Iran’s oil income began rising in the 1950s when the resolution of the oil crisis made increased state revenues possible. (For background on the oil crisis see Cold War Iran in the Aftermath of the 1953 Coup.) The first large jump in sales (236%) occurred between 1954 and 1955 when the British embargo of the Mosaddegh period ended.
As a consequence of subsequent rapid growth, oil sales comprised over 41% of total government revenues by 1960, compared to only 11% in 1948. Expanded production and more favorable contracts resulted in spiraling profits over the course of the 1960s.
By the end of the decade, observers were describing Iran as a rentier state, a state which receives
on a regular basis substantial amounts of external rent. These rents, in the form of reverse flow from the sale of oil in the case of petroleum-producing countries, have very little to do with the production processes of their domestic economies. Rentier states, in short, feature economies with undeveloped agricultural, industrial, and manufacturing sectors, the inputs from any such sectors being not significantly related to earnings from the sale of oil.
Oil income continues to rise.
A second large escalation occurred in 1974 when oil prices quadrupled. By this time, also, the political consequences of Iran’s reliance on oil were evident. Since the growth of this income lessened the need for taxation, the relationship of the populace to the state was transformed and there was little semblance of a participatory political project. Because the shah controlled the distribution of the oil profits, he dictated the social, economic, and political direction of the country.
Unlike the case of Taipei where the owners of small and medium-sized enterprises (SME’s) began to contest the traditional elites and to financially support an organized opposition, Iran’s new industrial entrepreneurs didn’t insist on a political role, choosing instead to define themselves as apolitical technocrats. (You may remember that this group had gained their wealth over the course of the 1960s as a consequence of the adjustment to land reform. For ramifications see our post on 1960s isfahan.)
Concurrently, the older generation of politicians who had been active during Mosaddegh’s era weren’t intuitive about the new realities. Some believed that they still had a say in politics when, in actuality, economic and social policies were designed without regard for social consent, and “social classes were adapting themselves to state policies that were beyond their power to influence.”
The Iranian populace is apolitical.
By the mid 1970s, it was apparent to most that the role of the populace was to act as “grateful beneficiaries of state handouts” controlled by the shah. Loyalty to his person
replaced loyalty to the state as the test of citizenship . . . . The establishment of an oil state meant a progressive erosion of the traditional linkages between the state and civil society.
As Theda Skocpol argues in her article on Rentier State and Shi’a Islam in the Iranian Revolution:
The state’s main relationships to Iranian society were mediated through its expenditures — on the military, on development projects, on modern construction, on consumption subsidies, and the like. Suspended above its own people, the Iranian state bought them off, rearranged their lives, and repressed any dissidents among them.
The state expands its control of the Iranian population.
By the mid 1970s, Iranians were becoming polarized around questions regarding the distribution of oil wealth. The issue of distribution was particularly critical in the urban arena where almost every resident relied heavily on the state for privileges, employment, and services. This topic and associated issues concerning moral decadence and conspicuous consumption were replacing the postwar discourse which had centered on political participation and rational decision-making.
The breakdown in linkage between the state and civil society was evident as the state “extended its control to all employers’ associations, trade unions, bazaar guilds, civil service associations, and rural cooperatives.” Political parties were no longer relevant.