Charismatic Political Authority and Populist Economics in Post-Revolutionary Iran

Author(s): Ali A. Saeidi

Source: Third World Quarterly, Vol. 22, No. 2 (Apr., 2001), pp. 219-236
Published by: Taylor & Francis, Ltd.
Stable URL: http://www.jstor.org/stable/3993408
Accessed: 12/12/2009 15:51

Your use of the JSTOR archive indicates your acceptance of JSTOR's Terms and Conditions of Use, available at
http://www.jstor.org/page/info/about/policies/terms.jsp. JSTOR's Terms and Conditions of Use provides, in part, that unless
you have obtained prior permission, you may not download an entire issue of a journal or multiple copies of articles, and you
may use content in the JSTOR archive only for your personal, non-commercial use.

Please contact the publisher regarding any further use of this work. Publisher contact information may be obtained at
http://www.jstor.org/action/showPublisher?publisherCode=taylorfrancis.

Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the screen or printed
page of such transmission.

JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of
content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms
of scholarship. For more information about JSTOR, please contact support@jstor.org.

Taylor & Francis, Ltd. is collaborating with JSTOR to digitize, preserve and extend access to Third World
Quarterly.

http://www.jstor.org
Third WorldQuarterly, Vol 22, No 2, pp 219-236, 2001 I

Charismatic political authority and

populist economics in post-
revolutionary Iran

ALI A SAEIDI

ABSTRACT Thispaper undertakesa political analysis of economicpolicy in Iran

in the post-1979 period, and examines a specific kind of populist economics
within the legacy of the rentierstate as a result of the emergence of charismatic
political authority.It discusses the implications of charismatic authority which
led to the implementation of populist economics, and which coincided with
economic and political instability during the reign of Ayatollah Khumaini and
afterwardswhen his successor was involved in a crisis of routinisationof charis-
matic legitimacy.In doing so, the economic effects of such policies are examined
in terms of the (re)distributionof income and the establishmentof para-govern-
mental organisations, the overvaluationof the national currency,and the budget
deficit and its inflationarypressure.

The 1979 Revolution changed Iran's system of political legitimacy from a neo-
patrimonial one to one of charismatic authority. When Ayatollah Khumaini
returnedto the countryafter 15 years in exile, millions of people were waiting to
welcome him. When he died millions of people likewise commemorated his
death, and his grave, which has been identified as a sacred shrine (Haram-i
Mutahhar), has received millions of pilgrims. One decade after his death, his
heritage still dominates Iranianpolitics. The political factions still refer to his
legacy as the main source of justification for their actions as they seek to control
the authoritative resources, and there is still nostalgia for a charismatic ruler
among his followers.
The centralaim of this paperis to examine the effects of AyatollahKhumaini's
charismatic political authority on economic policy in the post-1979 period in
Iran. It takes into account the likely political fallout of economic development
duringthe post-revolutionaryera. The main consequence of charismaticpolitical
authority for the Iranian economy was the emergence of a specific kind of
populist economics within the legacy of the rentier state. This study will probe
the relative capacity of charismatic authority to maintain populist macro-
economic policies. The populist economy had particular economic effects,
notably the (re)distribution of income and the establishment of para-govern-
mental organisations for charitable purposes, the overvaluation of the national

Dr Ali A Saeidi can be contacted at 5 Devonshire Court, Devonshire Road, Hatch End, Pinner, Middlesex
HA5 4NA, UK. E-mail: ali@webstar.co.uk.

ISSN 0143-6597 print; 1360-2241 online/01/020219-18 ? 2001 Third World Quarterly

DOI: 10.1080/01436590120037045 219
 ALI A SAEIDI

currency,which restrictedthe scope of private sector activities, and an increasing

budget deficit with inflationarypressure.In addition,the emergenceof a populist
economy coincided with economic and political instability.
This paper is concerned with the impact of Ayatollah Khumaini'scharismatic
authority and the problems of routinisation of charismatic legitimacy on
economic policy. The introductorysection considersthe definition of charismatic
authority and its routinisationin order to assess its impact on Iran's economic
structure.The next issue which the paper addresses is the politics of economic
development. In doing so, it is argued that the implications of charismatic
authority led to the implementation of populist economics, which in turn
contributedto poor policies and weak economic performance.

The general character of charisma: the instability of political authority

Before reviewing the characteristicsof Iraniancharismaticauthority,it is impor-
tant briefly to discuss the problems underlying political change in post-revolu-
tionary Iran. The neo-patrimonial regime of Iran during the Pahlavi period
included two main antitheticalcharacteristics,which were mutuallyexclusive in
the sense that the Shah's regime could by no means be either modern or
traditional.'In the case of the neo-patrimonialregime, the transition to a new
political legitimacy occurred through a dialectical synthesis of the modern and
traditional components of the old regime. However, this kind of political
authorityas an institutionof daily routinewas destroyedin the 1979 Revolution.2
Ayatollah Khumaini's success was to overthrow the Pahlavi regime mainly
throughthe acceptanceof his leadershipby the importantulama and intellectuals,
despite their small numbers,in the complicated course of the revolution, which
came to include virtually all urban classes and groups. This mass support
provided in Ayatollah Khumaini a charismaticleader. His victory reflected not
only the ability of charismaticleadership, which interruptedthe routine life of
traditionalauthority,to rally the supportof nearly all major social stratabut also
the utter failure of the Pahlavi regime to hold the allegiance of the very social
classes that it had helped to create.3After the revolution, Ayatollah Khumaini
used this position to consolidate his power and establish an Islamic state through
the elimination of all political groups-which had previously been allied to him
in the course of the Revolution-in the power struggle and conflicts resulting
from the natureof charisma.These challenges in the course of his consolidation
of power, and the crisis of routinisationof charisma made the political system
unstable.4Ayatollah Khumainigenerated three main conflicts with the govern-
ments he had himself appointed. The first and second conflicts between
Ayatollah Khumaini and his revolutionary followers on the one hand, and
Bazarganand Bani-Sadr's governmentson the other led to Bazargan'sresigna-
tion and Bani-Sadr's abdication,because neither was among his true believers,
and the absolute followers of charisma.5Because both sides of the third conflict
were followers of Ayatollah Khumaini,this conflict emerged as one of political
factions, which has intensifiedafterhis death.6
Consequently,the effects of political instabilityon economic performancehave
led to the view that Iranis a discretionarystate that lacks credibilityratherthan a
220
 AUTHORITYAND POPULISTECONOMICS
POLITICAL
CHARISMATIC

