniversity of DurhamSouth End 1louseSouth RoadDurham DHI 3'1'CUnited KingdomTel: 0191-374 2822Fal{: 0191"374 21130Tel: (Editorial office direct line) 0191-374 79113

Price: 5.00. To order , send your request with cheque m ~ d e payabl",to the University of Durham to the above address . Please add SOp forposta!;e UK in land and 1,00 for postage overs",as.Editorial board:Professor Timothy Nibk>l"kDr "noushiravan EhteshamiDr Paul StarkeyDr Fadia l'aqirSeries editor: Margaret GreenhalghThe Occasional Papers series covers all aspects of the economy, politics, socialscience, history, l iterature and languages of the Middle Rasl. Authors 'Heinv ited to submit papers to the Editorial l ~ o a r d for consideration forpublication (plea"c mail to: Margarcl Greenhalgh)All rights reserved. No part of this publication may be reproduced,stored in a rclrieval system, or trilnsmilled, in any fonn or by any

m e ~ n s , electronic, m e e h ~ n i c ~ l , photocopying, recording, or otherwise(other than short extracts for the purposes of review), without theprior written pennission of the Centre for Middle I ~ s t e m ilnd

1 s 1 ~ m i c Studies, University of D u r h ~ m ,

1995 A. Ehteshami ~ n d the Unhersity of D u r h ~ m


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Contents

IntroductionCompeting paradigms of economic and polit ical refonnThe polit ical foundations of policy changes in IranIranian economic liberalisation strategyThe Islamic Republic examines its options ..The political dimensions of economic reform _ConclusionTables:(1) Polit ical regimes of Iran and China(2) Iranian economic Indicators, 1989-93Notes , -

569

10_____ .11

. _ 14. 21

12172.


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About the authorDr AAO\Jshlravan Ehteshaml IS Senior lecturer InMiddle East Politics at theCentre for Middle Eastern and Islamic Studies,University of Durham


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The poliLics of economicrestructunng JJlpost-Khomeini iran

A dOX;Idc aflo;:r the 10'79 reyolution,"conomy of the Islamic RL'publi


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CHEIS OcauiOflul PUpn"Smol' h.I\ 'C

~ " n ~ " ' ' ' 4 U\ : n < : < : ~ .~ l ~ m r l < : a n t lurouknt wak", of I h ~ ' int


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CMEIS OccusiunQI PQJIf'rs

A mrollary observation is that,contrary to !X'pular belief, the declinl'of the state sector does nol automatically kad to the democratisation ofthe Olist ing politic.. l system ilndpo ...l'r structures. In South Korea ilndfaiwan, for instance, the dl'mocralisalion process began long after thestate-led e again at what poinl woulddemocracy no longl'r be a luxury but atlC'Ssity for progress?


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CMI.\' Occasion,,1 PapersWith Ilo'!\crcin' machmery of the s ta leby the scrurity forces until very recenlly in both South KOft'a i1nd TaiI"an prompted one ~ n a l y s t to dahhifytheir regimes as 'hypermiiitari!>1'.1Cn. In thiskmd of environment, the Nafsanjaniadministration faced two pJths for theildvilncemcnt nf its polkio:s: throughc o n ~ t r u c l i n g its own all-pov.'crful po-htK,d coalition; Or by pro;"''Cling ..more fun:dul pohlical counlerblocd)\ainst its opponents. A ~ the nexl :>celion dcmonslrdtes, lhe .ldminbtra!ion .. .ldopted pollh had much. to do.... lIh lhe nilture of the L'COnUmK polic i e ~ it was plannmg to pursue.

