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nomic policies and responses by entrepreneurs and customers. To begin
with, legal imports came to a standstill. After the outbreak of the war
and during the period when nationalization of trade was very much part
of the policy debate, china and glassware were classi¬ed as nonessential
consumer goods and therefore ˜˜luxuries™™; thus the state drastically
218 Bazaar and State in Iran

reduced the licenses and foreign exchange available to would-be
importers. For much of the 1980s the sector went through short-term
adjustments. Small-scale smuggling emerged as an alternative route to
import goods. As the war ended and special trade zones were estab-
lished, the more regularized system of smuggling and quasi-legal trade
came into existence. A few bazaaris left the Timcheh and joined
entrepreneurs in establishing import“(re)export operations in the free
trade zones and Dubai. The result has been that bazaaris now act as
secondary wholesalers, with the large importing operations being based
in Dubai and the shipments being distributed to Iran™s markets via the
free trade zones.
Meanwhile, a number of entrepreneurs in the Bazaar took this
opportunity to invest in both china and glass factories. With the sharp
devaluation of the rial, the resulting rise in the price of imports, and the
decline in the purchasing power of many Iranians, demand for imports
declined. Over time, domestic producers have been able to enter the
market and meet demand. These small emerging industrialists moved
into production of china and glass products by taking advantage of some
of the modest investment incentives and the large domestic consumer
market while maneuvering around the dense and unpredictable
bureaucracy. It has helped that Iran enjoys a relative comparative
advantage in these industries owing to availability of raw materials and
cheap energy. By the late 1990s, with domestic production meeting an
ever-greater portion of demand and an export trade to neighboring
countries burgeoning, the glassware and china industries had become
two of the few non-petroleum sectors to prosper and grow.65 While
domestic products are not able to compete with European and Japanese
manufacturers in terms of quality or diversity of design, bazaaris com-
mented that they attract buyers because they are only a third to a half of
the price of these imports and readily available. For instance, while
sitting in the store of one purveyor of French glassware, I overheard a
number of customers complain that it was dif¬cult to ¬nd complete sets
or replacements once dishes broke. The bazaari explained, ˜˜Dear lady,
it is not easy to import dishes, there are a thousand problems and it takes
a long time. If you want ¬ne French dishes like these you must accept
these problems.™™ Sales of domestic products and anecdotal evidence
suggest that more and more Iranians are unwilling to ˜˜accept these
problems.™™ Moreover, the high domestic sales have been reinvested in
the factories to steadily improve quality and patterns. However,

65
Dawran-e Emruz, 19 Azar 1380 (December 10, 2001) and 27 Azar 1379 (December 17,
2000).
Carpets, tea, and teacups 219

domestic producers are concerned that their prices cannot compete with
Chinese imports that are both produced at lower prices and avoid
import barriers by entering Iran through smuggling channels.
Hence, these market changes have restructured the china and glass-
ware bazaar in particular ways. The earlier stability has been replaced by
pervasive instability born out of changes in customs duties and policies,
exchange rate policies, uncertainties of smuggling operations, and
¬‚uctuations in Iran™s macroeconomic situation. These ¬‚uctuations limit
long-term planning, with few importers willing to take the risk of
ordering large shipments, while some wholesalers who are not in need of
liquid capital use their inventories as a means of speculation. Finally,
smuggling has had the same negative consequences for the maintenance
of cooperative hierarchies as discussed previously. In the context of the
new market possibilities in the kitchenware sector, they also diverted
some traders away from import value chains. Bazaaris who were
apprehensive about becoming involved in trade that was ostensibly
illegal switched into trading in domestic products either by shifting their
inventories or, in a few cases, investing in production. As one such
wholesaler mentioned, once he realized that importing would require
illegal activities, he shifted his attention to domestically manufactured
goods, explaining that ˜˜an importer™s job is not smuggling.™™
As some old-timers shifted out of imports, others entered. Markets for
standardized goods have lower entry barriers than comparable markets for
nonstandard goods. Start-up costs in the china and glassware sector are
relatively low: remember, ˜˜losses only come up to the shin.™™ Not only is
the value of basic inventories modest (a few thousand dollars), but unlike
with nonstandard goods such as carpets, tea, or jewelry, the knowledge
and reputation necessary to begin are quite minimal. Apprentices in the
Timcheh are some of the most upwardly mobile groups that I met in the
Bazaar. In today™s more open market, after only a couple of years,
apprentices can move on to begin their own small enterprises, typically
outside of the Bazaar. One small-scale wholesaler of domestic china
dishes, who began working in the Timcheh in 1995, chose to invest in the
china and glassware sector despite having enough savings to begin a
business in the more lucrative cloth bazaar, in which he also had some
acquaintances. He explained that he selected the Timcheh instead of
other sectors because he was able to enter the trade with little knowledge
about china, adding that selling dishes was not a skill (herfeh).
In addition, many of these new entrants were able to create a new home
for their trade. Located three kilometers from the Tehran Bazaar, near
Shush Square, a new wholesale center for china and glassware has
emerged. Immediately before the Revolution, this area housed small
220 Bazaar and State in Iran