protective state.7The lack of credibility of the state excluded the private sector
from its liquid resources and obliged it to retreat into informal relationships.
Therefore, the levels of savings, investment and technology were lower under
this unstable political authority(ie discretionarystate) and as a consequence per
capita income was lower. As most experimental research refers to political
instability as a significant obstacle to economic growth,8this might provide an
explanation of why Iran has not been rising to the income levels of an indus-
trialised country.A numberof scholars have pointed to political instability as an
importanthindranceto economic growth, since political instability reduces the
supply of both capital and labour.9 Investment is discouraged because the
increased risk of capital loss, and political turmoil causes capital flight and a
brain drain. Political unrest also hampers the establishment of property rights,
which are necessary in order to realise the productivity gains associated with
impersonalexchange. Political instability is positively related to the reductionof
political legitimacy and changes in the nature of political authority. The
Revolution of 1979 brought about a structuralchange from a neo-patrimonial
political authority to a charismatic legitimacy with an element of elective
legitimacy. The lattercontinueduntil the death of the charismaticleader in 1988.
Although the council of Experts(Majlis-i Khubrian)chose a new leader,the state
was involved in a crisis of the routinisationof charisma.This brought about yet
furtherpolitical instability.
In the post-revolutionary period, political authority involved two sorts of
anarchy.First was 'vulnerabilityof possession', in the sense that at any given
moment an individual'spossessions were subject to expropriationby the govern-
ment and some para-govemmentalorganisations,such as the Foundationof the
Oppressed (Bunyad-i Mustad'afan).10The situation was so unstable that people
could not show off their property,for instance, by using expensive cars. It was a
common rumour that such cars belonged to members of SAVAK, the Shah's
Intelligence Organisation. Second was 'transactional insecurity', in the sense
that, though to some extent propertyrights were established, contractrights was
not. At this stage (ie during the first months after the Revolution) the state
controlled a relatively large amountof individualproperty,and did try to protect
both sides of any contract,althoughnobody intendedto come forwardto invest."
The private sector can be thought of as having two differentproductiontech-
nologies. The first involves large-scale production,with accumulationof capital
and exposureof this capitalto the clutches of the state.'2In the case of Iran,large-
scale industriesand financial institutionswere nationalisedand confiscated after
the Revolution. The state, however, introducedcertain regulations, such as the
law for protection of industries, which limited the freedom of private capital.'3
There was also no guaranteethat the governmentwould not expropriateevery-
thing. Socially, it seems that it took a long time for the investors to forget the
memory of nationalisationand confiscation of large properties during the first
months of the Revolution. The second type of protection technically involved
minimising the accumulationof assets that could be expropriatedby the govern-
ment. This could be called a subsistence economy and was based on the use of
small investments and returnsthat could be consumed instantly or hidden effec-
tively from the state. This kind of productionwas characterisedmainly by small
221
 ALI A SAEIDI

firms, informalenterprises,tradeand services in the economy. The private sector

believed that the governmentwould have an incentive to expropriateeverything
if they engaged in large-scale production. The private sector thus preferredto
remain in the informal economic sector rather than be deprived of its efforts.
Therefore, the private sector agents avoided relying on resources that might be
expropriatedby the state. Only a limited numberof privileged entrepreneurshave
tried to associate themselves with the state and made use of the government's
powers in order to engage in rent seeking. Although the private sector, and
particularlythe old regime's entrepreneurialbourgeoisie, was interestedin new
opportunitiesfor investment in the country after the war with Iraq in 1988, and
some meetings were arrangedwith top economic authorities, they minimised
their contact with the state when the reaction of political factions tarnishedthe
prospectof privatesector activity.

The routinisation of charisma: continuous instability

In its purest form, charismaticauthorityexists only in the process of originating.
Afterwards,it becomes either rationalisedor traditionalised,or a combinationof
both, for the following reasons: first, the ideal and material interests of the
followers in the continual reactivation of the community, and second, the
interests of the administrative staff, disciples or followers of the charismatic
leader in continuingtheir positions, so that their own statusis stable on a day-to-
day basis.'4
After the death of the charismaticleader in Iran the position of authoritywas
well established, and control over large masses of the populationexisted. It did
not give way to the forces of everyday routine. There was, though, an objective
necessity for patternsof orderand organisationof administrativestaff to meet the
normal, everyday needs and conditions of carrying on the administration. In
addition, there was a striving for both internal and external security, requiring
legitimisation of positions of authority,social prestige and economic advantage
held by the followers. The process of routinisationwas thus not confined to the
problem of succession. The most fundamentalproblem was the transitionfrom
the charismaticadministrativestaff and the mode of administration,to officials
who could handle everydayconditions.
The Assembly of Experts (Majlis-i Khubrigan)chose Khamina'i, as the new
supreme leader. He was a middle-rankingcleric, and neither a senior religious
jurist nor a marja'-i taqlid (pl maraj'i-i taqlid, literally source of emulation). He
was promoted to Ayatollah, and then became a marja'i taqlid, a cleric of the
highest rank.This election reinforcedthe crisis of routinisationof the charismatic
leadership,particularlywhen Khamina'itried to continue Ayatollah Khumaini's
heritage in the political sphere. In order to solve the problem of routinisationof
charisma, Ayatollah Khumaini's followers likewise tried to search for a new
charismaticleader on the basis of criteriathat would fit him for the position of
authority.This could have led either to traditionalisationor to legalisation. For
instance, since in Ayatollah Khumaini's era, the populist aspect of charismatic
authoritywas supportedby (1) the non-tradeablegoods sector such as construc-
tion and services; (2) firms producingimportsubstitutes;and (3) farmersin rural
222
 POLITICALAUTHORIrYAND POPULISTECONOMICS
CHARISMATIC

areas and urbangroups who gained and received subsidies, these various interest
groups, played importantroles in preventingpolitical authorityfrom solving the
crisis of capital accumulation through economic reform. After Ayatollah
Khumaini's death, Rafsanjani's government tried to move towards economic
rationalisationpolicies by devaluing the national currency in order to increase
economic competitiveness, but the non-tradeablesector, which relies heavily on
imported intermediate inputs in the production process, opposed devaluation.
Those groups and individuals who enjoyed previous economic policies balked at
trade liberalisation, and the urban and rural groups, supportedby the religious
leaders at both local and national levels, inside and outside the establishment,
objected to the cutting of food and other subsidies. Individuals,households and
firms as producers, consumers and recipients of transfers were not to be
compensated whether they might benefit or lose from this reform. There were
uncertainties, which led to biases in favour of the status quo. Aside from
Rafsanjani's economic policies which were badly designed and badly imple-
mented, the government,dominatedby the right-wing faction, finally employed
populist tactics of the same style as those employed by the governmentof the left
during the 1980s. Routinisationhas also taken the form of the appropriationof
powers of control and of economic advantages by the disciples. Again, this
system may be viewed as either traditionalor legal, dependingon whetheror not
legislation of some sort is involved.

AyatollahKhumaini:religious charisma or economic charisma?

Ayatollah Khumaini's actions can be typified according to the degree of his
success and the political system in which he worked and struggled. Here, I
presupposethat he possessed a distinct charismaticquality, which was acknow-
ledged by a significant numberof followers.'5Some try to make a doctrine from
what Ayatollah Khumaini expressed on economic issues.16 This endeavour is
based on his scatteredviews concerning differenteconomic issues. For instance,
he createda dichotomybetween legal propertyrights and illegal propertyrights.'7
He depicted society as sharply divided into two main classes (tabaqat): the
mustad'afin (oppressed) against the mustakbirin(oppressors); the poor against
the rich (sarwatmandan);the millati mustad'af (oppressed nation) against the
hukumat-i shaitan (Authority of Satan); and the slum dwellers against palace
dwellers. He usually used these dichotomies intendingto promote one class over
another.Careful scrutiny of Ayatollah Khumaini'srhetoric,however, shows him
to have been remarkablyvague on specifics, especially on the question of private
property. He also did not express his own ideas clearly on controversial
legislation such as the nationalisationof foreign trade,land reformand the labour
law. He was content solely with giving moral advice and sometimes warned the
prosperous class to respect others.'8 On some socioeconomic issues, such as
migration,he also exhortedneedy people to avoid certainactions in favour of the
existing order.For instance, he warned the ruralpopulation against migrationto
urbanareas.'9He arguedthatprogressiveIslamic rule should supportthe poor and
needy and confiscate illegal wealth from the greedy.20
During his term of consolidation and the establishment of central power,
223
 ALI A SAEIDI

