Muhammad Reza Shah gradually sought to reduce his dependence on the West and the United States and to free the Middle East of the need for a foreign presence. (Supplied)

February 6, 2021

Ayatollah Ruhollah Khomeini, the founder of the Islamic Republic, claimed in front of an audience of engineers at the Ministry of Agriculture, on June 29, 1979, that: “In the name of progress and civilization, the Shah of Iran derailed the country’s economic growth, stopped the development of universities and made Iran dependent on foreigners.” He added that: “That is why the people revolted: because everything went to waste and the people grew tired. … But the people have not yet reached their destination. The goal is for a government of justice to be established, a government that is not affiliated with any faction, a country in which none of the factions can intervene, an Islamic country based on the rules of Islam, because the rules of Islam are just … and if those who are dependent on foreigners don’t interfere then this will be done.”

But was the last Shah of Iran, Mohammad Reza Pahlavi, an obstacle to the growth of universities, an economic vandal, and did he allow foreign domination to take over the country? And was Iran more dependent on foreigners in the Pahlavi period or during the Islamic Republic? Did the 1979 Islamic Revolution lead to a just government? Did the Islamic Republic establish justice in Iran? This report looks at the claims of the founder of the Islamic Republic during and after the Pahlavi period.

Iran’s economy before and after the Islamic Revolution

A look at photographs from the Pahlavi era, compared to the lives of the Iranian middle class today, probably shows that people today have more opportunities than they did under the Shah. But did the Shah in fact damage the economy? And was it revived by the Islamic Republic? Accurate information on all pre-Revolution economic indicators is not available, so it is not possible to refer to unemployment, poverty, class differences, or other factors; but information on the GDP (Gross Domestic Product) index is available, which is one of the most important indicator in showing economic progress.

GDP growth rate and economic growth

GDP growth per capita is the total value of goods and services produced in a year and divided by the country’s population. The resulting number shows how much wealth a country has produced per person per year.

According to the World Bank, GDP growth in Iran was at its lowest in the 1950s and 1960s. Economic policies under Mohammad Reza Pahlavi sent the GDP growth rate to its highest level, in 1976, about two years before the Revolution. The rate then fell sharply with the victory of the Revolution in early 1979.

The following chart shows what effect Mohammad Reza Pahlavi and then the leaders of the Islamic Republic have had on GDP between 1962 and 2019.

According to this chart, GDP in 1962 was equal to US$3,424. Mohammad Reza Pahlavi brings this figure to $10,261 in 1976 – the highest GDP in Iranian history. The GDP rate then begins to falls sharply, reaching its lowest levels in the late 1980s, during the 1980-88 war with Iraq. The GDP then rose through the 1990s and early 2000s, with two more sharp dives, finally reaching $5,922 in 2019. The highest GDP rate after the Revolution was in 2017 at $6,948.

“Iran experienced a ‘golden period’ in its contemporary economic history between 1961 and 1976,” Fereydoun Khavand, an economist, wrote in an article on Radio Farda in 2018. “During these 15 years, the average annual growth rate of the country fluctuated above 10%. The total volume of Iran’s economy increased nearly fivefold during this period. In contrast, during the past 40 years, Iran’s average annual economic growth rate has been only about two percent. Considering the growth rate of Iran’s population in the post-revolution period, the average per capita growth rate of Iran in the last 40 years is estimated between zero percent and half a percent. Among the main factors hindering the growth rate in Iran are a lack of a favorable business environment, severe investment weakness, very low levels of productivity and constant tension in the country’s regional and global relations.”

People’s purchasing power

A comparison of purchasing power shows the economic situation of Iranians before and after the Revolution. The minimum wage was 1,700 tomans per month in 1979; this figure increased to 1,835,000 tomans in 2020. But does an increase in the minimum wage translate to an increase in purchasing power?

Studies show that in 1979, the minimum wage was equivalent to $242 per month ($8 per day) while the minimum wage in 2020 was equal to $73 per month ($2.35 per day) given the exchange rate of 25,000 tomans per dollar. A worker in 1979 was able to buy a square meter of property in Tehran with a month’s salary. The same worker in 2020, working for minimum wage, has to pay an average of 27 million tomans for a square meter of property; in other words, the worker has to spend 14.7 months of salary.

The painful exchange rates and high inflation carried across other items – including basics such as food and clothing. Estimates suggest that inflation has reached double digits and sometimes broken past 40% since the Revolution.

The growth of universities in Iran

If we compare the situation of universities in Iran today with that of 1979, there is a huge difference; there are more universities, more students and more professors. But despite the high number of graduates or published articles per university, Iran still ranks just 104th in the Human Capital Index, and according to the World Economic Forum it ranks ninth in the region, after Israel, the United Arab Emirates, Qatar, Turkey, Saudi Arabia, Jordan, Kuwait and Egypt.

Knowing all this makes it clear that the lower number of universities and university students during the Pahlavi era cannot be considered a sign that the Shah obstructed the growth of Iranian universities.

