Page 298 - Arabia the Gulf and the West

Mene, mene, tekel, upharsin 295

land reform programme-which he introduced in July 1975- Every commercial
and manufacturing enterprise over a specified size was required to divest itself
of 49 per cent of its equity to its employees over a period of three years, the
funds for the purchase of these shares being made available to the workers from
the state treasury. It was a purely political gesture by the shah to appease a
section of the urban work force, particularly in Tehran, and as such it misfired,
economically as well as politically. The employers, after their initial dismay,
realized that the scheme afforded them an opportunity to rid themselves of
unwanted or wasting assets for sums far exceeding their actual worth and their
own expectations. When they received their compensation, instead of reinvest­
ing the capital they promptly transferred it out of the country. From a political
standpoint the scheme brought the shah scant reward, for it did not touch the
mass of the urban working class which was employed in small firms outside the
scope of the scheme. Within two years or less of its inception, the scheme had
joined the growing pile of Muhammad Reza Shah’s discarded fiscal inspira­

tions.
Veritable torrents of money were poured into the Persian economy by the
shah between 1974 and 1976 in an effort to achieve his dual object of stimulat­

ing industrial activity and procuring popular content with his rule. Between
March 1974 and March 1975 the money supply in Persia increased by 61 per
cent. The previous year it had risen by 27.7 per cent, and it was still growing at
an annual rate of 36 per cent at the end of 1975. Such a massive increase in so
short a time was bound to generate equally massive inflation, and so it did. The
unchecked speculation in land and building, notably in Tehran, only drove the
rate of inflation higher, to 40 per cent or more in 1974, 1975 and 1976. As the
cost of living rose, more money was pumped into the economy in the form of
wage increases, workers’ bonuses and food subsidies, fuelling the engine of
inflation still further. Refusing to admit any responsibility for creating the
monster, the shah blamed its emergence upon the Western industrial nations
for unwarrantably increasing the cost of their exports to Persia (any suggestion
that the steep rise in oil prices, which he had been largely instrumental in
engineering, might have had a bearing upon these increases was brushed aside
as unworthy of consideration), and upon Persian merchants and entrepreneurs

for profiteering at the expense of their fellow citizens. To curry favour with the
city masses, he encouraged anti-profiteering demonstrations against local
merchants and foreign businesses, which only served to create greater
economic uncertainty, leading in turn to further flights of capital from the
country.

If what has been said so far about the shah’s attempt to modernize Persia
overnight seems unduly harsh, it is because he more than any man was
responsible for the chaos, waste and corruption which accompanied that
attempt. As the source of all power within the state, he insisted upon retaining
control of the direction taken by the economy and the way in which the oil