AyatollahKhumainionly evinced populistviews in response to the problemsof a

modern economy. His stand on economic issues appeared in several different
announcements.For instance, on his arrivalin Qum in March 1979, he promised
free electricity, gas and water for all the people. He also issued an edict, which
was revoked a few days later, banning on religious grounds the consumptionof
frozen meats.2'He did not go furtherthan emphasising self-sufficiency in the
national economy, warningbusinessmen to avoid hoardinggoods and to reform
illegal money transactions.The most desirable economic policy was, from his
point of view, to supportpoor and oppressedpeople. He said thatjustice should
be implemented.22 On the first May Day after the Revolution of 1979, Ayatollah
Khumainipraisedthe workersas the most importantclass in society and thanked
them for their contributionto the course of the Revolution. 'We are for Islam, not
for capitalismand feudalism, not for land-grabbers(zamin kharan),but for bare-
footedness (pa birahnigan), for deprived classes. Islam originates from the
masses, not from the rich. The martyrs of the Islamic Revolution were all
members of lower classes, peasants, industrial workers, and bazaar merchants
and tradesmen'.23 He did not exclude any social group in his speech as long as
they supportedthe Islamic State.24
AyatollahKhumaini'sview of economics was also influenced by politics. For
instance, after the land reform of 1963, he issued a verdict against the establish-
ment of rural co-operatives.25It was obvious that this was a form of political
opposition to the interventionof the state in agrarianrelations. His approachto
economics was likewise to supporta subsistence economy in the sense that he
paid much attentionto agricultureas a vital sector to provide a survival standard
of living.26His extreme view against any priority in economic policy can be
found in the following sentence expressed shortly after the Revolution. He
criticised those who warned that preoccupation with religion might hinder
Muslim economic development: 'Some persons have come to me and said that
now that the revolution is over, now we must preserve our economic infra-
structure.But our people rose for Islam, not for the economic infrastructure.'27
Although he frequently claimed that the Islamic state was non-communist,
non-capitalist, but pursuing a third way towards development, he did not
systematically demonstrate the main economic principles of such an Islamic
state. His contradictoryattitudestowards the economy confused investors. The
plain and vigorous defence of the rights and interests of the oppressed and
disinheritedseemed to be a kind of Islamic socialism but, in contrastto that of
Shari'ati, and even MuhammadBaqir-Sadr,as Enayat pointed out 'he avoided
translatinghis general condemnationsof profligacy,corruption,and class differ-
ences into a scheme of systematicreforms,since this would have involved him in
reconcilingIslam with moderneconomic ideas'.28

Populist economics: implications of Ayatollah Khumaini's charismatic

authority
The development of populist economic policies, reinforced mainly by charac-
teristics of the rentier economy (ie heavy dependence on oil exports which
accountfor about 80% of total exports over the past decade, and a rapidincrease
224
 CHARISMATIC
POLITICALAUTHORITYAND POPULISTECONOMICS

in population in the 1980s and 1990s), occurredas a consequence of Ayatollah

Khumaini's charismatic leadership as well as his views on social justice as an
ideology. The methods the charismatic leader and his followers employed for
propagatingtheir views were populist, but their attacks on bazaaris and the rich
can to some extent be see as rhetorical. Here, I apply a modified version of
populist economic theory29because, to some extent, Iranianpopulist economic
policies were implemented to retain mass support within the inherited rentier
economy. Thus, by Iranianpopulism, I mean a political authority that tried to
gain legitimacy from mass society without really threateningthe whole principle
of privateproperty.In a simple definition, it can be arguedthat the main charac-
teristic of this version of populist economics is an approachto economics that
emphasises income (re)distribution,ie social justice, as an ideology. This implies
a large budget deficit and de-emphasises the risk of inflation, avoiding devalua-
tion, and bringing property rights into question and ambiguity. In addition,
pushing aggregate demand beyond existing economic bounds caused consump-
tion to go beyond investment. The reason for this was that the increase in
consumptionwas the result of a political decision to solve immediate economic
problems in the conditions in which the state tries to have mass support.
Nevertheless, all types of economic populism are rooted in economic instability.
Here, four main characteristicsof Iranianpopulist economics will be analysed:
the budget deficit and its inflationarypressure;the ratio of consumptionto invest-
ment; the overvaluationof the exchange rate; and (re)distributionof income and
para-governmentalorganisations.

The budget deficit

If we try to explain why the governmentdecided to run large fiscal deficits and to
rely heavily on an inflation tax as one of the characteristics of its populist
economics, the answer is mainly because of political instability. The evidence
supportsthe idea that an inflationtax (ie inflationresultingfrom an inefficient tax
system) is related to the degree of political instability of a country.30In Iran,
inflation, which is a highly inefficient form of taxation, has become the norm.
The inefficient tax system has been a constrainton the revenue collecting capaci-
ties of the government. The government could not decide to reform the tax
system for fear that a more efficient tax apparatusmight be used in the futureby
its political opponents. Political instability is directly related to inefficient taxes
such as seignorage.3'Thus, budget expenditureand a budget deficit can be used
as criteriato indicate the inefficiency of the tax system. The government could
not lift the constraintson revenue other than by relying on the capacities of oil.
The inefficient tax system and fears of reformforced the governmentto deal with
the budget deficit by borrowing from domestic resources, mainly from the
CentralBank of Iran.
Table 1 shows governmentexpenditureas a percentageof GDP, and illustrates
that the state occupied a key role in the use of available resources during the
1980s and 1990s. The table also measures the importance of the government
deficit as a percentage of GDP. Deficit spending has been the easiest way to
confront a fiscal crisis, because increasing taxes as an alternative to deficit
225
 ALIA SAEIDI

TABLE1
Government expenditure and deficit as a percentage of GDP

1982 1983 1984 1985 1986 1987198819891990 1991 1992 1993 1994 199519961997

Expenditure 30.6 28.4 23.5 21.5 20.2 18.9 19.4 16.0 16.9 16.6 16.7 38.2 30.3 28.8 28.0 27.6
Deficit 6.4 6.9 4.5 4.3 9.3 7.6 9.7 4.2 1.2 2.4 1.3 7.2 4.4 3.5 1.6 2.7

Note:FiscalIranianyearendsMarch20.
Source: Bank-i Markazi Jumhuri-i Islami Iran, Barisi-yi Tahawulat-i Iqtisadi-yi Kishwar tai-i salha-yi,
1361-1369, 1373/1994, Balance Sheet and Annual Report, vanous years; and TMF, Islamic Republic of
Iran:RecentEconomicDevelopments,IMF StaffCountryReportNo 00/120, Washington,DC, September
2000.

