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other. The old structure of the Bazaar has been lost. People are less
trustworthy (mawred-e e˜temad) and transactions less frequently follow
ethical lines and most resort to legal means that have their own problems.
Overall, in the Bazaar, a good economy does not prevail.™™ For him and
the majority of bazaaris I interviewed ˜˜a good economy™™ was born and
nurtured by the forms of its governance.
Governance refers to the manner in which power is exercised. The shift
from cooperative to coercive hierarchies is a story about how agreements

116
Elinor Ostrom, Governing the Commons (Cambridge: Cambridge University Press,
1990); and Robert C. Ellickson, Order without Law: How Neighbors Settle Disputes
(Cambridge, MA: Harvard University Press, 1991).
126 Bazaar and State in Iran

are forged and regulated in the Bazaar, and hence how individual and
group power operates. Speci¬cally, the changes in inter- and intra network
relations in¬‚uenced the role of reputation in monitoring, sanctioning, and
shaping behavior. Moreover, the forms of network governance offer
different capacities for holding superiors accountable and limiting their
ability to abuse power differentials. The form of governance also impacts
how group members view each other and gives meaning to being members
of the group. Thus, the shift from cooperative hierarchies to coercive
hierarchies has real consequences for power relations within the Bazaar.
These ¬ndings problematize the static and overly mechanistic account
of the Iranian bazaar. Misagh Parsa, for example, claims that ˜˜the
structure of the bazaar tends to generate strong solidarity against
external adversaries.™™117 However, this chapter shows the mechanisms
behind this solidarity by investigating its breakdown as well as its exis-
tence. The extent to which bazaaris develop ties across hierarchies, the
methods for garnering reputation and gathering information, and the
potentials for corporate identity re¬‚ect the shift from cooperative to
coercive hierarchies. If the arguments in this chapter are sound, we
would expect these transformations to have consequences for the poli-
tical potency of the Bazaar. But before contemplating that issue, we next
examine why the shift in the internal governance of the Bazaar occurred.
The answer to this question takes us out of the con¬nes of the Tehran
Bazaar and raises questions about state policies and institutions.


117
Misagh Parsa, ˜˜Entrepreneurs and Democratization: Iran and Philippines,™™ Compara-
tive Studies in Society and History 37 (October 1995), 812.
4 Networks in the context of transformative
agendas




Why have the guilds, which play an in¬‚uential socio-political role and
are ready to cooperate economically with the government, fallen out of
favor . . . ?
Editor™s Note in Asnaf [Guild] magazine1

[T]he constitution of political forces relates to various and shifting
bases of social solidarities, but crucially, these varieties and shifts often
result from changes in political and economic conjuncture, including
state structures and policies . . . .
Sami Zubaida2

Chapter 3 outlined the change in the form of governance in the Tehran
Bazaar and demonstrated that the cooperative hierarchies of
the prerevolutionary era have given way to coercive hierarchies. In
the process of elucidating this transformation it also pointed to the
symptoms and immediate causes of this shift “ political uncertainty, the
increased use of cash, the acute problem of bounced checks, the rise of
smuggling activities, the change in composition of bazaar members, and
the demise of network producers such as brokers. These proximate causes
and effects can be explained by generally accepted economic theories and
straightforward political logic. When import monopolies are created and
licenses are distributed, one expects rent seeking, corruption, and smug-
gling; when state institutions are up for grabs, especially in the case of a
rentier state, it is unsurprising that competition over their design and the
control of organizations that distribute power and wealth will ensue.
What still remain as questions are what underlies the shifts in the
Bazaar™s governance and what propelled these dynamics to take place
speci¬cally in the postrevolutionary era. Why was it that under the anti-
bazaar Pahlavi regime the Tehran Bazaar maintained its cooperative
hierarchies, which created a sense of community, disciplined group
members, and distributed resources without a centralized structure

1
Asnaf no. 3 (Day 1373 [December 1994“January 1995]), 7.
2
Sami Zubaida, Islam, the People, and the State (London: Routledge, 1989), p. 87.

127
128 Bazaar and State in Iran

capable of making binding decisions? Meanwhile, why under the see-
mingly pro-bazaar Islamic Republic did the Tehran Bazaar go through
structural changes that made its relations more short term, more single
faceted, and less crosscutting, and thus less capable of regulating
activities and generating a corporate identity? Presented from the state™s
perspective, why didn™t the Pahlavi regime™s policies succeed in
undermining the Bazaar™s structure, while the Islamic Republic™s pro-
grams undercut the very group that helped bring it to power? Or, why do
many guild members feel that they have ˜˜fallen out of favor™™?
To address these questions, I focus on the far-reaching processes of
change in regime and the transformation of state“bazaar relations during
the past half century. It was the state™s policies that produced the
paradoxical outcome of a stable, prosperous, and politically potent
Bazaar under the ˜˜modernizing™™ Pahlavi regime and a changing,
declining, and politically ineffectual Bazaar under the ˜˜traditional™™
Islamic Republic. I investigate the impact of each regime™s transfor-
mative programs and their consequences for the contours of commercial
networks.3 I argue that ˜˜the political and economic conjuncture™™ of the
two regimes™ different development projects (high modernism and
Islamic populism) resulted in the crucial realignment of circumstances
that institutionally and spatially dislocated the commercial networks and
with them the Bazaar™s form of governance.