Irnninn c(:onomif'libcraLisution g(ratcID'

The nelOd for economic reform in Iran" ' a ~ r . l . i ~ d a kriouS issulO Inmld-lotl8 at the outset of the lengthyd i ~ c u s s i { \ n ~ ~ r d i n g ('(;onomil:: reln'lruction tn the pns1-lr.l.n-lra"l war period. already mentioned, althoughpri\'atiSdlion uf the L'COnOmy was beinlli d i s c u s ~ by lhe go\'emment asc,lTly IOS5, It was not until threeyears later that l'remier Mir-HusseinMous""vi, best known for his ' : < I a l i ~ m ,h.id shuwn any willingne:!is 10 acceptan t.?Ipolnded roko for the pn\'ate sector. The rcfonn plans, howe\'er, werenot ~ h a p e d into concrete pI',hcies untilafter Rafsanjan\ had wun the july 1"110presidt.'1ltial elrthon:.. As coherentpolicy u b , . . . : t w t . ~ , mOre\'cr, the reforms ~ I g n i f i c d the post-Khomein,

l c a d e r ~ h \ p ' s ' a ~ k n o w l c d f ; e m e n l of Ihestructural eunSlraints whkh bind tho::lraman t....onorny and of the p o s ~ i b l e

o . . : ( ) n S ~ " I u e n l t .... o( maintaminlli the ""melslallsl[ ...... o n " m l ~ c o u ~ ' .

1 he mam c o m r o n e n t ~ of theprl:'idenl's e


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d :.pill-,w


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CMIS lkca.tionuf PUMnT ~ l ' ' ' ' ' ' p k ~ Repubhc of t:hmot

had cmwrkcd on a c o m p " , h e n ~ l " ' "~ ' C o n o m i c reform programme (thott meluded t'


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= =

CMEIS Occasiollul PQperschancc to speed up reforms and npl'Tl-inlj up 110 lhc W"st] su to improvcthe cconomy'.""

flCrlcct lhe altilud


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CMEIS Ocauionuf Papu$The- political dimensiolls or

economic reform\ ~ c r " i n ~ theirnet'ds."

immediate ,,'(onOmIC

Although Ihe d"monstra tlOn 'land riots nave followed similar palterns in most towns and cities andnave pemap5 shared many c o m m o ~objectives, It can be siud Inat prachcally all of them wen.: trig.J;ercd by local events. In QaT-vm, lhe nots brokeoul ostensibly ",'er the Majlis' n:fusal10 declare this largely Persianpopulak'd industrial and agriculturalcity (in the largely A 7 r i - p o p u l a l ~provinre of /.anjan) an a U l o n o ~ , : , u sprovincc, which would have quahflcdil for more central p,overnmcnt funding. In Arak, the riots were s ~ r k ~off by a lorry running over a child; mMashhad. the three daY5 of riotingfollowed the security forces' attemplto demolish illegally bUIlt makeshiFt(shanty town) nOuses of the poor; inShira1, the dislurbanres started whenthe security forces intervened to slopa disabled war v c t e r a n ~ ' rally fromlakmg pLace; in lslamshahr and A k ~ rAbad the prote


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5tn,:et> after the result> of the 'L'condround of the elc


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eMf/S (}cau;on,,1 PIlpO'S

Another aspect of the struggleamongst lhe various factions has,~ i n a : IIJ89, ~ n an intellectual oneconcemmg the correct mterpretationof Ayatollah Khomcini's ideas and, byc x t e n ~ i o n , the 'aulhent ici ty ' of Ihepost-Khomclni policies in view of therevolution's ideals, Nut too dbsimHarto the Chinese experience afl"r Mau'sdemise, tne Issue in Iran IS no longer

[In Mashhad]100 hooded men, armedwith sophisticated weapons designedfor urban warfare, turned the demonstrators into a mob which anaekedspecially cho5en targets They controlled and directed the furious mob10 destroy banks, allack buildin!lS, setfire 10 buses. rob and 1001 shops andooll"lrl'lCl'"cial cenlres They did thenbest to transform Ihe Justified anger ofthe poor, who are SIck and tired ofthcgovernment's broken promises andendless bureaucracy, into a horrifYingrevolt ..