spending would require tax reform. The share of the budget deficit in total
governmentpayments increased from 4.8% during 1974-77 to 33.7% and then
droppedto 21.1% during 1979-81 and 1982-85, respectively.32 The overall fiscal
deficit, which had been falling steadily since 1989 because of increasing oil
revenue, rose to 7.2% of GDP in 1993 (see Table 1). The drop in global oil prices
in 1998 sharply weakened the internal and external positions and forced the
governmentto increase the deficit-to close to 7% of GDP33-rather than the tax
revenues.34In orderto resortto increasedtaxation,especially if direct taxationis
involved, the governmenthad to meet a demandfor control throughaccountable
institutionswhich could be achieved only by increasingthe accountabilityof the
tax system and as a response to the non-economic needs of tax payers under
conditions of democraticlegitimisationratherthancharismaticones.
Table 2 shows the incidence of tax revenue over total revenue and grants.
Although the tax revenue appears to account for nearly 50% of total revenue,
particularlyafter 1986, which coincided with the fall of oil revenue, it decreased
after 1990 when the oil revenue again increased.During 1982-85, oil revenue as
a percentage of total revenue was 56.6%, while it decreased to 25.3% during
1986-90.
Iran was in the past very dependent on oil revenue, but its reliance on this
source of revenue decreasedwith the fall in oil prices and its respective oil export
volume. This decline shows that the country developed some, albeit limited,
domestic sources of revenue as an alternativeto oil. Nevertheless, dependenceon
oil income increased in 1992, and the country appearedto be in the process of
going back to its previous statusof a rentiereconomy (see Table 2). The govern-

TABLE2
Oil and tax revenues as a percentage of total revenue

1982 1985 1987 1990 1992 1994 1997

Oil revenue 67.5 44.6 35.3 59.8 52.0 73.4 41.5

Taxrevenue 24.5 38.7 47.4 50.3 38.2 18.7 27.7

Source: Bank-i Markazi Jumhuri-i Islami Iran, Barisi-yi Tahawulat-i Iqtisadi-yi Kishwar tai-i salha-yi,
1361-1369, 1373, and Balance Sheet and Annual Report, various years.

226
 POLITICALAUTHORITYAND POPULISTECONOMICS
CHARISMATIC

ment's failure to adjustto constraintsimposed by the instability in the oil market

through the balance of payments and internal productive capacity gave rise to
increased inflation. It can be concluded that inflationaryfinance arose mainly as
a result of the budget deficit, which originatedfrom populism. It was also rooted
in excessive optimism about the potential for rapid growth throughthe injection
of oil revenues via demand stimulation and inward-looking industrialisation.
Furthermore,the fluctuationof oil revenue, which led to the trend of increase in
this tax revenue, was not based on the re-construction of the tax system (ie
increasingdirecttax revenue)but on the indirecttax revenue.35
It is generally agreed that the lower the independence of a central bank, the
higher the inflation and thereforethe seigniorage (which is defined as the ratio of
the increase in base money to total government revenues and is a relatively
inexpensive source of government revenue because of widespread tax evasion
and the inefficient tax system).36This, in conjunctionwith my findings, suggests
that central bank independencemay be negatively related to political instability.
Recent evidence from a sample of middle-income countries suggests that the
lower the central bank independence, the higher is the degree of political
instability.37The increasing of seigniorage by injecting high-powered money
through state borrowing from the central bank was positively related to the
inefficient tax system which resulted from a rentier state as well as to the
problems generatedby charismaticleadership.The state could not reform the tax
system because of a lack of informationaboutthe volume of markettransactions,
and the fear of increasing popular dissent in the war with Iraq when some
believed that businessmen should help the state to finance some part of the war
expenditure.In addition, the bazaariswho had backed the government were the
first group who had to pay more tax after the tax reform. On the other hand, the
trade tax likewise was weak because of large rentseeking coming from import
licences. The governmentused the centralbank resources extensively to finance
its deficit. During 1974-78, the share of domestic financial resources, ie loans
and bankingcredits, to finance the budget deficit was 2.1%, and it then increased
sharply and reached 74.6% and 79.7% during 1979-81 and 1982-85, respec-
tively.38It continuedto rise in the following years and reached 80.3%, 95.3% and
99.6% in 1987, 1988 and 1989, respectively.39During 1978-92 the debts of the
government and its affiliated corporations increased more than 13 times from
1435.5 billion to 19 979 billion rials. 'The economic reason for the sole reliance
on the Central Bank is the government's inability to borrow either in the
domestic capital market or externally in the international market.'40A central
bank dependenton the governmentwas the second reason for the budget deficit.
Government borrowing from the central bank has resulted in a simultaneous
expansion in the monetarybase of the economy, and in the liquidity available.
During 1987-93 the annualrate of monetaryexpansion was 25.1%. When it grew
to 37% in 1996 the governmentwas forced to implement a contractionmonetary
policy.41

Inflation
As a result of the budget deficit, double digit inflation has been anotherfeatureof
227
 ALI A SAEIDI

Iran's populist economics. The average annual rate of inflation, defined as the
rate of change of the consumerprice index, from 1971 to 1982, was 14.3% and
its seignioragewas 12.9%,42from 1979 to 1992 it was 16.4%and during 1982-90
the average annual rate and per capita growth rate of subsidies on consumer
goods were 19.5% and 15.7%respectively.During 1979-81, the average annual
rate of increase of the ConsumerPrice Index was 16.8% while it decreased to
12.7% during 1982-85, mainly because the average annualrate of budget deficit
fell from 19.6% to 8.8% in the same periods. However, the government spent
huge amounts of subsidies on food and tried to control the price of essential
goods.43If we deduct the subsidies, the GDPimplicit price deflationin 1992 stood
at 1208 million rials, rising from 163 million rials in 1978 at constant 1974
prices. The rate of change in the GDPimplicit price deflatorduring 1989-93 was
25.3%.4 Between 1989 and 1993, the ConsumerPrice Index doubled from 323.8
to 628.7 and rose annuallyby 61% in urbanareas.45In 1995 it reachedits highest
rate of 49.4% since the Revolution (see Table 3).

Consumptionbeyondeconomic limits
The populist politicians could not prevent an increasing trend of private and
public consumption,and at the same time the trend for the investment rate also
suffered. This is because the allocation of resources between today's consump-
tion and tomorrow's consumption is a politico-economic choice. A populist
politico-economistchooses today's consumption.
As a result of populist economics two major contradictorytrends occurred
during 1980-86. First was a downwardtrend, in which, at constant 1982 prices,
gross saving per capita fell from 125.5 to 30.4 thousand rials, and gross fixed
capitalformation(GFCF)per capitafell from 98.8 thousandrials to 33.3 thousands
rials, with income per capita falling from 309.7 thousand to 167.8 thousands
rials. The same decline was observedfor productivityand othereconomic indica-
tors.46The average annual rate of GFCF was 14.1% during 1982-84, but it
decreased by 19% annually during 1985-88 mainly because of the drop in oil
revenue. A comparisonof GFCFin 1982 and 1989 indicates that that of the latter
year was less thanthat of the formerone.47
During 1982-89 the average rate of private consumptiongrew 3.5% annually
and its share in GDP increasedfrom 56.4% to 69.2% in the same period.48During
1979-89 the average annualrate of both output and investment decreased 1.8%
TABLE 3
Growth rate of consumer price and wholesale price indices

1982 1983 1984 1985 1986 1987 198819891990 1991 1992 1993 1994 1995 1996 1997

Consumer
Price Index 19.2 14.8 10.4 6.9 23.7 27.7 28.9 17.4 9.0 20.7 24.4 22.8 35.2 49.3 23.2 17.3
Whole
Price Index 13.8 7.8 7.6 7.3 25.1 29.7 22.0 18.4 23.9 28.1 33.4 25.3 42.4 60.1 25.1 9.9

Source: Bank-i Markazi Jumhuri-i Islami Iran, Barisi-yi Tahawulat-i Iqtisodi-yi kishwar tai-i salha-yi,
1361-1369, 1373/1994, and Balance Sheet and Annual Report, various years.