workshops that produced hand-made and blown-glass products. It was
also one of the main warehouse districts. A number of factors came
together to lead to a gradual relocation of the wholesalers, to Shush in the
mid-1980s. Most importantly, the limits placed on traf¬c movements in
central Tehran made Shush, an area just outside the traf¬c restriction
zone already containing a number of warehouses, an ideal location for
wholesalers to sell to provincial retailers and jobbers. Second, as
consumers gradually shifted from imported to Iranian-made china and
glassware, Shushis, as they are sometimes called, specializing in domestic
goods saw an improvement in their business. This attracted many new
businessmen to establish wholesale operations in this area, as well as
attracting a few from the Timcheh to establish of¬ces in the area. The
municipality has also stepped in to support this growing emporium. In the
mid-1990s the district 16 branch of the municipality built the impressive
and elaborate China and Crystal Shopping Center.
By the late 1990s, Shush and the Timcheh divided the market
between them. The Timcheh houses purveyors of imported goods and
caters to past provincial clients and Tehrani retailers who continue to
view it as the center for china and glassware. Meanwhile, Shush func-
tions exclusively as a wholesale district, and principally as an outlet for
domestic wares. While there is some overlap in the networks, their
market segmentation does not seem to have been bridged by social
relations. Bazaari Timcheh-iis consider Shushis as newcomers with little
or no experience in commercial matters. And Shushis continue to
recognize the Timcheh as the base for imported goods. Regional
differences also may play a role, with many of the original Shushis
coming from Hamedan, unlike the noticeable presence of Isfahanis in
the Timcheh. Nonetheless, since china and glassware are standard and
substitutable goods, economic exchanges can more easily ¬‚ourish
without the social underpinnings necessary for cooperative hierarchies.
Since goods are of more certain provenance, buyers have always been
more assured that quality and quantity will be consistent. Thus, new
merchants can enter, new wholesale districts do emerge, and trade is
conducted relatively smoothly despite the transformation of the market.

Comparisons and conclusions
The explanations laid out in the previous chapter understood changes in
the organization of the Bazaar as being principally produced by the
policies of the state and responses of bazaaris. The case studies in this
chapter are an opportunity to investigate other possible explanations
through comparison. I now look at four potential factors that I have not
Carpets, tea, and teacups 221

investigated “ group size, geographical dispersion of the value chains,
commodity type, and the existence of state regulation.

Group size
First, it is reasonable to expect that group size will be an important
constraint on the type of governance possible. Groups with larger
membership would tend to have dif¬culty in generating and sustaining
long-term, multifaceted, and crosscutting relations integral to generat-
ing an internal and collective regulatory system such as cooperative
hierarchies. In large groups, the breadth of networks (that is, the
number of individuals incorporated into chains of relations) would be so
great that we may expect the degree of embeddedness to be slight.
Moreover, from the rational choice perspective, governance is a non-
excludable ˜˜public good,™™ and hence faces the obstacle of under-
provision owing to free-rider problems.66 Thus, it is argued that without
outside provision of selective incentives these collective goods will not be
provided.67 This general hypothesis regarding group size and collective
action was most famously put forth by Mancur Olson, who argued that
unlike small groups, which can be organized around a single individual
or small number of entrepreneurs willing to bear the burden of orga-
nizing, large groups need the active participation of a large number of
individuals to transform latent groups into self-regulating groups. Thus,
˜˜the larger a group is, the more agreement and organization it will
need,™™ and ˜˜costs of organization are an increasing function of
the number of individuals in the groups.™™68 Therefore the hypothesis
would be that larger groups will tend to be less likely to generate
cooperative hierarchies than smaller groups, and one would expect that


