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the level of provinces and cities and larger retailers in Tehran™s mar-
ketplace.17 They owned of¬ces or stores in the Bazaar, with stores being
more like showrooms, and they would typically not sell to retail custo-
mers, preferring to sell only in bulk. Wholesalers who were able to
corner new markets and accrue capital or credit were able to add
importing operations to their wholesaling operations.
The success of wholesalers relied on long-term relations with actors
further up and down the value chain in order to purchase and distribute
goods. In large part this was achieved through specialization. Despite
appearances, wholesalers, like merchants, had a high degree of specia-
lization. For instance, to the casual observer it may have seemed that a
series of cloth sellers were all selling the same bolts of fabric. On closer
examination, it would be evident that one only carried products from
Iranian manufacturers, another specialized in black fabric for chadors,
and the third specialized in high-end European cloth. The narrow
specialization helped reduce competition between wholesalers in that a
retailer seeking a particular type of cloth could resort to only a limited
number of sources.18 This also explains why wholesalers would readily
refer customers to others if they did not sell the item in question.
After ¬ltering down through the network of importers and various
wholesalers, goods would ¬nally make their way to the retail stores that
lined the streets of the Bazaar and were involved in direct sales of goods
to customers. During the 1960s and 1970s, high rents and decline in the
residential population of central Tehran helped drive some retailers out

16
Martin Seger, Teheran: Eine Stadtgeographische Studie (New York: Springer-Verlag
Wien, 1978), p. 134, and Asar, 22.
17
There is some confusion in terminology when it comes to wholesalers. The terms
˜omdeh-forush and bonakdar are sometimes used interchangeably by bazaaris and take on
slightly different meanings depending on the sector in question. For the sake of
consistency and clarity I use ˜omdeh-forush or wholesalers to refer to wholesalers who
deal in larger quantities of goods and have more long-term operations and bonakdar or
distributors to refer to smaller-scale wholesalers who operate at the provincial or city
level.
18
Neil Fligstein, ˜˜Markets as Politics: A Political-Cultural Approach to Market
Institutions,™™ American Sociological Review 61 (August 1996), 659.
Bazaar transformations 81

of the Bazaar region, yet the boom in consumer demand among all
classes and the expansion of af¬‚uent and poor residential areas away
from the center attracted retailers to establish shops in new shopping
districts. While retailing for everyday and large items followed the
population ¬‚ows, retailing for luxury goods and big-ticket items (e.g.
jewelry, carpets, cloth, and ¬‚atware) that were bought seasonally or for
special occasions, such as a bride™s dowry, continued to prosper. In
addition, the retail stores beyond the immediate Bazaar area were tied to
the Bazaar™s wholesalers for goods and storage.19 Also, a limited number
of retail shops outside of the historic marketplace were owned by bazaari
families. Although it depended on their marketing strategies, knowl-
edge, and contacts, retail units in the Bazaar had a narrower selection of
goods than retail outlets in the streets or in industrial countries. In
general, only a few brands were available and they generally specialized
in either imported or domestic goods, or in either high- or low-quality
goods “ market segmentation was the rule. However, retailers attracted
customers because their limited selection was cheaper than that of
competitors outside the Bazaar and goods tended always to be in stock,
sometimes even after the producers stopped producing them. ˜˜We did
not have a large variety,™™ explained one old retailer selling kitchen
appliances, ˜˜but we specialized and made sure that we had a stock
always ready for customers. Customers knew that they could come to us
[for their needs].™™ Taken as a whole, Bazaar retailers offered a wider
variety of goods than outside the Bazaar.
Brokers (vaseteh, dallal, or haqq al-˜amal kar),20 not to be confused
with middlemen, played a fundamental role in ensuring a steady ¬‚ow of
information, credit, and goods through the Tehran Bazaar™s networks.
A wholesaler illustrated the point by explaining, ˜˜A good cannot sell
itself. It doesn™t have legs to walk out and ¬nd itself a buyer. And I am
too busy to run around to ¬nd buyers, ensure that they are reliable,
¬gure out the price, collect my debts, and gather all the information.
That is why we need brokers.™™ Brokers specialized in a particular trade
and acted as an intermediary between the various levels in the Bazaar. It
is important to note that brokers did not assume ownership of goods;
rather ownership went directly from the seller to the buyer, for instance
from the wholesaler to the provincial distributor. Their marketing
earned them a commission ranging from 5 to 10 percent that depended
upon the sector, market conditions, and the volume of the transaction.
19
Kazem Vadi˜i, ˜˜Bazar dar Baft-e Novin-e Shahri,™™ Yaghma 25 (Farvardin 1351
[March-April 1972]), 9“19.
20
Vaseteh and dallal have pejorative connotations. Brokers themselves often prefer to call
themselves ˜˜commissioners™™ or haqq al-˜amal kars (agents).
82 Bazaar and State in Iran