228
 POLITICALAUTHORITYAND POPULISTECONOMICS
CHARISMATIC

and 6.6% respectively. Over the same period the aggregate consumption in
constant prices was calm, while the average rate of population growth increased
annually from 3.2% to 3.9%. The objectives of the First Five-Year Plan (1989-
1993) for the rate of investment,GDP and consumptionwere ratherambitious.In
the first year of the plan the rate of private consumption was 19.5% while the
plan targeted5.7% annually.Its average annualrate was 7.7% duringthe years of
plan.49
Massive implicit and explicit subsidies were anothercharacteristicof Iranian
populist economics, which intensified both consumption and the budget deficit.
The governmentallocated a large part of the budget to rationing goods through
the coupon system. In fact, the populist economic policy on food prices was
implemented through subsidisation,direct control of prices and two-tier pricing
based on coupon allocation for certain products during the period 1980-88,
which affected the relative costs of all other economic activities.50The huge
subsidies on consumer goods, as well as those on industrial and agricultural
inputs, were partiallyin the form of a preferentialand official exchange rate paid
indiscriminationally (ie to all different income groups). Had the government
intended to remove these subsidies, particularlyconsumer subsidies, at a time of
devaluationof national currency,the private and public sectors would have had
to increase the nominal wage rate or the price of goods, which paid subsidies for
them. In the former case this might have led to an income effect and the latter
might have increased the cost of subsidies. The government did none of these,
but tried to reduce the cost of subsidies. First, some items such as eggs, butter,
meat, detergentand soap were removed from the scheme as less essential to the
diets of the people. Second, the government continued the distribution of
coupons to all households regardless of income level, in order to minimise the
psychological effect of the removal of subsidies, but it increasedthe frequencyof
the distributionof items in the new scheme. The governmentexpected better-off
households voluntarily to withdraw from the subsidy system. Nevertheless, the
share of subsidies in GDP in current prices which slowed down temporarilyto
0.6% in 1989 reboundedin 1993 and reached 2.7% in 1996.51In 1999 budgetary
subsidies were as high as 6681 billion rials, with wheat subsidies accounting for
roughly 80% of the total,52and a coupon system has been in place for all
subsidisedgoods with the exception of wheat.

The overvaluationof the exchange rate

Overvaluation of the official exchange rate was another characteristic of the
Iranianpopulist economy. Three exchange rate policies were implementedduring
the 1980s and 1990s. The growing overvaluation of the official exchange rate
resulted from the maintenanceof a fixed nominal exchange rate by the govern-
ment during the period 1980-89. The increase in state interventionenabled the
government to continue this trend through its control over the main source of
foreign exchange revenue. The overvaluation of the official exchange rate, as
well as the introductionof quotas of foreign currenciesfor importersat a special
rate, resulted in an increase of the premium on the black market rate from low
levels at the time of the 1979 Revolution to 200%-300% by the early 1980s,
229
 ALIA SAEIDI

500%-600% by the mid-1980s and 2000% by the end of the 1980s.53In this
period foreign transactionstook place within a multiple exchange rate system
applicableto imports.
During the period 1982-89 an exchange rate regime was implementedbased
on quotas and overvaluation.Although a differentpreferentialexchange rate of
$1=IR350 was applied to exports, it could not motivate exportersto increase the
volume of exports, because they then had to sell their revenue to the government
at a rate less than that of the black market. The official exchange rate was
applicable to all import items only through the import licences issued by the
state, called Enterprisesfor Provision and Distributionof Goods (Shirkatha-yi
Tahiahwa Tuwzl').The exchange rate regime was so inflexible that it could not
react to the inevitablefluctuationof oil prices, particularlyafter 1985.54
In 1989, at the beginning of the Economic Adjustment Programme, the
multiple exchange rate was abandoned and the number of exchange rates
applicable to imports was reduced to three: the official rate of $1=IR70
(applicableto the importof essential consumergoods, developmentprojects and
military and defence items); the competitive rate of $1=IR600; and the floating
rate of $1=IR1460 (allocated mainly to raw materialsand intermediateinputs).
This immediate change to the exchange rate policy broughta lot of easy money
for importers and exporters, particularly when the exchange rate for exports
increasedfrom about $1=IR350 to IR800. Under this exchange regime importers
and industries were allocated foreign exchange at the competitive rate and
allowed to sell their goods and products at te market prices. Thus, this policy
provided a substantialsubsidy for these state enterprisesand para- governmental
organisations and importers, and competition to gain this premium intensified.
Exchange at the subsidy rate was rationed,but the government'sunderestimation
of oil revenues, which was caused by the perspective of a rise in the price of oil
at the beginning of the PersianGulf war, and the inability of the central bank to
supervise the circulationof letters of credit led to the accumulatingof short-term
foreign debt in 1991-93 and its consolidationin 1994. Because of the decline in
oil prices, the central bank rescheduledits repaymentthroughnegotiations, and
established a new foreign debt departmentto supervise the external debt there-
after. This process increased the level of the budget deficit because it added the
interestrate to the previous subsidy.
Despite the aim of the Economic Adjustment Programme to unify the
exchange rate system, the government returnedto the previous overvaluation
policy in 1994 and a complex multiple exchange system remainedin effect in the
1990s consisting of two official rates, the floating rate and the exportrate, as well
as an importrate which tradedon the TehranStock Exchange. Nevertheless, the
gap between these rates and open market value of the dollar widened after
January 1994, which indicated an unprecedented50% increase in the Iranian
currency,55and then increased sharply to about 5000 rials in 1995 and jumped
more than 50% during 1995-98.56

Incomedistribution:the distributionof poverty

Social justice was the main slogan of the Revolution, and it was conceived as dis-
230
 POLITICALAUTHORITYAND POPULISTECONOMICS
CHARISMATIC

TABLE4
Poverty line and poor urban areas

1362/1983 1363/1984 1364/1985 1371/1992 1372/1993 1373/1994

Poverty line
(rural income
per year) 136 302 146 819 155 051 280 815 358 759 481 995
Poor (%) 30.2 35 36.4 14.8 11.2 13.7

Source: J Pazhuyan, 'Faqr, Khat-i Faqr wa Faqr Zuda'i' (Poverty, Poverty Line and Poverty Reduction),
Siminar-I Faqr (A Seminar on Poverty), Plan and Budget Organisation, Tehran, 1374/1995, pp 43-60.

