7 - Economic Development, Political Underdevelopment

Summary

The state that evolved under the second Pahlavi monarch featured rapid economic development and persistent political underdevelopment. Especially from the 1950s onward, when the amount of oil revenues coming into the economy increased significantly compared with before, the economy began showing classic signs of the “resource curse.” As is often the case, resource curse – that is, the negative consequences of overabundance of a single commodity and the riches accrued from it to the economy – had manifold ramifications for Iran. As the economy grew, reliance on its single, biggest source of growth, oil, deepened greatly. This occurred at the expense of other sectors of the economy, especially agriculture. It also hastened rural flight, resulted in unplanned urban growth, and brought about maladjustments between economic needs on the one hand and resources, skills, and opportunities on the other. More detrimentally, it froze or significantly slowed down any transition out of rentier arrangements and strengthened existing institutions and practices where they were. The state may have fostered economic development, but it remained politically underdeveloped itself.