Brokers, therefore, had an interest in maintaining a smoothly operating
system that generated a high volume of exchanges.
Brokers ¬rst identi¬ed buyers and sellers. This can be a critical role in
actual markets since search costs can be quite high.21 Brokers did more
than simply match transaction partners; they ensured that these parties
were reliable trading partners who would deliver goods and payments at
the agreed-upon time and to the agreed-upon speci¬cations. Brokers
provided sellers information about the buyer™s credit history, past per-
formance, and potential for long-term partnership. A proverb heard in
the Bazaar begins, ˜˜A good customer is a jewel,™™ yet goes on to caution,
˜˜but you have to know the jewel to ensure that it is not a fake.™™22
Brokers helped separate the ˜˜fakes™™ from the ˜˜real™™ customers. Also, by
quickly locating buyers for sellers they helped reduce warehousing costs.
Obviously this cost can be quite substantial in cases where goods were
more costly to store (i.e. perishables, items that are larger, and illegal
goods). On the other hand, brokers assured buyers that the seller would
deliver high-quality goods on time and had the ¬nancial and marketing
capacity to continue providing that particular good.
Brokers could also play an important role in cases where the quality of
a good was highly variable but dif¬cult to ascertain. In this case brokers
helped differentiate the market and limit adverse selection by ensuring
that low-quality goods were not sold at the same price as high-quality
goods.23 Since brokers had regular working relationships with a wide
spectrum of bazaaris they tended to have ¬rst-hand and idiosyncratic
knowledge about levels of indebtedness or marketing strategies. A ¬nal
and less commonly identi¬ed reason that brokers were used in trans-
actions is that brokers created anonymity for buyers and sellers. The
screen that brokers provided reduced personalism in exchanges, which
may have become bogged down in expectations and interpersonal
obligations, and replaced it with exchange that was mediated by a broker
ensuring reputations via his own personal ties to and knowledge of the
parties. Bazaaris mentioned that brokers were at times used so that
exchange partners, who may have known each other, could transact
without the ˜˜interference™™ of nonmarket factors. This logic demon-
strates that bazaaris have been quite conscious of the interpersonal
nature of markets and the potentially disruptive side to them. Ironically,

21
Ariel Rubenstein and Asher Wolinsky, ˜˜Middlemen,™™ Quarterly Journal of Economics
102 (August 1987), 581“94.
22
Mohammad ˜Atiqpur, Naqsh-e Bazar va Bazariha dar Enqelab-e Iran (Tehran: Kayhan,
1358 [1979]), p. 90.
23
Paolo Garella, ˜˜Adverse Selection and the Middleman,™™ Economica 56 (August 1989),
395“400.
Bazaar transformations 83

networks and personal relations are used to mimic the ˜˜arm™s-length™™
exchange assumed by neoclassical economics.
In addition, the brokers™ intermediary position and role of overseers of
transactions placed them in an ideal position to track price ¬‚uctuations
and market conditions. By gauging supply and demand, brokers played
an important marketwide function of monitoring price. Even today
bazaaris cite brokers as the best source for information about
prerevolutionary market conditions. Their astute knowledge helped
reduce bargaining since buyers and sellers deferred to their price as the
¬nal price or the focal point around which they negotiated.24 The term
˜˜expert™™ (khebreh) is often used to describe the most notable brokers.25
In short, brokers were network makers, in the sense that they tied toge-
ther and reinforced the many links in the value chain by creating the
foundation for exchanges.
Economists would expect brokerage to lead to principal“agent pro-
blems where sellers and buyers would be concerned that brokers had
opportunities to manipulate transactions to increase their commission
or favor one party or the other. Principal“agent problems in the real
world are mediated by networks of ongoing relations that ensure
external monitoring and create incentives for honest behavior. Since
brokers were potentially involved in long-term and repeated relations
with buyers, sellers, and others in the Bazaar, their actions had reper-
cussions well beyond a speci¬c transaction between a given trading
dyad.
In such a context, a reputation for honesty, fairness, and expertise was
the most crucial asset for a broker. A broker™s ˜˜whole life depended on
being reputable and trustworthy; without a good name he would be
paralyzed,™™ mentioned one broker. This reliance on reputation might
help explain why some observers have noted that brokers were the most
outwardly religious members of the Bazaar.26 In the Bazaar, brokers can
signal their trustworthiness and principled behavior by espousing reli-
gious adherence and consciousness. Of course, simple lip-service would
not be enough; over time if religious display was not consonant with
practice, a broker™s reputation would be discredited. Meanwhile, age
and tenure in commerce were important indicators of knowledge,