Universities in the modern sense were in fact first founded in Iran during the Pahlavi period. Iran did not have an organized university before the Pahlavis. The University of Tehran became the first university in Iran, in 1926, a year after Reza Shah gained power after the Qajar dynasty. And of course it took many more years for Iranian graduates to achieve a masters’ degrees and to further develop universities.

Mohammad Reza Pahlavi established extensive relations with the best American universities and founded the most prestigious universities in Iran, including Sharif University of Technology, formerly known as Aria Mehr, the Isfahan University of Technology, Shiraz University, Ferdowsi University of Mashhad and Bu-Ali Sina University of Hamadan.

Most of Iran’s scientific credibility is due to the universities that were established in Iran during the reign of Mohammad Reza Pahlavi and his father Reza Shah. The University of Tehran and Sharif University of Technology (Aria Mehr) are Iran’s top universities.

The sudden increase in population after the Revolution called for more universities – while before the Revolution the focus was on the improvement of existing universities rather than the establishment of new institutions.

Iran’s Cultural Revolution, from 1980 to 1983, which led to the closure of universities for several years and the mass expulsion of professors and many students, did not take place in the Pahlavi regime but was an initiative of the Islamic Republic. The policy was continued in later years by singling out some students for the denial of education, expelling some professors and banning almost all Baha’is from lecturing at or attending universities.

Dependence and independence

Examining the degree of dependence of the Pahlavi regime on the West and the United States, and the degree of dependence of the Islamic Republic on the East, including China and Russia, is a subject that requires its own research and fact checking. But a few general points can be explored.

The Pahlavi regime (Reza Shah and his son Mohammad Reza) laid the foundations of development and modernization in Iran. And it is unavoidable that 80 years ago, when a country wanted to take a step towards development, it had to turn to the West as a symbol of development that was equipped with modern technology. The Pahlavi regime did exactly that; it established universities, industries, railways, hospitals and research centers, relying on the knowledge, technology, expertise and experience of Western countries, including the United States. Organizing a modern and well-equipped army, forming the Plan and Budget Organization, organizing administrative bureaucracy, and developing human resources would not have been possible for a country like Iran without the cooperation of developed and powerful Western countries.

But over time, Muhammad Reza Shah gradually sought to reduce his dependence on the West and the United States and to free the Middle East of the need for a foreign presence. Efforts to establish the Organization of Petroleum-Exporting Countries, to raise oil prices and to help countries in the region put Iran in a special position.

Interaction and friendship with the world and close cooperation with world powers had also improved Iran’s position in the international community.

Unlike the Pahlavi regime, the Islamic Republic established its power on the slogan of “Neither East, nor West; [just] the Islamic Republic,” and tried to adopt an independent posture by through anti-capitalist policies and by supporting revolutionary movements in the Islamic world. What were the results?

Iran’s regional power declined. Regional friends became Iran’s enemies. Iran’s position among the international community fell rapidly and Iran, which had a special place in the world and a place at the table of international affairs, became an isolated country. International and unilateral US sanctions shut down Iran’s economic growth and dramatically slowed its development. And extensive economic pressure forced the Islamic Republic closer to the East, i.e. Russia and China, though this proximity has only made Iran an importer of substandard Chinese products and a militarily partner to Russia, without them contributing to Iran’s development.

Even if we assume the Islamic Republic is less dependent on other countries than the Pahlavi regime was, we cannot ignore the fact that the Islamic Republic turned Iran from a regional power, an influential country in the international community experiencing rapid development, to an isolated, backward country, in need of Russia and China, deprived of modern technology, deprived of banking and financial cooperation with the international community, deprived of the freedom to sell oil and deprived of military and petrochemical industries. Poverty, deprivation and misery have been the result.

Did the Islamic Republic lead to justice?

The equal distribution of power and wealth, respecting minority rights, the rule of law, the rule of national will over a nation’s collective destiny, transparency and the free flow of information, the presumption of innocence, responsibility and accountability, are the principles and criteria of a fair government based on justice.

Do any of these principles prevail in the Islamic Republic? IranWire in an article titled “Is there democracy and national sovereignty in Iran?” fact-checked the claim of Iranian President Hassan Rouhani, who had declared that “there is democracy and national sovereignty in Iran and elections are not formalities,” and concluded that it was not true. Iran’s Supreme Leader Ayatollah Ali Khamenei acknowledged in 2018 that the Islamic Republic was lagging behind in achieving justice and owed an apology to the people. Forty years after the establishment of the Islamic Republic, he promised that “progress will be made with the efforts of officials and the people,” a promise that was a repetition of the mirage painted by the first leader of the Islamic Republic 40 years earlier.

Iran Wire

About Track Persia

Track PersiaTrack Persia is a Platform run by dedicated analysts who spend much of their time researching the Middle East, in due process we fall upon many indications of growing expansionary ambitions on the part of Iran in the MENA region and the wider Islamic world. These ambitions commonly increase tensions and undermine stability.