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temporary. If individuals give money, it will stand and if not, they will
not exist. For example, if the government says it is not going to tax the
asnaf [guilds], they don™t need ettehadieh any more because they don™t
have anything else to do.™™35 Thaiss concluded that these trade asso-
ciations bene¬ted only the commercial groups outside of the Bazaar,
˜˜tradesman who have little sense of solidarity or an ˜in-group™ feeling
such as that in the bazaar.™™36
As Thaiss™ ethnographic study and the analysis in Chapter 3 demon-
strate, the Tehran Bazaar, however, had a very strong ˜˜ingroup feeling,™™
and this was enhanced by the state™s antagonistic outlook and institutional
detachment. The antibazaar sentiment that prevailed among the political
and intellectual elite generated a defensive banding together by the
bazaaris. This can be detected in the two-tier discursive distinction made
between edaris (literally ˜˜of the of¬ces™™) and bakhsh-e azad (the ˜˜free-
sector™™) and, second, between the khiyabanis (people ˜˜of the street™™) and
bazaaris.37 Older bazaaris continue to make these distinctions. For
instance, while I was drawing the family tree of a merchant, I asked him to
identify the occupations of his male kin. The merchant, born in the 1940s,
responded by listing the sector and occupation of those who were in the
Bazaar, for instance ˜˜Uncle so-and-so was involved in the wholesale dye
trade.™™ Then he came to a few who were employed by the government
bureaucracy and he labeled them as edari. Finally, there were a few relatives
whose occupations he could not remember, but he recalled that they were
members of the ˜˜free sector.™™ When I asked him what he included in this
category, he commented, ˜˜The free sector was anyone who was involved in
commerce and industry and was independent of the government. But they
were not necessarily part of the Bazaar; they can also be khiyabani or owners
of workshops. At that time these occupations were separate from the
[government] of¬ces, so we called one occupation ˜free work™ (kar-e azad)
and the other ˜of¬ce work™ (kar-e edari).™™38 The bazaaris™ own classi¬cation
of the Bazaar in contradistinction to both the bureaucratic of¬ces and the
modern street re¬‚ected how in the context of the modernist and hostile
discourse, their self-identi¬cation helped create a communal boundary.

35
Thaiss, ˜˜Religious Symbolism and Social Change,™™ p. 35.
36
Ibid.
37
Thais also mentioned the distinction between bazaari and edari. Ibid., p. 22.
38
Interestingly, many older non-bazaari Iranians also make the distinction between of¬ce
jobs and occupations in the bazaar.
138 Bazaar and State in Iran

