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maydun, implicitly denying their af¬liation to the higher-status bazaar
community.73

71
Mas˜ud Kuhestani-Nejad, ˜˜Mo˜arre¬-ye Jam˜iyyat-e Motalefeh-ye Eslami,™™ Gozaresh
93 (1378 [1999]), 13“21.
72
Habibollah ˜Asgarawladi, the leader of the hardline Islamist faction who was the
Minister of Commerce from 1981 to 1983, lost his position after the press accused him
of nepotism and sabotage of the distribution system. Ali Rahnema and Farhad Nomani,
The Secular Miracle: Religion, Politics and Economic Policy in Iran (London: Zed Books,
1990), p. 250.
73
For comments on Ra¬qdust being an ˜˜illiterate produce seller,™™ see Mohammad
Shanehchi, interview by Habib Ladjevardi, tape recording no. 4, Paris, France, March
4, 1983, Iranian Oral History Collection, Harvard University. On maydunis in general
and the difference between them and bazaaris see Adelkhah, Being Modern in Iran,
chapter 2.
Bazaar transformations 103

Those who are outside of the Bazaar causally refer to this state-
dependent economic class as the bazaaris because some of them at one
time worked in the Bazaar, were born to bazaari families, were active in
the ˜˜traditional™™ commercial activities, or are perceived to have bazaari
values and sensibilities. However, neither are all bazaaris members of
this group, nor are all members of the state-af¬liated bourgeoisie from
bazaari backgrounds. More importantly, the Bazaar does not recognize
them as such. Rather the location of their occupation (ministries instead
of the Bazaar) and access to state power trumps their historical asso-
ciation or genealogy; their clientelist status impedes them from main-
taining a dual identity of bazaari and dawlati. Political scientists studying
the developing world have quite rightly argued that patron“client
relations blur state“society boundaries and complicate discussions
about ˜˜the state,™™74 yet the subjective perspective of social groups
demonstrates that insiders clearly differentiate between coopted
members of the state and those who are not directly incorporated via
the patron“client system. This ¬nding is quite consistent with the
network approach, for conceptions of group identity and solidarity are
byproducts of relationships and interactions, not inherited and
unchanging individual markers.
The remaining bazaaris faced both real and prospective obstacles.
International sanctions, a turbulent political atmosphere, a drop in oil
production and revenue, and the Iraqi invasion sent the economy into a
tailspin. The Bazaar faced macrolevel restrictions owing to the declining
purchasing power of consumers, a sudden and dramatic decline in
domestic production, and limited hard currency. From the bazaaris™
perspective the ¬rst few years of the Islamic Republic also brought a
highly uncertain future for private business. Owing to pending bank-
ruptcies and under pressure from the secular and Islamic Left, the
provisional government nationalized all banks, insurance companies,
and large industrial and agricultural enterprises within the ¬rst few
months of the Islamic Republic.75 The Constitution, adopted in Octo-
ber 1979, challenged the rights of property owners and created a frame-
work to enhance the role of the state in economic affairs. The
Constitution clearly places the bulk of the economy, including foreign

74
Catherine Boone, ˜˜States and Ruling Class in Postcolonial Africa: The Enduring
Contradictions of Power,™™ in Social Power and Social Forces: Domination and
Transformation in the Third World, ed. Joel Migdal, Atul Kohli, and Vivienne Shue
(Cambridge: Cambridge University Press, 1994).
75
Ali Rashidi, ˜˜De-Privitization Process of the Iranian Economy after the Revolution of
1979,™™ in The Economy of Islamic Iran: Between State and Market, ed. Thierry Coville
(Tehran: Institut Francais de Recherche en Iran, 1994).
¸
104 Bazaar and State in Iran

trade, banking, and shipping, in the direct hands of the state, while
suggesting that the private sector is a mere supplementary appendage. In
the following chapter I show that the anti-private-sector constitutional
provisions were interpreted and applied in a way that did not in fact
result in the abandonment of private property rights, but their sweeping
language certainly worried Iran™s business community.76 To heighten
tensions, the policy of expanding the state™s role and supervision of
markets was quickly bolstered by the requisites for developing a war
economy.77
In response to both real economic contractions and potential future
limits on commercial activity, many bazaaris judiciously downsized their
operations by diverting their capital to pro¬table activities such as real
estate purchases, construction,78 and the purchase of hand-woven car-
pets (investments in land proved to be lucrative, but in many cases
carpet purchases were unpro¬table). These older established bazaaris,
who had available liquid capital and bought land or warehouses in the
1970s and early 1980s, did bene¬t from the speculative property mar-
ket. Yet, their absence from the Bazaar decommissioned its reputation
system. An economy based on speculation may be good for individual
bazaaris, but it is not good for the Bazaar™s social fabric.
Finally, as many members left the Tehran Bazaar for lives abroad,
activities in other segments of the economy, or positions in government,
many new faces entered the Bazaar. The Bazaar was always a locus for
those who were unable to ¬nd employment, but after the Revolution the
numbers of unemployed and those seeking a second income increased
dramatically. Throughout the postrevolutionary period, employment in
the industrial sector was increasingly scarce and public sector salaries
could not keep pace with increasing costs of living. Therefore, many
Iranians turned to the Bazaar and the informal sector for employment,
moonlighting, and investment. Those who had family members or friends
in the Bazaar turned to them for opportunities and referrals. Those who
lacked ties to the Bazaar or sought to go into economic activities not
represented in the Bazaar joined the ballooning informal sector that both

