This chapter focuses on the political economy of Iran, specifically the evolution, formation and role of the Iranian state before and after the Revolution. Using historical materialist analysis, it attempts to frame the origins of the state within its integration into global capitalism. This will be done by exploring Iran’s economic development in the early 20th century, land reform and industrialization after the Second World War, and responses to economic, political and social conditions, in particular the establishment of the Islamic Republic in 1979.
The state has played a crucial role in nearly all developing countries, especially with transformations in the ‘third world’ after 1945 (katouzian, 1981; Harris, 1983, 1986; Bromley, 1994). Rapid changes in the economy and society took place under the capitalist mode of production that had replaced pre-capitalism, a development that began in the West and later spread to the rest of the world. Iran was no exception to this process, and had to develop its own way of integrating into global capitalism. The transformation included such political developments as that of a parliament based on forms of popular representation. Iran has followed similar patterns of capitalist development to those of other ‘third world’ countries, initially adopting import substitution industrialization (ISI), and with state intervention along capitalist lines. It also had to conform to market demands, Increasingly after the rise of neoliberalism during the 1970s before and after the Iranian Revolution. These demands originated in global markets and were variously adapted locally.
With the global increase in the price of oil in the 1970s, oil-producing countries found themselves overwhelmed with the large flows of income they were receiving.
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