Like the Dominican neighborhood in New York™s Washington
Heights, San Francisco™s China Town, or Miami™s Cuban enclave, in
these discriminatory surroundings bazaaris came to be viewed by out-
siders as a ˜˜city within a city,™™ and they developed a reputation for being
˜˜secretive™™ and ˜˜traditional™™ or ˜˜clannish.™™39 This social marking,
meanwhile, fostered a sense of ˜˜bounded solidarity.™™ However, dis-
crimination and group identi¬cation do not necessarily lead to durable
informal institutions, self-help, or a corporate identity. In the Tehran
Bazaar™s case bounded solidarity was supplemented by the reputation
system that circulated resources that in turn accentuated its distinc-
tiveness,40 and importantly could compete with those available ˜˜out-
side™™ the group in the realm of the state and bureaucracy. By not
incorporating the Bazaar into the state™s economic policies or bureau-
cratically regulating its accumulation of capital, the Pahlavi regime
allowed the Bazaar™s institutions and ongoing and embedded relations
to persist, and more signi¬cantly to regenerate themselves in relation to
new economic and political situations. Thus, the Tehran Bazaar™s social
endowments transformed this autonomy into active self-governance. In
fact the cooperative hierarchies acted as protection against the rare cases
when the state did try to infringe the Bazaar™s autonomy. Bazaaris
mention that the Shah™s secret police, or the SAVAK, were generally
unable to monitor the Bazaar, since bazaaris were quick to identify
outside agents and suspicious behavior.41 A further contributing factor
in the viability of the Bazaar™s autonomy from the state is that the
commercial sector, unlike industry, had a small workforce (often with
family employees). Merchants were far less concerned with the state™s
potential mediating role in solving labor disputes and acting as a reg-
ulator of class con¬‚ict, a factor that could have encouraged them to seek
state support. Under the Shah, the Bazaar was institutionally indepen-
dent of the state, and on an individual basis and as a collective entity felt
little allegiance to the regime.
This line of interpretation also suggests that group segregation and
isolation can become a means of protecting the group™s common social
and political identity, and in the case of the Bazaar, of de¬ning the
group™s boundaries through the repeated use of their independent
39
Alejandro Portes and Julia Sensenbrenner, ˜˜Embeddedness and Immigration: Notes on
the Social Determinants of Embedded Action,™™ in The New Institutionalism in Sociology,
ed. Mary C. Brinton and Victor Nee (New York: Russell Sage Foundation, 1998).
40
Zubaida, Islam, the People, and the State, p. 75.
41
Davoud Ghandchi-Tehrani, ˜˜Bazaaris and Clergy: Socioeconomic Origins of
Radicalism and Revolution in Iran,™™ Ph.D. dissertation, City University of New York
(1982), p. 103; and Asadollah Badamchian and ˜Ali Banaii, Hayatha-ye Motalefeh-ye
Eslami (Tehran: Awj, 1362 [1983]), pp. 206“46.
Networks in the context of transformative agendas 139

reputation system and cooperative hierarchies. This is not to say tradi-
tion guides their lives, but rather modern institutions and economies
that disavow the Bazaar as a viable entity engender problems that are
solved through historical and communal relations and modes of beha-
vior. These groups are neither integrated into modern society nor fully
marginal or essentially unable to be part of it. Thus, they resort to their
own repertories and externally unregulated means because the bureau-
cracy does not meet their needs.

Economic policies and the Bazaar™s autonomy
The state™s development strategy, combined with its political non-
incorporation of the Bazaar, opened a political space for the Tehran
Bazaar to prosper and regenerate its internal organization unencum-
bered by state regulations. The Pahlavi state followed import substitu-
tion industrialization (ISI) as a strategy for development that directed
resources to the production of consumer durables by placing quantity
and price restrictions on competing foreign imports.
As many observers have pointed out, ISI along with its pro-urban eco-
nomic policies generates and spurs a series of interrelated economic pro-
blems, not least inef¬cient industrial output, depressed agricultural
production, and rapid rural to urban migration. Another common con-
sequence of ISI is a shortage of foreign exchange owing to the inability of
inef¬cient industries to export their products and earn the foreign exchange
necessary for capital and intermediate imports. However, Iran and other
countries with external sources of revenue (oil, remittances, foreign
investment, and aid) have been able to alleviate, or more accurately delay,
this balance of payments squeeze, which would have forced stringent
austerity measures. Thus, limits on imports were never as stringent in the
Iranian, Algerian, and Iraqi cases as they were for example in the Turkish
or Egyptian cases. Imports of consumer goods and intermediate goods (the
prime areas of activity in the Bazaar) rose steadily in the 1960s and went
through a ¬vefold increase from 1973 to 1978 (total imports more than
doubled), making them higher than in most middle-income countries.
Several factors merged together to encourage commercial activities,
especially imports of consumer goods, under the Shah™s regime. First,
demand for consumer manufactured goods rose with rising incomes,
pro-urban policies that spurred rural“urban migration, a rising popu-
lation, high levels of liquidity associated with the 1970s oil boom, and
the fetishizing of western commodities. A great part of this demand was
met through imports of either ¬nished goods or capital goods necessary
for the manufacturing sector. Another force shifting labor and capital
140 Bazaar and State in Iran