66
Mancur Olson, The Logic of Collective Action: Public Goods and the Theory of Groups
(Cambridge, MA: Harvard University Press, 1965).
67
To be more precise, we must account for jointness of supply cost. Jointness of supply
cost refers to costs associated with providing goods that have constant costs regardless
of the number of individuals bene¬ting from the good (e.g. a bridge, a dam, or a border
between countries). Perfect private goods have zero jointness of supply costs since costs
are proportional to the number of individuals consuming them. In the case of
cooperative hierarchies that require collective governance, in which the cost of
organization is proportional to the size (i.e. they do not enjoy perfect jointness of supply
cost), as the size of the group increases the cost of maintaining these relations will
increase (in this case cost in terms of time and effort is more important than ¬nancial
cost). Thus, the neoclassical economic approach would predict that unlike those public
goods with perfect jointness of supply cost, the supply of this public good will be more
unlikely as the group size increases.
68
Olson, The Logic of Collective Action, p. 46.
222 Bazaar and State in Iran

the underlying reason for the shift from cooperative to coercive hier-
archies is simply arithmetic.
At ¬rst glance, this argument seems to have merit. Even without
speci¬c data, it is universally agreed that the number of bazaaris has
increased. Chapter 3 discussed the many causes, including the increase
in urban population, high levels of unemployment in the manufacturing
and public sectors, and the relative pro¬tability of the service sector.
However, on closer examination, the group size argument becomes
far less compelling. First, an increase in the number of members of the
Bazaar was occurring through much of the twentieth century. The
Tehran Bazaar™s overall membership increased as the economy and
polity were increasingly centered in Tehran; these patterns have mat-
tered at least since Reza Shah™s reign (1925“1941). Thus, in the 1960s
and 1970s, the Tehran Bazaar™s membership was in the tens of thou-
sands, but cooperative hierarchies persisted. The increase in size of the
Bazaar after the Revolution is not a suf¬cient or necessary reason for a
decline in cooperative hierarchies. Second, when we compare the three
sectors in ordinal terms we do not see a correlation between group size
and type of governance. The carpet bazaar was consistently the largest
sector, followed by the china and glassware bazaar and then the tea
bazaar. However, it is the very large carpet sector that has been able to
retain some of the characteristics of cooperative hierarchies. Third,
transformations within the tea bazaar suggest that a decline in numbers
does not help to maintaining cooperative hierarchies. A member of the
unof¬cial Association of Tea Wholesalers of Tehran told me that
whereas before the revolution there were as many as 500 tea wholesalers
and importers, most of whom were in Tehran, now the association only
had 100, many of whom are actually inactive and retired. Other tea
merchants have noted that there are now fewer professional tea mer-
chants than three decades ago. This decrease in group size, however, did
not prevent the unraveling of cooperative hierarchies.

Geographic dispersion of value chains
If the size of a group is less critical for preserving cooperative hierarchies,
it seems reasonable that concentration of group members in a given
space is an important condition. As we saw in the discussion of the
carpet bazaar, for instance, localization was one of the prominent
characteristics of this trade, facilitating the creation of multifaceted
relations and weak ties that bridge network clusters. Thus, we would
expect that value chains that are spread across great distances would
prevent coordination and limit the capacity of social relations to mediate
Carpets, tea, and teacups 223

market forces. As the distance between members of the value chain (say
between a wholesaler and an importer) expands, regular face-to-face
interactions become less common and cooperative hierarchies become
less prevalent. The argument would explain the shift from cooperative to
coercive hierarchies as an outcome of dispersion of networks.
On closer inspection, however, we see that dispersion of value chains
across wide expanses does not necessarily reduce the likelihood that
cooperative hierarchies will prevail. The carpet sector, alongside loca-
lization of wholesalers in the Tehran Bazaar, in fact has been highly
dispersed across great distances. Domestically, carpet production occurs
quite literally in all four corners of Iran “ Azerbaijan in the northwest,
Turkmen areas and Khorasan in the northeast, Kerman in the south-
east, and Fars in the southwest. Internationally, carpets were exported
to carpet emporiums such as Hamburg, Zurich, and Secaucus, New
Jersey, through fundamentally continual sets of networks with the same
informal institutions. Yet both forms of governance existed with this
dispersion. Moreover, the postrevolutionary china and glassware sector,
despite being localized in the Tehran Bazaar and Shush Square (only a
few kilometers away from the Timcheh), has witnessed patterns of
commercial relations that have more readily become short term, purely
economic, and less crosscutting than those of the carpet bazaar. Thus,
institutions, formal and informal, must be present to encourage inter-
actions so traders do not simply pass each other by, but exchange
thoughts, experiences, and information. These cases demonstrate that
society is spatially organized, in the sense that it is contingent not only
on interactions in physical spaces, but on social interactions that form an
interface transcending geographies and boundaries. It is only when
shared space is accompanied by shared experience that space acquires
an importance in relational terms.

Commodity type
Recalling the discussions about standard versus nonstandard goods and
the latter™s pervasive information costs that impede transactions, we
might expect commodity types to condition relations within sectors. In
what Geertz calls a ˜˜communication model of the bazaar economy,™™ the
scarcity of information about commodities and prices creates techniques
and shapes relations in order to search for information and protect the
information one has. One of the main pillars of his analysis is that goods
and services in the bazaar economy are ˜˜inhomogeneous.™™ ˜˜Those that

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