tributivejustice in practicalterms. This notion raises the issue of income distri-

bution as an agenda. Populist economic policies, ignoring basic economic
equilibria, did not alleviate the problems of the poorer segments of society and
also unavoidably resulted in major macro-economic crises.57 Although some of
the long-standing disparitiesin the distributionof resources decreased, political
instability effectively discouragedprivate investment and the competitiveness of
non-oil exports was undermined.
Despite a reduction in the numbers of poor, the mechanism of income distri-
bution did not work properly.58 Although the income distributionamong house-
holds generally, and between the rural and the urban sectors in particular,
improved in the early years following the Revolution, this trend had come to a
halt by the mid-1980s (see Table 4).59 The percentage of the urban population
living in poverty declined slightly from 12.9% in 1988 to 12.1% in 1996, but for
rural households it increased from 21.3% to 22.9% in the same period.60This
clearly indicates that the state failed to target the poor sufficiently, despite the
establishment of several para-governmentalorganisations directly to assist the
poor and low-income groups, the regulationof importedgoods at official prices
and the direct distribution of goods. The populist policies had significantly
adverseeffects on economic efficiency.
The initial nationalisationand confiscation of large-scale privatepropertyafter
the 1979 Revolution created a large para-governmentalsector. This expanded its
activities qualitatively and quantitativelyduring the course of the consolidation
of power by the charismatic leader. Para-governmentalorganisations became
major obstacles to the rationalisation of political authority and the transferral
from populist economics to rationalist economic policies, particularlyafter the
death of AyatollahKhumaini.The manifest functions of all the foundationsshow
that they worked with overlapping objectives as a consequence of populist
economic policies. Nevertheless, as their latent function, they tried to integrate
control over authoritative resources for the charismatic leader and interested
political factions. They were exempted from taxes and many legal restrictions
and assessments, and had easy access to nominal exchange rates. They were
answerableonly to the supremeleader,but there was no governmentsupervision
over their activities. The main manifest function of these foundations was to
improve the welfare of the poor and oppressed as part of the populist economic
policy of the state (see Table 5). They were independentof governmentagencies
with their own administrativebodies and financial resources. For instance, when
231
 ALI A SAEIDI

TABLE 5
Vulnerable groups supported by main Bunyads in 1369/1990

Bunyad Household Population Payments

Mustad'afan NA 295 342 112 195

Shahid 302 286 662 2861 170 000
Kumitah imdad 868 936 3 003 224 43 087
15th Khurdad 381 684 6 674 984 NA
Total 1 798 988 12 432 204 370 268

Source: Bunyad-i Mustad'afan, Bunyad-i Shahid, Kumiti-i yi imdad, Iran Statistical

Centre.
I Estimated.

PresidentRafsanjanitriedto revise Iran'sideological foreign policy, the Bunyad-i

Panzda-yi Khurdad(Foundationof the 15th Khurdad)announcedthatthey would
increase the rewardfor the assassinationof Salman Rushdie. Rafsanjanireacted
by saying that they were a privatecharitableinstitution.6'In fact, this foundation
is neither privately nor state owned. This classification (ie privately or state
owned) depends to some extent on a move to political legitimacy between a
legal-rational political authorityand routinisationafter the charismaticauthority.
With no governmentaldiscretionover their expenses, no shareholders,no public
accounts, and no well-defined legal status, they have been operating autono-
mously from the government,and have acted like giant privatemonopolies rather
than charity organisationscaring only about the welfare of the poor. They have
therefore themselves been a major source of distortion and obfuscation in
resource allocation, a major financial drag on the economy and one of the main
obstacles to rationaleconomic reform.62
Being aware of the underlying economic difficulties, Khatami's government
set out a new programmeof economic reformas partof a National Rehabilitation
Plan (Tarh-iSamandihiMilli) in August 1998, mainly in order to increase GDP
growth, to reduce inflation, reduce subsidies, remove price distortionand expand
the role of the private sector, very similar to the objectives of Rafsanjani's
economic policies in 1989. Apart from the intense confrontation of political
factions which increasedthe political instabilityto its highest level since it began
in 1982, the temptationof populistpolicies ensuredthat the programmeremained
intact. Among other causes for diverting such rational policies, the role of the
para-governmentalorganisations was particularlysignificant. For instance, the
fourth Majlis (1992-96), dominated by the right-wing faction, converted the
trend of privatisation of state enterprises from the private sector to the para-
governmentalorganisationsby passing a law in 1994 which allowed the govern-
ment to sell state enterprises to those who devoted themselves to the war, to
prisoners of war, and to relatives and members of those who were killed in the
war through these organisations.63Again, when the fifth Majlis (1996-2000)
under the budget bill for 1999/2000 passed the removal of a number of tax
exemptions including those for these organisationsin order to increase the tax
revenue, the Council of Guardiansvetoed the bill on the grounds that they were
non-governmentalorganisationsbelonging to the public sector under the super-
232
 POLITICALAUTHORITYAND POPULISTECONOMICS
CHARISMATIC

vision of the supreme leader and that their earnings were used for charitable
purposes."

Conclusion
Political instabilitywas crucialto the practicesand spreadof political authorityin
Iran during the 1980s and 1990s. After the collapse of neo-patrimonialpolitical
authorityin the course of the 1979 Revolution, charismatic authorityemerged.
This starteda new period in which political institutions and political instability
were underminedbecause of the challenges of the charismaticmovement to the
institutions of the old political authority. Charismatic authority was uncertain
because it was dependenton the actions of the charismaticleader, who consoli-
dated his power by demolishing the institutions of the old regime. The process
was exacerbatedby the conflict of office charismawith the faqih's three govern-
ments in the course of the consolidation of his power. This conflict continued
after the death of the charismaticleader in the form of factional politics in the
crisis of the routinisationof charisma and intensified to its highest level when
Khatamicame to the presidentialoffice in 1998.
The political instability,resulting from charismaticaction, affected economic
performance by reducing the supply of both capital and labour, discouraging
investment,causing capital flight and a braindrain, and hamperingthe establish-
ment of property rights. Structurally, political instability has had a positive
relationshipto the changes in the type of political authorityand legitimacy. It has
been suggested that it would be more appropriateto view Iran as a discretionary
state that lacks credibility rather than as a protective state. In less than two
decades Iran has witnessed considerable changes in political authority. The
Revolution of 1979 replaced neo-patrimonial authority with charismatic
legitimacy. Such authorityheld power up to the death of the charismaticleader.
Although the Council of Experts (Majlis-i Khubrigan) immediately chose
Ayatollah Khamina'i as the new leader, a crisis of legitimacy over political
authority from, and the question of transition of charismatic authority to,
routinisation has led to a new political instability reflecting in the intense
confrontationbetween political factions that has occurredin the 1990s.This situa-
tion can be assessed as one of the causes of the defeat of the implementationof
the Economic AdjustmentProgrammebegun after AyatollahKhumaini'sdeath in
the sense that, while the programmeneeded a legal-rational authorityto bring
about a stable political situation, the political authoritywas itself involved in a
crisis of routinisation.
It can be concluded that Iranianpopulist economics introducedby the charis-
matic featuresof AyatollahKhumaini'sleadershipwas like classical populism in
the sense that it favoured governmentinterventioncommitted to a strong role in
price determination,and to protection of workers by increasing wages and the
passing of a new labour law. It also led to policies of cheap food through sub-
sidisation, and to direct distributionin orderto fill the gap between the poor and
the rich, to state ownership of key and large industries, to state allocation of
credit at low interest rates, and to overvaluation of the national currency.
Although Ayatollah Khumaini's ideas sometimes changed drastically from a
233
 ALIA SAEIDI

