Fundamental Changes in Economic Laws
When countries such as Japan, South Korea, Taiwan and later China
entered free trade and global economy, and acted exactly opposite to
the theory of affiliation and achieved remarkable success, we were
among the few countries that followed the theory of dependency and
eventually gave in to its harmful results.
The dominant political and intellectual atmosphere in the years before the
February 1979 Islamic Revolution had significant impact on the formation of
the line of thinking of the constitutional drafters. By examining that
intellectual mood one can realize why the economic principles of the
Constitution were outlined and written in that form; what were its goals and
how it was finally carried out, and what its consequences are today and its
effects on the current economic situation.
The slogans of the Revolution, both politically and economically, were
anti-imperialist or independence seeking, and viewed the Shah’s dependence
on the West and the United States. The political dependence of the regime is
outside this debate, and judgment about it is complex and requires deep
insight into the relationship between Iran and the West and the United
States as well as the Soviet Union. But the slogan “Independence, Freedom,
the Islamic Republic” was not just political, and its economic dimension was
strong. The revolutionaries considered the Shah’s regime and Iran under him
to be completely dependent economically. Therefore, they explained this with
dependency theory, which briefly states that the global economic system
consists of the exploiting centers and the exploited peripheral.
The center or the Metropole includes the developed Western countries and the
peripheral includes Third World countries (other than the Soviet Union and
the Eastern Bloc). This theory is essentially of the Leftist and Marxist
type. Of course, non-Marxists also had a theory of affiliation, which
challenged the Marxist theory. The theory of dependence was so ripe for the
people of struggle and politics as well as revolutionary intellectuals that
not only Marxists but Islamists promoted the same theory, including the
speeches of Dr. Ali Shariati and his references to Frantz Fanon and the
description of the colonization and exploitation of Europeans in Africa.
It is under such conditions that the Revolution occurs and, as a result, an
important demand by the revolutionaries is to cut off any economic
dependence on the outside and achieve “self-sufficiency” within the country.
They want to reduce foreign trade relations, especially with the West, and
cut imports more and more, and all needs be met internally. This
misconception was the source of many blunders and deviations in the Iranian
economy. As an example of the devastating consequences of this line of
thinking is the current water crisis.
Since restricting the use of water for agriculture was considered the
enemy’s conspiracy to prevent Iran from achieving self-sufficiency in
producing strategic agricultural products such as wheat, irregular use of
groundwater and deep well drilling was authorized. Not just license for well
drilling was issued but there was basically no strict control of licenses.
Even the government itself facilitated the import of motors and
electro-motors thus increasing the number of wells and development of water
Subsidized hard currency, subsidized gas oil and free water wells were
utilized in the service of increased output for self-sufficiency ignoring
the fact that country’s groundwater resources were being wasted rapidly.
This example objectively demonstrates to us that the promotion of false
thinking and its transformation into a national slogan and national
aspiration can bring a lot of losses and damage in the realm of action.
Self-sufficiency was not limited to agriculture and wheat cultivation;
efforts were made to reach self-sufficiency in the industry and that too in
the 1980s when all countries were moving toward globalization and free
In the years after the 1979 Revolution and the period described by some as
the Golden Decade of the 1960s we swam in the opposite direction. When
countries such as Japan, South Korea, Taiwan and later China entered free
trade and global economy, and acted exactly opposite to the theory of
affiliation and achieved remarkable success, we were among the few countries
that followed the theory of dependency and eventually gave in to its harmful
In the same period some said that the conventional banking system is a
Western and degenerate phenomenon, and we need to create usury free Islamic
banking. This happened when the world’s banking system was evolving, and new
banking innovations and methods, auditing and transparency were applied. The
same thing occurred in the industry. With the onset of the Revolution,
people became decision-makers and decision takers whose main slogan was
struggle against capitalism.
The ruling ideology in the midst of the Revolution was the leftist ideology
influenced by Marxist ideas. Islamic scholars such as Dr. Shariati or
non-Islamic intellectuals, such as those who worked in the Writers’
Association as an intellectual center opposed to the Pahlavi regime were
anti-capitalist and opposed to the private sector. As a result all large
industries and a large part of the small and medium industries became state
owned after the Revolution.
Industries were either directly owned by the state or indirectly managed by
government institutions. Consequently, instead of economic logic, political
logic dominated the industry. The idea of economic independence is also
evident in all post-revolutionary documents. Before drafting of the
Constitution, the resolutions of the Revolutionary Council were in the same
direction. Nationalization of banks and industries, confiscations and
nationalization of water and agriculture were also carried out by the
legislature of the Revolutionary Council. The Constitution was also drafted
on the same line of thinking.
Part of the flaws and perhaps the illusions that have been created for the
claimants of the economy goes back to the very same historical period of the
Iranian economy. At that time, oil revenues were rising and the assumption
had been shaped in the revolutionary atmosphere that Iran was very rich and
that the Shah and corrupt courtiers were lavishly dispossessing the assets
of the nation. It was supposed that, if the revolutionaries took over, they
would end this lust, and with the oil income they could meet all the
requirements cited in the constitutional articles.