24
¨
Hochschule der Kunste Berlin, Fachbereich 2 Architektur ˜˜Bazaar Teheran,™™
Documentation 1: Probleme der Internationalen Stadtentwicklung (series title) (West Berlin:
¨
Selbstverlag [Hochschule der Kunste Berlin, Fachbereich 2 Architektur], February
1979), p. 10.
25
In one instance I mentioned that a particular bazaari was a vaseteh, and I was quickly
reminded that he was not simply a vaseteh but was a khebreh.
26
˜Atiqpur, Naqsh-e Bazar, p. 91. This also emerged in several interviews.
84 Bazaar and State in Iran

another component of reputation. Successful brokers tended to be older
and experienced, having many and well-positioned contacts who could
vouch for their reputation.27
There is also a second type of intermediary whom I will call a middle-
man. In the Tehran Bazaar they are also referred to as vaseteh or dallal, but
should not be confused with brokers, as in much of the secondary litera-
ture. Unlike a broker, a middleman did not necessarily specialize in a
particular trade; one day he bought domestic vegetable oil and the next he
purchased imported cutlery. Their commercial forays were more often
based on speculation and short-term pro¬t maximization. When middle-
men were able to combine market analysis and timely purchases they were
able to accrue windfall gains. Their position, however, was precarious since
they actually purchased these goods and accepted the associated risks.
Middlemen were notorious inside and outside the Bazaar. Outside the
Bazaar, the public and government blamed them for hoarding, price
¬xing, and deception. Inside the Bazaar, they were mocked for their lack
of expertise, ethics, and stature. They ˜˜disturbed market equilibrium,™™
charging ˜˜exorbitant prices,™™ and sullying ˜˜the good name of bazaaris
by introducing poor-quality goods and overcharging customers.™™ When
I made the mistake of misidentifying a particular broker as a middleman,
I was quickly corrected by him, and his friend who had joined us gave
me a stern speech explaining the difference between the two. The
middlemen were generally younger, began with little capital, and often
had few family contacts in Tehran or within the Bazaar. Some may have
worked as apprentices, and others may have had no background in the
Bazaar but turned to short-term transactions to augment their income.
Those who were successful and acquired a reliable and honest reputa-
tion could expand their operations and credit lines. Before the Revo-
lution, the middlemen were marginalized by the regularized ¬‚ow of
goods that passed through the commercial hierarchy. The opportunities
for buying low and selling high were limited by high levels of liquidity
and consumer goods. At times, middlemen were able to operate,
however, by taking advantage of run-away demand for imports, trans-
portation bottlenecks, and economic inef¬ciencies in domestic
production.28
Thus, bazaaris were enmeshed in a tightly knit value chain based on
long-term relations and interconnected networks. Despite their being a
large, heterogeneous, and strati¬ed group, the pattern of trade relations
27
Some brokers were merchants who had become bankrupt and used their experience and
knowledge to become a broker. Mina Jabbari, Hamisheh Bazar (Tehran: Agah, 1379
[2000]), p. 77.
28
On bottlenecks and inef¬ciencies in the prerevolutionary economy, see Graham, Iran.
Bazaar transformations 85

integrated the members of the Bazaar into a corporate unit. These
contributing factors were enhanced by the credit system.

Extending credit, relationships, and reputations across the Bazaar
In the Bazaar, especially among distributors, there is a mantra: ˜˜You
don™t get anywhere by selling only for cash.™™ Most transactions were on
credit, with loans extended through the value chain and beyond it. The
availability of credit has been critical for the ability of bazaaris to take
advantage of ¬‚uid market conditions. The complex money market was
the foundation of the Bazaar™s marketing system, and prior to the
Revolution was an integrative mechanism simultaneously generating
and accessing horizontal dimensions of cooperative hierarchies.29
Capital was not scarce in Iran during the late Pahlavi era; however, it
was highly politicized.30 The state distributed the abundant oil revenue
as subsidized credit through state-owned commercial and development
banks. Retailers in the Bazaar and other small manufacturers did not
have access to these funds in part because they were high-risk and costly
customers for the banking system.31 Moreover, throughout much of this
period, these loans were ostensibly a resource transfer, for the interest
rates were set below the rate of in¬‚ation, resulting in a high negative real
rate of interest.32 The subsidized credit was an attractive source to
¬nance operations, and in and of itself entailed a pro¬t. Not surprisingly
it opened the door to varied forms of rent-seeking behavior and cor-
ruption. Given the authoritarian and arbitrary rule of the Shah™s gov-
ernment these loans were politicized; that is, access to these highly
desirable loans was not universal. Credit-worthiness was based on
political and cultural allegiance to the Pahlavi monarchy and speci¬cally
to its modernizing agenda. These hidden transfers of capital were
channeled to members of the royal family, high- and low-level govern-
ment of¬cials, and large industrialists who were involved in grand
industrial and construction schemes often tied to western ¬rms
29
Clifford Geertz, Peddlers and Princes: Social Change and Economic Modernization in Two
Indonesian Towns (Chicago: University of Chicago Press, 1963), and Clifford Geertz,
˜˜Suq: The Bazaar Economy in Sefrou,™™ in Meaning and Order in Moroccan Society, ed.
Clifford Geertz, Hildred Geertz, and Lawrence Rosen (Cambridge: Cambridge
University Press, 1979).
30
See Djavad Salehi-Isfahani, ˜˜The Political Economy of the Credit Subsidy in Iran,

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