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1930 1940 1950 1960 1970 1980 1990 2000

Figure 1.1 Urbanization: percentage of total population living in urban
areas, 1936“1996
Sources: Julian Bharier, Economic Development in Iran 1900“1970
(London: Oxford University Press, 1971), p. 27; Statistical Centre of
Iran, Iran Statistical Year Book (various years).

sector. Large and internationally oriented marketplaces, like Tehran™s
central bazaar, house many import“export trade houses. Also, as states
in the region have rolled back their distributive and redistributive roles,
private and informal sectors have played increasingly important roles in
providing jobs and credit and distributing goods and services.
In the case of the Tehran Bazaar, despite the Shah™s hostility, it played
a very signi¬cant and central role in Iran™s prerevolutionary economy. At
the time of the Revolution it was estimated that the Bazaar controlled
two-thirds of national domestic wholesale trade, at least 30 percent of all
imports, and an even larger portion of consumer goods.9 In terms of
credit, in 1963 the bazaars in Iran loaned as much as all the commercial
banks put together,10 while in 1975 the Tehran Bazaar was believed to
control 20 percent of the of¬cial market volume, or $3 billion in foreign
exchange and $2.1 billion in loans outstanding.11 Also, sources suggest
that there were 20,000“30,000 commercial units and 40,000“50,000

Robert Graham, Iran: The Illusion of Power, rev. edn. (New York: St. Martins Press,
1980), p. 221.
Richard Elliot Benedick, Industrial Finance in Iran: A Study of Financial Practice in an
Underdeveloped Economy (Boston: Division of Research, Graduate School of Business
Administration, Harvard University, 1964), p. 52.
Alan D. Urbach and Jurgen Pumpluen, ˜˜Currency Trading in the Bazaar: Iran™s
Amazing Parallel Market,™™ Euromoney (June 1978), 116.
The puzzle of the Tehran Bazaar under two regimes 7
Total workforce in nonagricultural activities (%) 90
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000

Figure 1.2 Industrialization: percentage of total workforce active in
nonagricultural sectors, 1906“1996
Sources: Julian Bharier, Economic Development in Iran 1900“1970
(London: Oxford University Press, 1971), pp. 34“5; Statistical Centre
of Iran, Iran Statistical Year Books (various years).

Literacy (%)

1950 1960 1970 1980 1990 2000

Figure 1.3 Literacy: percentage of total population that is literate,
Source: Statistical Centre of Iran, Iran Statistical Year Book (various

employees within the Bazaar and the immediately surrounding streets
during the 1970s.12 The Tehran Bazaar functioned as the national
commercial emporium for the import of almost all consumer goods and
Asar nos. 2, 3, 4 (1359 [1980]), 22 and 25; and Misagh Parsa, Social Origins of the
Iranian Revolution (New Brunswick, NJ: Rutgers University Press, 1989), p. 92.
8 Bazaar and State in Iran
Primary schools (per capita)

1940 1950 1960 1970 1980 1990 2000

Figure 1.4 Education: number of primary schools per capita, 1940“1996
Source: Statistical Centre of Iran, Iran Statistical Year Book (various

Population per bank

1955 1960 1965 1970 1975 1980 1985 1990

Figure 1.5 Commercial and ¬nancial development: population per
bank, 1961“1986
Source: Statistical Centre of Iran, Iran Statistical Year Book (various

many intermediary goods into Iran, as well as the export of many non-oil
goods (e.g. hand-woven carpets, dried fruits and nuts, and some tex-
tiles). Thus, wholesalers in the provinces, retailers in Tehran, private
manufacturers, and many others relied on the Bazaar for inventories and
credit. The Tehran Bazaar, possibly unlike the provincial bazaars,
The puzzle of the Tehran Bazaar under two regimes 9

prospered during the oil boom of the 1970s.13 One indicator of the
Bazaar™s wealth and the value of its property is ˜˜key money™™ (sarqo¬‚i). Key
money is the market-determined sum of money paid by an incoming renter
of a space. The amount depends on the location, size of the property, and
wares sold, but it is also a measure of the commercial potential of the
property. All the bazaaris I talked to agreed with Martin Seger™s ¬nding
that during the late Pahlavi era the value of key money increased greatly in
the Bazaar (surpassing the rate of in¬‚ation) and reached several hundred
thousand dollars for spaces as small as ten square meters.14
Yet bazaars are not simply economic institutions; they are a funda-
mental part of the urban morphology. The older bazaars are also typically
located in the heart of the city, and often neighbor government of¬ces,
courts, major religious institutions, and traditional social gathering places
such as coffee shops and public baths. The hustle and bustle and central
location of bazaar areas make them a major public forum, attracting
diverse people who in the process of conducting their personal affairs
exchange and overhear information, rumor, and opinions about economic
conditions, family affairs, and political disputes. In certain contexts this
socioeconomic melange was a base for political organization and mobili-
zation. The political dimension of bazaars is particularly important in the
Iranian context, where bazaaris have consistently played an active and
central role in major political episodes, including the struggle for con-
stitutionalism (1905“11), Mosaddeq™s movement to nationalize the oil
industry and strengthen democratic rule (1953), the protests against the
Shah™s ˜˜White Revolution™™ (1963), and the overthrow of the monarchy
and establishment of the Islamic Republic (1978“9).
Given the multiple dimensions and prominent position of bazaars in the
region, it is unfortunate that they have not received scholarly attention.
Clifford Geertz introduces his study of Sefrou™s bazaar by pointing out:
What the mandarin bureaucracy was for classical China and the caste system for
classical India “ the part most evocative of the whole “ the bazaar was for the
more pragmatic societies of the classical Middle East. Yet . . . there is only a
handful of extended analyses . . . seriously concerned to characterize the bazaar
as a cultural form, a social institution, and an economic type.15