into the service sector was Dutch Disease, a phenomenon initially
detected in the Dutch economy after the large in¬‚ux of North Sea gas
revenue.42 Economists differ on the exact mechanisms underlying this
process, but they agree that government spending of oil revenues induce
changes in relative prices, shifting resources out of the production of
traded goods (industry and agriculture) into nontraded goods (com-
merce and services). This process helped channel resources into con-
struction and all levels of commerce, with bazaaris pro¬ting from both
the expansion of trade and their land speculation. This was all ¬nanced
through the interlinking credit system within the Bazaar, but with
important complementarities in the formal banking system. Informal
and formal credit markets were mutually reinforcing since the market
was highly segmented, with the formal ¬nancial markets focusing on
large enterprises and the informal markets focusing on small enter-
prises.43 Also, complementarities between the two ¬nancial markets
emerged since many of the top merchants and moneylenders borrowed
funds from major banks and held large deposits in them.44 Thus, the
˜˜national™™ bourgeoisie, like the ˜˜petroleum™™ or ˜˜comprador™™ bour-
geoisie, was dependent on the rentier political economy.45 Yet, as
one analyst at that time noted, the various attempts ˜˜to ¬nd [an]
alternative credit and distribution mechanism to replace the bazaar™™
were unsuccessful.46
The Pahlavi monarchy, in conclusion, neither mobilized the Tehran
Bazaar nor sought to control it through patronage or monitoring.
Believing that the Bazaar would give way to new commercial and
¬nancial institutions, the state™s modernist transformative program did
not call upon legal instruments to control the activities of the bazaaris or
to impose a coercive apparatus. The economic policies of the state,
although not designed to perpetuate the institutions of bazaars or sup-
port their economic activities, created inadvertent opportunities for the
commercial community to prosper. Besides providing economic bene¬t,
the state™s institutional nonincorporation enabled the continued use of
42
Alan Richards and John Waterbury, A Political Economy of the Middle East (Boulder:
Westview Press, 1996), pp. 14“16.
43
Djavad Salehi-Isfahani, ˜˜The Political Economy of the Credit Subsidy in Iran, 1973“
1978,™™ International Journal of Middle East Studies 21 (1989), 359“379; and Maryam
Ghadessi, ˜˜An Integrative Approach to Finance in Developing Countries: Case of
Iran,™™ Ph.D. dissertation, The University of Utah (1996).
44
Ghadessi, ˜˜An Integrative Approach to Finance,™™ pp. 174“9.
45
ˆ
Bernard Hourcade and Farhad Khosrokhavar, ˜˜La Bourgeoisie iranienne ou le controle
de l™apparaeil de speculation,™™ Revue Tiers Monde 31 (October-December, 1990),
877“98.
46
Michael M. J. Fischer, ˜˜Persian Society: Transformation and Strain,™™ in Twentieth
Century Iran, ed. Hossein Amirsadeghi (London: Heinemann, 1977), p. 182.
Networks in the context of transformative agendas 141

the Bazaar™s reputation system to endogenously regenerate its form of
governance. Thus, the exclusion of the Bazaar from the political econ-
omy offered an opening for it to reproduce the networks and norms that
undergird its cooperative hierarchies.