76
The threat to private property was heightened when Morteza Motahhari, a leading
revolutionary ideologue who favored the market system, was assassinated in May 1979
and when Mehdi Bazargan, the prime minister of the Provisional Government and
advocate for liberal economic policies, was ousted from power in November 1979. This
last point was mentioned by several bazaaris when they discussed the uncertainties
during the immediate postrevolutionary period.
77
Nader Nazemi, ˜˜War and State Making in Revolutionary Iran,™™ unpublished Ph.D.
dissertation, University of Washington (1993).
78
Kaveh Ehsani, ˜˜Municipal Matters: The Urbanization of Consciousness and Political
Change in Tehran,™™ Middle East Report 209 (Fall 1999), 22“7.
Bazaar transformations 105

complemented and supplemented the Bazaar™s commercial and service
activities. The new ˜˜free sector™™ (bakhsh-e azad) included a diverse set of
activities, among them the sale of illegal goods (e.g. banned books and
alcohol), taking advantage of arbitrage opportunities (e.g. sale of food
coupons, subsidized dollars and products), and small-scale and informal
markets (e.g. household jobs and petty production in unregistered
locales).79 Extrapolating from of¬cial ¬nancial accounts, Firouzeh Kha-
latbari concludes that these activities, which attract all classes and both
genders, at the very minimum comprised 25 percent of the of¬cial econ-
omy in the late 1980s and have increased in subsequent years.80 The
expansion of these parallel markets, the largest portion of which were in
the service sector, was part and parcel of the overall trend that saw Iran™s
economy being diverted from industry to service, in particular trade. The
number of commercial units almost doubled from 1976 to 1986,81 with
roughly half of them being unlicensed.82
The transfer of scarce resources from manufacturing, and to a lesser
extent agriculture, to the service sector and the establishment of parallel
markets made the Tehran Bazaar a far larger and disparate commercial
economy. The postrevolutionary informal product and service sector
obviously competes with the Tehran Bazaar by purveying substitute
goods and diverting capital and labor from the Bazaar economy. Many
bazaaris, however, also depend on the informal economy. For instance,
many turn to ˜˜the black market™™ for hard currency or inventories.
Those who seek to export or import goods use commercial cards (kart-e
bazargani) that are sold in ˜˜the black market™™ via classi¬ed pages in
daily newspapers. The use of government newspapers to advertise the
selling of government-issued licenses is indicative of the quasi-informal
nature of the underground market, as well as the role of intermediaries
and brokerages that are outside of the realm of the Bazaar. The
underground economy has forced bazaaris to extend their networks well
beyond the Bazaar and has introduced a larger and more diverse group
of people into the commercial world.

79
Asef Bayat, Street Politics: Poor People™s Movements in Iran (New York: Columbia
University Press, 1997), p. 136.
80
Firouzeh Khalatbari, ˜˜Iran: A Unique Underground Economy,™™ in The Economy of
Islamic Iran: Between State and Market, ed. Thierry Coville (Tehran: Institut Francais de
¸
Recherche en Iran, 1994) and Massoud Karshensas and M. Hashem Pesaran,
˜˜Exchange Rate Uni¬cation, the Role of Markets and Planning in the Iranian
Economic Reconstruction,™™ in The Economy of Islamic Iran: Between State and Market,
ed. Thierry Coville (Tehran: Institut Francais de Recherche en Iran, 1994).
¸
81
Ebrahim Razzaqi, Ashnaii ba Eqtesad-e Iran (Tehran: Nashr-e Nay, 1376 [1997]),
p. 226.
82
Asnaf no. 90 (Aban 1379 [October“November 2000]), 11.
106 Bazaar and State in Iran