Parsa, Social Origins of the Iranian Revolution, p. 101.
Martin Seger, Teheran: Eine Stadtgeographische Studie (New York: Springer-Verlag
Wien, 1978), pp. 164“5.
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), p. 123. European travelogues on Iran and the Middle
East often discuss bazaars as essential components of Middle Eastern society. For
example, ˜˜To see Persia without knowing its bazaars is seeing it like a small boy watching a
10 Bazaar and State in Iran

Almost three decades since his remarks, Geertz™s dismay at the lack of
research on Middle Eastern bazaars continues to resonate.16
Furthermore, despite the universal acceptance that bazaars are funda-
mental socioeconomic and political loci in Iranian society, intensive
empirical research on bazaars has been very limited since the Revolution.
Thus, scholars have tended to assume that the organization of the bazaars,
their relationship to other social groups, and their political ef¬cacy have
remained unchanged. Two important analyses of postrevolutionary poli-
tics, however, speculate that the bazaars have undergone important
transformations. Ahmad Ashraf™s history of bazaars includes a suggestive
paragraph: ˜˜On the whole . . . the bazaaris have been threatened by such
unprecedented radical governmental measures as nationalization of for-
eign trade and elimination of brokerage junction through the development
of cooperative societies.™™17 Meanwhile, in his political history of the ¬rst
decade of the Islamic Republic, Shaul Bakhash points out: ˜˜In the bazaar,
the old merchant families were edged out by the new men with connections
to the clerics in the government.™™18 In the chapters that follow, I extend
Ashraf™s and Bakhash™s astute, but unelaborated, observations to show that
state policies have not simply threatened the Tehran Bazaar or changed its
composition, but have radically restructured its internal organization and
its relationship to the state and economy “ a restructuring, moreover, that
has consequences for the political ef¬cacy of the Bazaar.

Studying transformative states
This initial observations take us away from the alleys and shops where the
Bazaar™s bargaining and trade takes place and moves us to the political
architecture where policies are formulated and conceptions of develop-
ment and social transformation are enacted. That is, to understand the
organization of the Bazaar we must consider the policies of the state.
The state was recovered from relative analytical obscurity by political
scientists and sociologists in the 1980s.19 Positioning themselves in

circus through a hole in the tent.™™ Fred Richard, A Persian Journey (London: Jonathan
Cape, 1931), p. 39.
A recent exception is Annika Rabbo™s A Shop of One™s Own: Independence and Reputation
among Traders in Aleppo (London: I. B. Tauris Press, 2004).
Ahmad Ashraf, ˜˜Bazaar-Mosque Alliance: The Social Basis of Revolts and Revolu-
tions,™™ International Journal of Politics, Culture, and Society 1 (Summer 1988), 564.
Shaul Bakhash, The Reign of the Ayatollahs: Iran and the Islamic Revolution (New York:
Basic Books, 1990), p. 290.
Atul Kohli, ˜˜State, Society, and Development,™™ and Margaret Levi, ˜˜The State of the
Study of the State,™™ in Political Science: The State of the Discipline, ed. Ira Katznelson and
Helen V. Milner (New York: W. W. Norton and Co., 2002).
The puzzle of the Tehran Bazaar under two regimes 11

opposition to pluralism, structural-functionalism, and modernization
theory, which tended to see social and economic processes as the
mechanistic engine for change, both macrostructural and rational choice
scholars turned their attention to the state as an autonomous force and
critical factor in withstanding revolutions,20 fostering economic growth
by reducing transaction costs,21 and in¬‚uencing a whole host of policy
options and outcomes.22 The object of study for this literature was the
state™s interests and institutions, with scholars considering both causes
and consequences of variations of these factors.
These early works, however, had serious shortcomings in that they
tended to conceptualize the state as an overly unitary, coherent, and
omnipresent structure or actor. More recently a group of scholars have
advocated important modi¬cations to the state-centered approach of the
1980s. Scholars have increasingly cautioned against exaggerating the
state™s autonomy from society and its capacity to restructure society.
Instead they have advocated greater attention to the dialogical process in
which state and social forces shape one another. In turn, state effec-
tiveness is based on particular state“society relations, with more effective
states tapping into social resources and institutions. For example,
the volume edited by Migdal, Kohli, and Shue offers a more modest
and nuanced perspective on the role of the state in development. They
critique the more dogmatic state-centered approaches, proposing a shift


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