Spatial centralization and integration of the Bazaar™s networks
In the Pahlavi era the Tehran Bazaar™s institutional autonomy was
reinforced by a physical cohesion and separation. Typically, importers,
wholesalers, and retailers all had shops and of¬ces in, or in the
immediate area surrounding, the Bazaar. The centralization of com-
mercial networks in the physical setting of the Bazaar was bolstered by
the morphology of the Bazaar, which grouped sectors together in par-
ticular alleyways. Localization reduced the costs of searching for sellers
and facilitated the exchange of information about price, quality, and
supply between sellers, buyers, and exchange partners.
This spatial concentration did not preclude shifts in residential pat-
terns. The post-World War II era ushered in a major transformation in
the morphology of Tehran. Newer residential areas were built north of
the old royal district (arg) that was adjacent to the Bazaar and some
commercial areas emerged in the embassy quarters. The move was
initiated by Reza Shah when he left the Golestan Palace for the Marmar
Palace, and was then duplicated in 1966 when Mohammad Reza Shah
moved to Niavaran Palace in Shemiran, a northern suburb in the
foothills of the Alborz mountains known for its orchards, large plots of
land, temperate climate, and spring waters. During the 1956“1966
period, while the population of the whole city increased by 79 percent,
the old city area that included the Bazaar and the immediate area sur-
rounding it lost 23.8 percent of its population (the larger city center,
which that encompassed the old city, lost 14.9 percent of its resi-
dents).47 The dispersion of the population along class and status lines
created a modern city spatially strati¬ed along class, rather than com-
munal, lines. This urban segmentation precipitated Tehran™s legendary
north“south sociospatial divide, which became the physical manifesta-
tion of the dichotomy. At 3,000 meters above sea level, northern Tehran
hovers above southern Tehran, which sprawls out into an arid valley (see
Map 4.1). Depending on one™s theoretical perspective, the dualism city
of northern and southern Tehran was representative of the dichotomy
47
H. Bahrambeygui, Tehran: An Urban Analysis (Tehran: Sahab Books Institute, 1977),
pp. 63“4. The highest population growth was in the southern area, where the
population increase in a ten-year period was 300 percent. At the other end of the
axis, the population of northern areas increased by 200 percent.
Map 4.1 Teheran “ evolution of the built-up area between 1891 and 1996
Networks in the context of transformative agendas 143

between the modern and traditional, western and authentically Iranian
or Islamic, bourgeois and proletarian, or the land of the idol-wor-
shippers and the land of the disinherited. Thus the process of urbani-
zation, complete with the dualistic segmentation that mapped economic
and cultural class relations, was already being etched onto the mountain
slope in the 1960s.
As for members of the Bazaar, there was a strong incentive for
bazaaris to remain in the old city quarters and to preserve their social
attachments and their proximity to their place of work and the institutions
of trade and ¬nance.48 But even the bazaaris began to move away from
the increasingly crowded residential areas near the Bazaar and relocated
their residences to either the northern or the western areas of the city.
Yet commercial life remained concentrated in the old Bazaar quarter.
Upon returning from his undergraduate and graduate school studies in
the United States, Habib Ladjevardi, a member of one of Iran™s pro-
minent families of merchants and, independent industrialists com-
mented, ˜˜When I returned to Iran in 1967 my parents had moved [from
the Bazaar area] to a new residence in an enclosed compound located at
the foot of the Alborz mountains in Niavaran. . . . From 1963 to 1968,
my daily drive from my house in Niavaran to my of¬ce on the edge of
the Bazaar was a daily reminder of the great chasm developing between
the northern and southern parts of Tehran “ the one pseudo-modern,
the other traditional.™™49 Ladjevardi™s recollection captures the moment
in time when residential, economic, and cultural patterns were
redrawing the landscape of Tehran, but it also includes an important
reference to his daily drive to his of¬ce in the Bazaar area. Despite the
demographic shifts and the development of a ˜˜dual city,™™ economic
activities, even by mercantile families that had entered the industrial
sphere, remained located in the Bazaar quarter. ˜˜The bazaar was the
pulse of the economy,™™ argued a semi-retired merchant. ˜˜Everything
you needed was there. You knew what was going on in the rest of the
city and the country “ you had the latest news about the economic
situation in the provinces. The brokers were here. The suppliers, the
buyers, and competitors were all here. Your friends and acquaintances
were here too. There was no need to run around [to other places].™™
The Tehran Bazaar, despite being situated in the old city center and
gradually becoming part of ˜˜southern Tehran,™™ remained the commer-

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