Ilowcwr. tt1(: ~ I a k t " b i factionm the p"lillla1 '::1110.: (wh ......c Inslituli"nal p o w e r - b a ~ was much weakened a ...."ull of their poor showingin the ApriVMay 19"2 elections for IheFourth Majlis)'" w a ~ not abll: 10 capitalise on Ihc urban unresl to advanceits own l:au!iC'. largel)' be


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..bout Aptoll.. h K h n m . . , m i ~ i d e . ! ~ ('


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Additi(,naU}, In l r ' I n ' ~ t:ae, thestalc's d e p e n d e n ~ ' c on revt'nUt: irom

h y d f l X a r b o n ~ c ~ p o r t s (which traditionally have provided H", statc withan c ~ t c T l l a l ~ O U T C ( , ' oi income, ensuring

l c s ~ rt:liance on domestic SOUn:l'S ofincomc, such l a ~ o ) is a uni'lue faclor 11'1011 needs l " ( m ~ i d e r a t i o n in ttwlIhis SOUTU' until f\'CCnlly had providedconsiderable freedom for the Slatefrom domestic p r e s s u ~ . Sinre the oil

c r i s i ~ of 1llll6-8;, ho\\ 'cn"r, tn.: stalc'sabllily to raise :.i/o\nificant re\'cnucsthrough hydrocarbons exporls hasbeen seriously reduced, which in turnmade Ihc slate more vulnerable 10domestil.: pressures and has increasedliS reliance on dUrTK:'5tic sources of In -corne." :\1orc


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G\fEIS fkNsjonQI Paposbarri


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ClIEIS Occfuionuf PIlfH'TSF;"vcrnl1"l\.'nt. , ' , Raf....nlam M ~

v ~ r ' > C d ~ u l . h "talism in fa\'our of themarket, the Hoiaheh has found itselfIn accord wllh the g{Wernmcnt on ('Co-nomic policy and has benefited fromthis In t e r m ~ of nwn (albo:il i n d i ~rectI politkal influence.

Problems have arisen, huwever ,when the administration has shownan inten... t in Hmitt."Cl. Iibcrali.... tion of'OOCial policy. Su


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cl 'momk I i b c r d h ~ d h " n likdy In cnluurag!.' Ihe em"rl;"nll: of 'rlCvolutumary' monopolies with their b o - . ' < C ~ andinlerlocuWr.; closely intqSrated inlothe ..tem. If th e process of l'CUnnmlc",fonn were to wnlinuc unabalro,one could spo:-culale that the groundwas blcmg p r e p ' l l ' ~ ..d in Iran for Ihebirth of Iranian-styl!:: ( ' h a ( ' b o l , ~ ' " aruundthe clergy-dominated 'revolutionarycapilalisl conglomerates' whose embryonic ~ t n J ( t u r e < l are tn be found 10many of the post-revolution foundahons. Indeed, evidence is beginningto mount thai, with a:ooomk deregulalion, a b u s i n , , ~ s ' o r i c n l e d , ncw uppermiddle d""s, with stronJo; '-'Siablishmcnt l:onOf.:l:tion


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CMEIS Occus;ollflf P u p e r . ~

that 'o".-il'ly would a


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f\'r the moment, s u c n : ~ ~ f u l l y ~ u b d u e dthe Maktabl f o r < : c ~ in the ruling cHt\:,;\Ithough the l ~ a f s < l n j a n l - K h a m c n c i 'alliance' may regard thl' demisl' of theMaktabis a" a price worth paying, it 1"not at all clear that it Will be able torontrolthc multitude of fOI"ee5 Ihal arcrelng unleashed by the process ofC'COnomic reform, Un ...ss, of COUl'SC,the alliance opts for li rera li sa lion ofthe p


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('MEIS OccQ!f;onuf Pupers

NotesI . . . . ymfuIlO Ib\mond H""'CbuJo:h. Ene: lioolfuad. Elnna M ~ and Gn d NoImtmaa fo< lbe. .

