Tahqiqāt-e Târix-e Eqtesâdi (Economic History Studies of Iran)

Explaining the economic crisis and its impact on the price of basic goods and inflation in the last years of Pahlavi II (according to newspaper reports)

Document Type : .

Authors

Jaffar Aghazadeh 1
MOHSEN PARVISH 2

1 Associated professor of History and Sociology, Mohaghegh Ardabili University, Ardabil, Iran

2 Assistant professor of History, Mohagheg Ardabili University, Ardabil, Iran

https://doi.org/10.30465/sehs.2023.42575.1866
Abstract
Introduction:
The increase in oil prices in global markets in the early 1970s prompted the Pahlavi government, which aspired to reach European standards, to reconsider its plans. Consequently, the fifth development plan, approved by the Senate and the National Assembly in the second half of 1972, was revised. The government claimed that considering the absorptive capacity of the Iranian economy, potential inflation, possible conflicts between rapid growth of resources and production factors, and existing income distribution inequalities, the total investment volume of the government and the private sector was set at approximately 4,699 billion rials (equivalent to about 69.5 billion dollars). However, things did not go according to plan, and when global oil prices fell in 1975, the economic boom came to an end. Thus, the oil revenues injected into the economy over the previous years resulted in nothing but acute inflation. The people faced shortages of essential goods and excessive prices for their purchases. The prices of imported food and the government's failure in agricultural programs further exacerbated the trade balance deficit, leading to increased living costs. Despite the government's attempts to control inflation and rising prices, the economic crisis peaked in 1977. This article seeks to answer the fundamental questions of what caused the shortages and rising prices of food items and what factors contributed to this disorder. What measures were taken to address this crisis and meet the essential needs of the people?Regarding the background of the research, it should be noted that several articles have been written about the economy during the Pahlavi II era, including the article "Application of Edward Shils' New Oligarchic Theory to the Pahlavi II Era (1953-1979)" by Mohammad Radmard (2020), which attempts to align the prominent features of new oligarchic systems from Shils' perspective with the realities of the Pahlavi II era (1953-1979). Ali Voshmeh and colleagues (2017) in their article "Economic Policies of the Pahlavi II Government in Industry with Emphasis on Iran-Germany Relations from 1961 to 1978" sought to answer the question of what quantitative and qualitative transformations the economic policies of the Pahlavi II government, particularly through the use of German industries, brought about in the modernization of Iranian industries. Therefore, regarding the rising prices of essential goods and inflation in the final years of the Pahlavi II regime, a critical period in contemporary Iranian history, no comprehensive and independent study has been conducted so far.
 
 
 
Methodology:
In this article, the historical research method was employed to analyze the economic crisis and its impact on the rising prices of essential goods and inflation during the final years of the Pahlavi II era. This methodology involved a thorough examination of newspaper reports and archival documents from the period, allowing for a comprehensive understanding of the socio-economic conditions that contributed to the crisis
 
Findings:
 
The findings of the research indicate that the surge in oil prices in global markets, coupled with excessive demands from executive bodies, significantly increased the liquidity in the country. This influx of liquidity led to a heightened demand for goods and services, which in turn resulted in an uncontrolled rise in the importation of essential commodities and food products.As the government and various institutions sought to capitalize on the increased oil revenues, they often prioritized immediate consumption over sustainable economic policies. This approach not only exacerbated the dependency on imported goods but also created a mismatch between supply and demand within the domestic market. The overwhelming influx of imported goods, while initially appearing to meet consumer needs, ultimately contributed to a distorted economic landscape.The consequences of this situation were profound, as the rapid increase in imports led to inflationary pressures that affected the prices of essential goods. As the cost of living rose, the purchasing power of the average citizen diminished, leading to widespread dissatisfaction among the populace. The combination of rising prices and stagnant wages created a climate of economic instability, which fueled public unrest and discontent
 
Discussion and conclusion:
The developments in the international oil market between 1972 and 1974, which led to a significant increase in oil prices, prompted the Pahlavi II government to revise the Fifth Development Plan of the country. The total volume of investment from both the government and the private sector was estimated at approximately 4,699 billion rials (equivalent to about 69.5 billion dollars). This ambitious investment plan exceeded the capacity of the Iranian economy and resulted in a substantial decline in growth rates, with the growth rate in the Fifth Plan dropping to half of that in the Fourth Plan. Concurrently, inflation skyrocketed from 2.6% to 24.9%, and the cost of living index for the urban middle and lower classes doubled.The situation became even more critical with the decline in global oil demand in 1975, marking the end of Iran's economic boom. The oil revenues from previous years had already contributed to rising inflation, exacerbating the economic challenges faced by the country. The influx of foreign nationals into Iran further inflated housing prices and rents, as demand surged in urban areas. This led to a significant increase in the migration of rural populations to cities, as individuals sought better opportunities amidst the economic changes.Speculators and brokers in the housing market capitalized on the situation, driving rental prices even higher. Additionally, the prices of imported foodstuffs rose sharply, and the failure of agricultural programs contributed to a growing trade deficit. The combination of these factors created a precarious economic environment, where the rising cost of living and inadequate domestic production capabilities left many citizens struggling to meet their basic needs.

