The Iranian Economy in the Twentieth Century: A Global Perspective

Abstract

This paper examines the transformation of the Iranian economy through the twentieth century within a global context. At the start of that century, the Iranian economy had long remained stagnant, poor, and largely agrarian, with a marginal role in the world economy. By the turn of the twenty-first century, Iran had transformed into a complex and relatively large economy with important consequences for the economies of the Middle East and other parts of the world. While the initial conditions and the evolution of domestic institutions and resources played major roles in the pace and nature of that transformation, relations with the rest of the world had crucial influences as well. This paper focuses on the latter forces, while taking account of their interactions with domestic factors in shaping the particular form of economic development in Iran. We study the ways in which the development of the Iranian economy has been affected by international price movements and by the ebbs and flows of trade, investment, and economic growth in the rest of the world. In considering these effects, we also analyze the role of domestic political economy factors and policies in enhancing or hindering the ability of domestic producers to respond to external challenges and opportunities.