COIOSU1Ic\J\'c cnllC1SmS of _be.- dr.lllis m l!IJs p > p ; fOn the prcblcrtq r;lClllf; lbc Imwln CUl l _ I I ' _ l ~ h : a n C ' r ~ . 1lIe IrJnwI CCOII"" C..if (London ROU1.ledJtc. 1991).PI' 65-108

lmnlan ccooon1lC hbcrohs:ross. I Y H ~ ) . PI' 1921,n Boo"d. Pacific T",* In,...stmMl and I'olJDa (London PInter, 1989)

For an e:


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CMEIS {)cc:asi,m(ll p(lpersHagen Koo. ,b e " l l e , p l a ~ ' f s'"IC. >O


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OIElS Ocauianul P u ~ r s""11-11 Quott:d " ' Ibm. rmundcT of 79'". 'hJJh F .- 1 1 1 ~ . . - I . no 26.1anc nalUIC of nlbn; 1.I,nm: n : I : , m ~ . I>:>trowed {,om I t Slcihn;. 'G.oupoonO"" and pohllcal c h a n l l ~ ' . 'n Chalmc. . Johnson (cd). elmng " alh,,,,,, bas rnobolucd to dl'knd tb' 'M &0'''''''''''''1'' pcrfI:ncy" Sc< P c , ~ , Waldman. 'ClC1K:! ,-""pu,:lhsm mullal.. k""l' conlml of han",n CC'Onomy "'lh an imn Mnd'.

11 "I I Sr,..,.U"u,."ol f'"mpr, S May IW!. . ChMhul, 01 JIle""'. " 1M Koman l ~ , m fOl oonl\lomenl1cs The cb.:lclxll ,n Ko'e. ha,.., bc:nc:fl1cdcno'ltIOUSly from ""..,mn>enl pol,cy . .ne t the earl) 196O!.:lnd lada)' < b l l u n : l l ~ ,he e c o o o ~ ' So"", J2 V'l>'PS(lnc:rtS':lllOn pamap3lJOa _ pubhr;

p o ~ ' . florld Po/mes H. 110 1. Apnl 1911'" Chun&,n Moon, ,lII,am:r t ''"'*'' T r ~ , .."" IAr F""IMDon " / SaarA ~ _ o n I ' S. Rr/all""$ (Boulder,CO Wl:'t>lC'I' Press. 19S5)., James COllOn. 1l>c l"n'l!; of hbcrnhullo" ," ,nerfic

, ~ f f m n ' . vol 00 l F : l 1 I 1 ~ 1 . P

26


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I f Centre for Middle Eastern and Islamic StudiesUniversity of DurhamOccasional Papers

already published in this series: .JINo. Title and publication date P r j c ~ ~ Prieca

illlHnd O\l f rSUJ

1300 3 50200 B SOBOO 3 50200 J 50400 450450 500550 6.00550 'l''''' '"'IWTCIt"""'" ~ I n t - ' " '" dw tjutJrwrIan r ....,.... j / '5t t I J S."mllollc:.j19l111

12 CoJlff/IOtIS ' " 1J""sJr hbnvirs .... .I1111d1. EwunI wt J J>1_. SI.Jir"'""hl.flome. (19811I TIre gwgrl1phu;"J InI"prt l""00 "r ,"Ir"""'",,,,,/ ""1("""011 a = study "lh .lfaghnb. A M Fmdla,'. (1981)

l ' Sume "'p"lNl


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)) 71''''''' m,d fimmcl' III Jordan, I J Seccombl"'cl., fIr ''''I1'loma/R"mnl.' Conferellc, /982. 1'"Iomle I rhe ",,,./ng " f Ihe S,,,laneS

the politics of economic restructuring in post-khomeini iran

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