The Pahlavi regime and the Tehran Bazaar
When comparing the status of the Bazaar in the era immediately prior to
the Islamic Revolution and its position since then, most bazaaris stress
the relative freedom enjoyed by private capital during the earlier era.
Interviewees commented that ˜˜back then we had a certain freedom,™™
3
Since my main concern is the organization of the Bazaar and its relationship with the
state, I will not evaluate the performance of these two regimes in terms of
macroeconomic indicators or their ability to meet their objectives, salutatory or
retrograde. There is a relatively large literature on macroeconomic performance of the
two regimes. See Hossein Razavi and Firouz Vakil, The Political Environment of Economic
Planning in Iran, 1971“1983: From Monarchy to Islamic Republic (Boulder: Westview
Press, 1984); Homa Katouzian, The Political Economy of Modern Iran 1926“1979 (New
York: New York University Press, 1981); Fred Halliday, Iran: Dictatorship and
Development (New York: Penguin Books, 1979); Parvin Alizadeh, ed., The Economy of
Iran: The Dilemmas of an Islamic State (London: I.B. Tauris, 2000); Hooshang
Amirahmadi, Revolution and Economic Transition: The Iranian Experience (Albany: State
University of New York, 1990); Janhangir Amuzegar, Iran™s Economy under the Islamic
Republic (London: I. B. Tauris, 1993); M. H. Pesaran, ˜˜The System of Dependent
Capitalism in Pre- and Postrevolutionary Iran,™™ International Journal of Middle East
Studies 14 (1982), 501“22; and Ebrahim Razzaqi, Gozideh-ye Eqtesadi-ye Iran (Tehran:
Amir Kabir, 1375 [1996]).
Networks in the context of transformative agendas 129

˜˜there existed a space for commercial activity,™™ and ˜˜the private sector
was meaningful and had room to operate.™™ It is easy to dismiss these
statements, as I did when I ¬rst heard them, by attributing them to a
romantic vision of a bygone golden age. But the consistency of the
comments and the variety of bazaaris who made these statements (from
importers and exporters to retailers, from gold dealers to household
appliance sellers, and from supporters of the Islamic Republic to its
critics) suggest that there was an underlying set of factors behind these
comparative assessments. Moreover, there is evidence that reminiscing
about the past is not mere retrospective historicizing. Even immediately
after the Revolution, the Bazaar community was aware of the relative
increase in barriers to private capital and mercantile activities. In 1980,
the Christian Science Monitor reported, ˜˜Although bazaaris in no way
long for a return of the Iranian monarchy, they do concede that
˜everything was easier before, in the sense that the Shah supported
capitalism and private enterprises.™ The bazaaris ˜hoped that everything
would be better after the departure of the Shah. Instead we have lost our
capital and gained nothing,™ says one of them.™™4 Therefore this chapter
begins by investigating the state policies that bazaaris believed ˜˜supported
capitalism and private enterprises,™™ and the Bazaar™s position in the policy
matrix.

High modernism as a transformative program
Economic policymaking in prerevolutionary Iran revolved around the
dual pillars of the state™s unwavering belief in the application of a
modernist blueprint and the access to rapidly rising oil revenue. The
Shah was an arch-proponent of what David Harvey has called ˜˜high
modernism.™™5 Harvey differentiates between the heroic, but disastrous,
modernism of the early twentieth century and the post-World War II
˜˜universal™™ or ˜˜high modernism™™ that was trumpeted as it was allied
with the centers of capitalist political economy.
The belief ˜˜in linear progress, absolute truths, and rational planning of ideal
social orders™™ under standardized conditions of knowledge and production was
particularly strong. The modernism that resulted was, as a result, ˜˜positivistic,
technocentric, and rationalistic™™ at the same time as it was imposed as the work
of an elite avant-garde of planners, artists, architects, critics, and other guardians
of high taste. The ˜˜modernization™™ of European economics proceeded apace,
while the whole thrust of international politics and trade was justi¬ed as bringing
4
The Christian Science Monitor, November 18, 1980.
5
David Harvey, The Conditions of Post-Modernity: An Enquiry into the Origin of Social
Change (Oxford: Basil Blackwell, 1989).
130 Bazaar and State in Iran