conservative view to a radical revolutionaryone on society and state, the point

behind these changes was the populist natureof AyatollahKhumaini'sleadership
as a high-ranking cleric. He was not a political philosopher or economic
strategist.Instead,he was a charismaticleader who expressed views on different
issues in a populist tone. This was particularlytrue of his statementson economic
issues. As part of the function of the faqih in the close relationship with his
followers' demands, Ayatollah Khumaini employed populist methods to
propagatehis views, because as a faqih he had to consider the people's wishes
and attitudes ranging from the poor to the rich. In addition, the domination of
revolutionary conditions and social justice as an ideology made Ayatollah
Khumaini address economic issues rhetorically.He was repeatedlyproclaiming
that the countrybelonged to the slum dwellers, workers and peasants. However,
Ayatollah Khumainialso on some occasions addressedbazaarisas the pillars of
the Revolution. The revolutionary situation pushed the state to implement its
rhetorical promises and its populist economic policies through subsidisation,
direct control of prices and two-tier pricing based on coupon allocation for
certain products during the period 1980-88. Consequently, the budget deficit
worsened tremendouslyas a result of pervasive subsidies on food, bank credit
and foreign exchange. The budget deficit also deterioratedviolently because of a
steep decline in tax collection. Although it seemed that Rafsanjani's and
Khatami'sgovernmentsin 1988 and 1998 showed their awarenessof the under-
lying populist policies by proposingfar-reachingrationaleconomic reforms,both
reformshave been hamperedby these undeclaredpopulist economic policies as a
result of political instability.

Notes
I am grateful to Tim Unwin for reading the manuscript and providing excellent critiques and useful
advice. I also wish to thank Vanessa Martin for her comments and help on the first draft of this paper.
The anonymous reviewer(s) designated by the journal gave me valuable suggestions for strengthening the
essay's thesis and improving its structure,for which I am indebted.
For more, see H Katouzian, The Political Economy of Modern Iran: Despotism and Pseudo
Modernism, 1926-1979, London: Macmillan, 1981, pp 101-111; and A A Saeidi, 'Sociological
obstacles to development of a market economy in Iran', unpublished dissertation, Royal Holloway,
University of London, 1999, ch 2.
2 For theoretical discussion, see H H Gerth & C R Mills (ed), From Max Weber, London: Routledge &
Kegan Paul, 1948, p 245.
For some chronological clarity on the political life of Kumaini, see B Moin, Khomeini: Life of the
Ayatollah, London: I B Tauris, 1999, pp 74-107; A Ashraf & A Banuazizi, 'Classes in the Pahlavi
period', Encyclopaedia Iranica, Vol V, Berkeley, CA: Mazda Pres, 1992, p 689.
For more on an approach to the political instability in terms of persistence or continuity of certain
types of political system, see S M Lipset, Political Man, New York: Doubleday, 1963. This approach
found empirical expression in G Almond & S Verba, The Civic Culture, London: Little, Brown, 1965.
For a review of all approaches see D Sanders, Patterns of Political Instability, London: Macmillan,
1981, pp 49-65.
For more on the root of these three conflicts see Saeidi, 'Sociological obstacles to development of a
market economy in Iran', ch 4; A Sami'i, Tuluw' wa Ghurub-i Duwlat-i Bazargan (Rise and Fall of
Bazargan's Government), Tehran: Shabawiz, 1371/1992, p 243; M Bazargan, Masa'il wa Mushkhilat-
i Awalin Sal-i Inqilab (The Problems of the First-Year of the Revolution), Tehran: Daftar-i Nahdat-i
Azadi-i Iran, 1362/1983, pp 165-175, 243-259; Mukatibat-i Bani-Sadr wa Raja'i (correspondence
between Bani-Sadr and Raja'i), Tehran: Nakhust Waziri, 1361/1982; and A Bani-Sadr, Khiyanat bi
Umid (Treason against Hope), Paris, 1982.

234
 POLITICALAUTHORITYAND POPULISTECONOMICS
CHARISMATIC

6 Formoresee Saeidi, 'Sociologicalobstaclesto developmentof a marketeconomyin Iran',ch 4.

The term 'protective'state means the states providesthe two public goods, propertyand contract
rights. Anotherbasic task of the state is to correctall marketfailures in order to aim for Pareto
efficiency as a 'productive'state. For more, see J Buchanan,The Limitsof Liberty,Chicago, IL:
Universityof Chicago Press, 1975. The 'protective'functionof the state is to protectand enforce
contractswithoutdiscretionaryinterpretation. If the state does not accomplishthis task, it leads to
severeproblemsof credibilityandthe hamperingof economicgrowth.For more on the reasonswhy
the protectivestatecan work as the solutionto economicgrowthand developmentsee S Borner,A
Bronetti & B Weder, Political Credibility and Economic Development, New York: St Martin's Press,
1995,pp 20-28.
8 Borner et al, Political Credibility and Economic Development, p 36.
9 Jakobde Haan& L J ClemensSiermann,'Politicalinstability,freedom,and economicgrowth:some
further evidence', Economic Development and Cultural Change, 44 (2), 1996, pp 339-350.
10 This Foundationwas sets up on AyatollahKhumaini'sordersthreeweeks afterthe Revolutionon 5
March 1979 in orderto concentrateall the confiscatedwealth of the Pahlavifamily and the bour-
geoisie in a single body to aid the oppressedand destitute.See Bank-iMarkazi-iIran,Tahawulat-i
Iqtisadi-iKishwarba'ad az Inqilab(EconomicDevelopmentafterThe Revolution),Tehran:Bank-i
MarkaziIran,1363/1984,p 268.
These termsare introducedby Kronman.A Kronman,'Contractlaw andthe stateof nature',Journal
of Law, Economics and Organisation, 1, 1985, pp 5-32.
12 Borner et al, Political Credibility and Economic Development, p 267.
3 Ruznamah-iRasmi-yi Kishwar (The country's official paper), Qanun-i Himayat wa Tusi'ah-yi
Sanayi' (The Law for Protectionand Development of IranianIndustries),Wizarat-iDadgustari
(Ministryof Justice),No 10031,9 Murdad,31 July, 1358/1979.
14 For more, see S N Eisenstadt, Introduction to Max Weber on Charisma and Institution Building,
Chicago:Universityof ChicagoPress, 1958, p xxi; andM Weber,Economyand Society,New York:
BedminsterPress, 1988,pp 241-242.
15 For more, see M Weber, Economy and Society: An Outline of Interpretative Sociology, 3 Vols, eds G
Roth & C Wittich,New York:Irvington,1968, p 1405;and for more on varietiesof charismasee A
Schweitzer,TheAge of Charisma,Chicago,IL:Nelson-Hall,1984, pp 3-29.
16 Formoresee The FirstSymposiumon ImamKhumaini'sEconomicThought,9-10 Khurdad,Tehran,
1371/1992; and E Kedourie, 'Crisis and revolutionin modernIran', TimesLiterarySupplement,
19-25 May 1989, which gives an introductionto AyatollahKhumaini'sideas as a socialistradical.
Despite the carefulscrutinyof AyatollahKhumaini'sideas in the following source,Enayatreduces
Ayatollah Khumaini'sideas and classifies him as a socialist. See H Enayat, 'Iran:Khumayni's
conceptsof the "Guardianship of the Jurisconsultin Islam in the politicalprocess",'in J Piscatori
(ed), Islamin thepoliticalprocess, New York:CambridgeUniversityPress, 1983,pp 160-180.
17 R Khumaini,Sahifah-yiNur (Pagesof Light:A Collectionof SpeechesandAnnouncements), Tehran:
Ministryof Islamic Guidance,1358/1979, p 135; and R Khumaini,Kashf al-Asrar (Discovery of
Secrets),Tehran:Ministryof IslamicGuidance,1362/1983,pp 181-182, 229-230, 282, 289-291. In
this sourcehe arguedthatGodhadendowedmanwith privateproperty.See also Khumaini,Kashfal-
Asrar,pp 259, 266-267. In these two sourcesKhumainiopposedReza Shah'spolicy of monopolisa-
tion of free tradeand levying import-exportduties for businessmenand bazaaris.For an economic
view as a juristsee R Khumaini,Tudahal Masa'il (A Clarificationof the Questions),Tehran,1978,
p 133.
18 R Khumaini,Sahifah-yi Nur (Pagesof Light),6, 1361/1982,p 4.
19 Ibid, Vol 18, 1365/1986, p 189.
20 Ibid,Vol 8, 1361/1982,p 103;andVol 4, 1361/1982,p 242.
21 Ibid,Vol 5, 1361/1982,p 139.
22 Ibid, Vol 2, 1361/1982,p 18.
23 Ittila'at,Tehran,3 May 1980.
24 Ibid, 15 February-23 April 1983.
25 A Ashraf,'Bazaar-mosquealliance:the social basis of revoltsandrevolution',Politics, Culture,and
Society, 1 (4), 1988, p 565.
26
Khumaini,Sahifah-yiNur,Vol 17, 1364/1985,p 64.
27 Ibid,Vol 9, 1983,pp 71-72; andEnayat,'Iran',p 175, 171.
28 Enayat, 'Iran', p 175.
29 For more on this theory, see J Sachs, Social conflict and populist policies in Latin America, NBER
working paper No 2892, Cambridge:MA, March 1989; and R Dornbusch & S Edwards, The
EconomicsPopulismParadigm,NBER workingpaperNo 2986, Cambridge:MA, 1989.
30 S Edwards,'The politicaleconomyof inflationand stabilisationin developingcountries',Economic
Development and Cultural Change, 42 (2), 1994, p 261.