Highlights

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Kayhan, No. 10373, Sunday, January 21, 1978, p. 28, No. 10391, Tuesday, February 14, 1978, p. 2, No. 10401, March 1, 1978, p. 2, No. 10406, Sunday, March 5, 1978, p. 2, No. 10407, Monday, March 6, 1978, p. 2, No. 10408, March 7, 1978, p. 2, No. 10409, Wednesday, March 8, 1978, p. 2.

Khak va Khun, No. 673, Sunday, October 21, 1973, p. 2.

Middle East Market, No. 195, Tuesday, May 21, 1974, p. 5.

Middle East Market, No. 196, Friday, June 21, 1974, p. 4.

Proceedings of the National Assembly, 23rd Term, Session: 214, Monday, February 30, 1975.

Proceedings of the National Assembly, 24th Term, Session 1, Tuesday, September 8, 1975.

Proceedings of the Senate, 6th Term, Session: 103, Thursday, April 10, 1974.

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Raji, Parviz (2008). The Memoirs of Parviz Raji, translated by Hossein Abutalebian, Tehran: Information Institute.[In Persian] 

Keywords

Expensiveness
basic goods
inflation
Second Pahlavi
Information newspaper
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Abrahamian, Ervand (2005). Iran Between Two Revolutions, translated by Ahmad Gol Mohammadi, Tehran: Nashr-e Ney. [In Persian]  
Alam, Amir Asadollah (2011). Alam's Notes, Tehran: Ketabsara. [In Persian]  
Archive of the National Documents and Library Organization (Sakma) 158735/293.
Ayandegan, Vol. 10, Issue 2776, Sunday, March 20, 1977, p. 2.
Ettela'at, No. 14381, April 17, 1974, p. 4, No. 10846, Thursday, July 10, 1962, p. 17,No. 10970, Sunday, December 9, 1962, p. 19, No. 12853, Thursday, April 3, 1969, p. 17, No. 12948, Thursday, July 24, 1969, p. 8, No. 13728, Sunday, February 19, 1972, p. 4, No. 14362, Tuesday, March 25, 1974, p. 12, No. 14363, Wednesday, March 26, 1974, p. 12, No. 14366, Sunday, March 30, 1974, p. 12, No. 14367, Monday, April 1, 1974, p. 4, No. 14373, Tuesday, April 9, 1974, p. 12, No. 14376, Thursday, April 11, 1974, p. 13, No. 14380, Tuesday, April 16, 1974, p. 16, No. 14382, April 18, 1974, p. 12, No. 14386, Tuesday, April 23, 1974, p. 16, No. 14764, Tuesday, July 21, 1975, p. 21, No. 14775, Sunday, August 3, 1975, p. 4, No. 15350, Friday, June 29, 1977, p. 5, No. 15398, Sunday, August 26, 1977, p. 28, No. 15419, Friday, September 22, 1977, p. 4.
Fifth Development Plan of the Country (Revised) 1977-1973, Vol. 1, 23rd Term, p. 7124.[In Persian]  
Foran, John (2007). Fragile Resistance, translated by Ahmad Tadin, Tehran: Rasa Cultural Services. [In Persian] 
Heyat, Ziaoddin (1974). "Inflation and Its Reflection in the Iranian Economy," Journal of Business Research, Issues 1 and 2.[In Persian] 
Katouzian, Mohammad Ali (1995). The Political Economy of Iran from Constitutional Revolution to the End of the Pahlavi Dynasty, translated by Mohammad Reza Nafisi and Kambez Azizi, Tehran: Markaz Publishing.[In Persian] 
Kayhan, No. 10373, Sunday, January 21, 1978, p. 28, No. 10391, Tuesday, February 14, 1978, p. 2, No. 10401, March 1, 1978, p. 2, No. 10406, Sunday, March 5, 1978, p. 2, No. 10407, Monday, March 6, 1978, p. 2, No. 10408, March 7, 1978, p. 2, No. 10409, Wednesday, March 8, 1978, p. 2.
Khak va Khun, No. 673, Sunday, October 21, 1973, p. 2.
Middle East Market, No. 195, Tuesday, May 21, 1974, p. 5.
Middle East Market, No. 196, Friday, June 21, 1974, p. 4.
Proceedings of the National Assembly, 23rd Term, Session: 214, Monday, February 30, 1975.
Proceedings of the National Assembly, 24th Term, Session 1, Tuesday, September 8, 1975.
Proceedings of the Senate, 6th Term, Session: 103, Thursday, April 10, 1974.
Proceedings of the Senate, 7th Term, Session: 67, Thursday, August 24, 1977.
Proceedings of the Senate, 7th Term, Session: 68, Sunday, August 26, 1977.
Rah-e Najat, Vol. 56, No. 1111, Thursday, June 5, 1973, p. 1.
Raji, Parviz (2008). The Memoirs of Parviz Raji, translated by Hossein Abutalebian, Tehran: Information Institute.[In Persian] 

  • Receive Date 07 November 2022
  • Revise Date 06 March 2023
  • Accept Date 06 May 2023

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