a benevolent and progressive ˜˜modernization process™™ to a backward Third
World.6
Not impervious to this trend, the development literature of the 1950s
and 1960s was based on a belief that development was a direct product
of scienti¬c methods and technical inputs that drive a mechanistic and
homogeneous path to modernity. The Shah, building on his father™s
etatist development project of the 1920s and 1930s, sought to apply
these principles to transform Iran into a ˜˜modern™™ industrial power by
implementing a stylized and linear developmental model of western
industrialization, with modernization ¬‚owering out of large-scale and
capital-intensive projects “ dams, nuclear power plants, and steel mills.7
In Iran planning, development, and modernization were synonymous
with westernization. Leonard Binder captures the resolute and unwa-
vering nature of the Shah™s modernization policy when he writes,
˜˜Future shock was considered virtuous, the goal of rational moder-
nization, to be pressed forward ruthlessly by means of science, tech-
nology, planning and despotic authority. No element of tradition, no
personal desire, no aesthetic value, no religious qualm, no philosophical
hesitancy was to stand in the way.™™8
The Shah™s lofty aspirations and, with hindsight we can say, ill-
conceived project of modernity and monarchy were heralded and
legitimated by the leading theorists of development, including Samuel
Huntington, who viewed the Shah as the epitome of the ˜˜modernizing
monarch,™™9 and adopted by Iran™s political elite, several of whom had
studied economics, political science, and sociology at the top uni-
versities in the United States.10
The Shah™s proclivity for the grand symbols of modernity and physical
structures was illustrated early on when the government, often via the
Industrial and Mining Development Bank of Iran, began to invest in the
construction of prestigious projects that they believed were more critical

6
Ibid, p. 35.
7
Several analysts have described these ends-focused development programs as ˜˜pseudo-
modernity.™™ Katouzian, The Political Economy of Modern Iran; Nikki R. Keddie, Roots of
Revolution: An Interpretive History of Modern Iran (New Haven: Yale University Press,
1981).
8
Quoted in Samih K. Farsoun and Mehrdad Mashayekhi, ˜˜Introduction,™™ in Iran:
Political Culture in the Islamic Republic, ed. Samih K. Farsoun and Mehrdad Mashayekhi
(London: Routledge, 1992), p. 8.
9
Samuel Huntington, ˜˜The Political Modernization of Traditional Monarchies,™™
Daedalus (Summer 1966), 763“88.
10
On the in¬‚uence of theories of participation on high-level dignitaries of the Rastakhiz
Party see Jerrold D. Green, Revolution in Iran: The Politics of Countermobilization (New
York: Praeger, 1982), pp. 57“8.
Networks in the context of transformative agendas 131

than investing in people. In particular a few select high-pro¬le projects
absorbed the vast majority of the capital and with it skilled and semi-
skilled labor. In the Fourth Development Plan (1968“72), for instance,
half of the credit allocated to industry and mining was directed to build
the Isfahan steel mill.11
Many rulers and policymakers in the developing world ¬xated on the
technological registers of development and viewed development as a
uniform experience that could be modeled on the western trajectory.
What made the Iranian case different was that the state enjoyed some-
thing that helped fuel this particularly ambitious drive, namely oil rev-
enue. In the 1960s income from oil rose steadily as western demand
increased and Iranian production expanded. This resulted in a ¬vefold
increase in oil-related income from 1960 to 1971. Then in 1973 the
price of oil more than tripled (from $1.85 to $7.00 per barrel), and by
the end of 1974 it exceeded $10 per barrel. In terms of revenue, Iran™s
earnings rose from $2.4 billion in 1972 to $18.5 billion in 1974. Finally,
throughout these two decades oil revenue accounted for well over 40
percent of the government™s revenue. The growth of the oil industry
allowed the state to provide the capital necessary to draft these grand
projects with little requirement to bargain with internal political and
social groupings.
This oil revenue has had a number of consequences for planning and
development, including allowing the state to compensate inef¬cient
industries.12 Serious planning had always been dif¬cult given the
unpredictability and ¬‚uctuations of the international oil market, but in
the 1970s the Shah™s whims outweighed the Plan and Budget Organi-
zation™s ¬ve-year plans as the template for investment.13 One method of
bypassing the Plan and Budget Organization was to dispense oil revenue
directly to ministries and agencies rather than to the budget for devel-
opment planning.14 In the wake of the oil boom, the Shah and a few of
his close advisors followed a ˜˜maximalist approach™™ to spending the
newfound earnings. This modernist vision supported a ˜˜big push™™

11
Razavi and Vakil, The Political Environment of Economic Planning in Iran, p. 33.
12
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

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