235
 ALI A SAEIDI

31 For more on Seignorage and its consequences see Cukierman et al, 'Seignorage and political
instability', American Economic Review, 82 (3), June 1992, pp 537-555.
32 Bank-i Markazi Jumhuri Islami-i Iran, Barisi-i Tahawulat-i Iqtisadi-i Kishwar Tai-yi Salha-yi
1361-1369 (Economic Development During 1982-1990), 1373/1994.
33 International Monetary Fund, Islamic Republic of Iran: Recent Economic Development, IMF Staff
Country Report no 00/120, Washington, DC, September 2000, p 8, Table 1.
34 Akhbar Iqtisad, Tehran, 26 Isfand 1378/2000, p 5.
35 For more on a comparative analysis see G Luciani, 'The oil rent, the fiscal crisis of the state and
democratisation', in G Salame (ed), Democracy without Democrats? The Renewal of Politics in the
Muslim World, London I B Tauris, 1994, pp 130-156.
36 Cukierman et al, 'Seignorage and political instability', p 554.
37 Ibid.
38 Bank-i Markazi Jumhuri Islami-i Iran, Economic Development During 1982-1990.
39 Ibid, 1373/1994,p 655.
40 A Rashidi, 'The de-privatisation process of the Iranian economy after the Revolution of 1979', in T
Coville (ed), The Economy of Islamic Iran, Between State and Market, Tehran: Institution Francais de
Recherche en Iran, 1994, p 66.
41 Bank Markazi Iran, Balance Sheet and Annual Report of 1376/1997, pp 88-91.
42 See Cukierman et al, 'Seignorage and political instability', p 538.
43 Bank-i Markazi Jumhuri Islami-i Iran, Economic Development During 1982-1990.
44 H Pesaran, 'Barnamah-rizi wa Tasbit-i Iqtisad-i Kalan' (Planning and Macroeconomics Stabilisation,
Iran Namah (XIII (1-2), 1995, p 79.
45 Bank-i Markazi-i Iran, Balance Sheet and Annual Report of 1372/1993.
46 Banki-i Markazi-i Iran, Hisabha-yi Milli-i Iran, 1353-1366 (National Accounts for Iran, 1974-1987,
1991, and Hisabha-yi Milli-i Iran, 1367-1369 (National Accounts for Iran, 1988-1990), 1992.
47 Bank-i Markazi Iran, Economic Development During 1982-1990, p 42.
48 Ibid, 1373/1994, pp 41-42.
49 V Nuwshirwani, 'The fate of the structural adjustment programme', Iran Namah, XIII (1-2), 1995,
pp 61-63.
50 For more on the extent to which price subsidies, particularly on bread and fuel, affected the relative
price structure, see M Karshenas & M H Pesaran, 'Exchange rate unification, the role of markets and
planning in the Iranian economic reconstruction', in T Coville (ed), The Economy of Islamic Iran,
Between State and Market, Tehran: Institution Francais de Recherche en Iran, 1994, pp 141-175.
51 Bank Markazi Iran, Balance Sheet and Annual Report, 1376/1997; 1372/1993.
52 IMF, Islamic Republic of Iran, p 17.
53 Karshenas & Pesaran, 'Exchange rate unification', p 158.
54 For more detail see Bank-i Markazi Jumhuri Islami-i Iran, Economic Development During
1982-1990, pp 457-473, 480-481.
55 B Baktiari, Parliamentary Politics in Revolutionary Iran: The Institutionalisation of Factional
Politics, Gainesville, FL: University Press of Florida, 1996, p 228.
56 Akhbar-i Iqtisad, Tehran, 20 Shahriwar 1378/1999, p 4; 15 Isfand 1378/2000, p 4.
57 It is worth mentioning that the (re)distributive objective of populist economics overlaps with those of
socialism. For more see M Conniff, Latin American Populism in Comparative Perspective, Albu-
querque, NM: University of New Mexico Press, 1982, p 5.
58 Asri Ma, Tehran, 9 Aban 1375/1996, p 1, 3.
59 S Behdad, 'Winners and losers of the Iranianrevolution, a study in income distribution', International
Journal of Middle Eastern Studies, 21 (3), 1989, pp 327-358.
60 M Tabibiyan et al, Poverty Line and Characteristics of Poor, Tehran: Institute for Research in
Planning and Development, 1377/1998, pp 22-25.
61
Itilla 'at, Tehran, 19 Aban 1374/1994.
62 For more on these foundations before and after the Revolution, see Saeidi, 'Sociological obstacles to
development of a market economy in Iran', chs 2, 5.
63
Itilla'at, Tehran, 18 Murdad 1374/1995. In the summer of 1373/1994, an office was established in the
presidential office to consider how to implement the law. For more detail see Ruznamah-yi Rasmi-yi
Kishwar, No 14395, the detailed discussion of the Majlis Shura-yi Islami on 5 Murdad 1373/1994.
64
Ittila'at, Tehran, 25 Esfand 1378/1999.

236