A shoe seller argued that ˜˜trust between people has almost disappeared
and the main reason for this is entrance of inexperienced people (kam-
sabeqeh) and fraudsters (kolah- bardar).™™ The change in actors, in and of
itself, had several critical consequences for the form of network govern-
ance. The assumption that transactions would lead to future dealings
seemed less tenable as membership became more unstable. Exchange
dyads were unable to knit together particular transactions into nested
commercial relationships comprising past and prospective interactions on
multiple fronts. Also, as many of the well-known intermediaries in
exchanges left the Bazaar or passed away, the linkages between various
layers in the sectors diminished. These factors had dire repercussions for
the appraisal of reputation; the key ingredient in ensuring smooth ¬‚ows of
goods was made far more dif¬cult since personal histories in the Bazaar
were shallow and not as readily disseminated. Trustworthy new entrants
had dif¬culty in building reputations in order to convince bazaaris of their
credentials, while dishonest newcomers™ fraudulent intensions were dis-
guised by the bazaaris™ ignorance. New entrants refashioned the system in
another way too. A retired merchant commented that the very existence
of new and inexperienced entrants destroyed the Bazaar™s trusting cli-
mate. He argued that these new entrants did not have experience in
detecting frauds (i.e. people who would overcharge, not pay for goods, or
deliver poor-quality goods) and that this led to an increase in actual fraud,
as well as the ˜˜the fear of fraud,™™ with the latter being as determental for
cooperative hierarchies as the former.

The consequences of ¬‚uid commercial relations and smuggling
A simple change in actors, however, should not necessarily have trans-
formed the economic structure of the Bazaar over the long run.
Neoclassical economic views of markets, of course, would predict that
market operations are independent of actor™s identities and relations.
Ceteris paribus, the factors of production would have generated the same
market structures, if not the exact same equilibrium. The moral economy
perspective also discounts the relevance of changes in members for the
economy. Through modes of cultural and normative learning, the same
notions of reciprocity, expectations of behavior, and generalized culture
should have re-created ˜˜the bazaar economy.™™ The prevailing view
within the embedded network approach to markets implicitly posits that
the value chain, credit system, and social fabric should have reproduced
itself. But while networks have reemerged, cooperative hierarchies with
long-term, multiplex, and crosscutting relations have not been restored.
In the following chapter I ask why this has not occurred, but in the
Bazaar transformations 107

remainder of this section I sketch the form of network governance that
since the 1980s has emerged in the Tehran Bazaar.
The relatively stable hierarchy with de¬ned roles within the Bazaar no
longer exists. On numerous occasions my interviewees paused and
pondered out loud before they explained to me their ill-de¬ned eco-
nomic activities. They would begin by saying that they used to be
wholesalers, but they would add that they now would sell retail if they
had the opportunity or necessity. They were simultaneously importers,
wholesalers, and often dabblers in speculation. If opportunities offered
themselves they would import goods and sell wholesale. However, when
stocks ran low and imports were not delivered in a timely manner, they
would resort to retail sales and stop-gap measures to replenish inven-
tories. The instability in the ¬‚ow of products has to some degree ham-
pered specialization after the Revolution, which in turn has helped
reduce ongoing commercial relations.83 Not only did they play multiple
and changing positions in the value chain, but bazaaris were never quite
sure of the roles and scope of activities of their colleagues. On more than
one occasion, I was referred to an individual who, I was told, was
involved in one level of trade only to discover during the course of the
interview that they were in fact involved in different activities.
The value chain begins with importers who are now no longer
members of the Tehran Bazaar. Domestic production during the past
half century was outside the Bazaar, yet up until the Revolution
importers were part of the Bazaar™s network. After the Revolution this
changed, because the state intervened by becoming the major actor in
international trade and by placing substantial restrictions on other
products. The president of the Association of Iron sellers of Tehran
remarked that ˜˜the government has practically taken the market away
from the Bazaar in such a way that it is the primary purchaser and
wholesaler.™™ He added, ˜˜The government is not only not a good
wholesaler, but at present is not a good retailer either. Of course it is not
that the government itself is a retailer, but the organs under its super-
vision and dependent on the government and commercial companies
connected to the ministries interfere in the commercial sector, to a point
that it interferes with the private sector too.™™84
State organs, including trade units within ministries, military organs,
religious charities, and foundations (bonyads), have become the primary
actors in international trade. These state af¬liates have monopolies and
access to special licenses, and they bene¬t from various subsidies and

83
Neil Fligstein, ˜˜Markets as Politics,™™ 656“73.
84
Hamshahri, 8 Bahman 1379 ( January 27, 2001), 4.
108 Bazaar and State in Iran

exemptions. Meanwhile, the state has sought to regulate exports in
order to prevent capital ¬‚ight. Exporters had to resort to unof¬cial
channels to export their goods. As one would expect, the licensing
process is rife with opportunities for corruption, nepotism, and
patronage, with the disparate constellation of state procurement boards,
religious trusts, and relatives of senior of¬cials enjoying privileged
positions.85
Much if not the vast majority, of imported goods sold in the Tehran
Bazaar, however, do not arrive directly or by purely legal means.86 Rather
imports are either smuggled into the country or enter through commercial
loopholes via special commercial zones (free trade zones or border
cooperatives and markets) and are then incrementally brought across the

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