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Where Did Iran's Islamic Economy Come From and Where Did It Go?

by FRIEDA AFARY (translator)

23 Oct 2010 01:131 Comment

Economist Sohrab Behdad speaks with Reza Talebi.
Translator's note: Below are excerpts from an interview conducted with Dr. Sohrab Behdad, professor of economics at Denison University, Ohio, and co-author with Farhad Nomani of Class and Labor in Iran: Did the Revolution Matter? The interview was conducted in Persian by Reza Talebi and was published on the website of Radio Zamaneh (Amsterdam, Netherlands) on August 14 and 17, 2010. -- Frieda Afary


What was the economic orientation of the Iranian Revolution, considering that slogans in defense of the oppressed were given at that stage? Was the Islamic economy, in the beginning of the revolution, more socialist or liberal?

It would be better to examine this event by starting from the early 1970s. At that time, there was no talk of an Islamic economy or the "oppressed." There was talk of toilers, workers, the rural population, the dispossessed, and the urban slum dwellers who were formerly part of the rural population and had escaped the poverty of the countryside to face the misery of urban slums. There were mainly two theoretical standpoints for explaining the economic-social situation: Marxist perspectives and those of [Ali] Shariati and his followers.

During these years, the "nationalists" were asleep and did not have much to say. After the revolution, most became "religious-nationalist" -- first nationalist and then mostly religious.

Although there were differences among Marxists, they demanded some type of socialist revolution. Regardless of whether they saw the "main contradiction" as imperialism or capitalism, their theoretical direction was ultimately socialism.

The other main force however was constituted by Shariati and his theoretical followers. Shariati provided a theoretical and ideological framework for the religious intellectuals who were intimidated by the Marxist theories of Left intellectuals. This framework put religious intellectuals on par with their Marxist competitors.

While Marxists relied on historical materialism and the class struggle to explain historical developments, the followers of Shariati based themselves on Shariati's philosophy of history. They believed that "on the basis of a scientific determinism, from the beginning of human existence,...there has been a dialectical contradiction...between two antagonistic and contradictory elements...which has been ubiquitous and has shaped history."* This was the contradiction between the followers of Abel and the followers of Cain. "Cain, the property owner, killed Abel. From that point on, the system of private property emerged." According to Shariati, this was the beginning of the liberation movement in the history of human civilization, a movement for the emancipation of the freeborn human from the yoke of property and property owners.

In Islamology, Shariati writes that "Abel has survived historically and is not dead" and the movement continues.

While Marxists ultimately aimed for establishing a proletarian state, the followers of Shariati aimed for a "monotheistic classless economy." For Shariati, just as for Marxists, it was considered a given, that in the age of imperialism, capitalism could not be the pathway to overcoming misery and underdevelopment in underdeveloped countries.

Given this state of affairs, what was the economic orientation after the revolution?

With such a set of ideas, Iran was moving in the direction of the 1979 Revolution without being aware of it. The dominant theories, Marxist and Islamic (Shariati) were both radical and leftist. Both Marxists and the followers of Shariati aimed at overthrowing capitalism. With the rise of the revolutionary movement, opposition to "dependent capitalism" became the dominant theme of the slogans and demands of the revolution. If you examine the leaflets from the months of January and February of 1979, and the speeches given during the first two years after the Revolution, you will see that all, whether Left or non-Left, Marxist or Islamic, followers of Shariati or otherwise (with the exception of the nationalists) were aimed at overthrowing "dependent capitalism." The common slogan for all was "Down with the dependent capitalist."

All political groups were determined to free Iran from the influence of imperialism and the evils of "leech-natured capitalists," who were considered to be the main enemies of the people and the revolution. Therefore, there is no doubt that in the beginning of the Revolution, the general economic plan was the negation of capitalism with a type of indeterminate socialist direction...

The Islamic Republic had neither a clear understanding of how to combat imperialism -- other than to rant and make faces at it -- nor an alternative to capitalism. There were slogans about nationalization, confiscation, forming councils and expropriating agricultural land, urban houses, and locations.

Were these actions planned?

These were all spontaneous actions that were proposed and executed in the heat of the Revolution. Some of these actions were inevitable. Factories whose owners had left them with heavy debts and empty warehouses, banks that had given their cash reserves as booty to capitalists and the heads of the regime were all left bankrupt and ownerless.

The government "nationalized" them and took them over. On the other hand, formal and informal confiscations were taking place throughout Iran. In the meantime, some landless peasants came to own land, slum dwellers of zoorabads [squatters' ghettos] outside city limits built huts made of brick without permits and received water and electricity, and became Islamshahrs [cities of Islam].

It was clear that rival groups inside and outside the government who were competing to prove their revolutionary appearance were determined not to be outdone in terms of expropriations, confiscations, and redistribution. When the revolutionary dust settled, it became clear that in those passionate days of revolution, there were those who were not combating either capitalism or imperialism. They were only after collecting and seizing choice property (booty).

The following were the two sides of the economic formation that appeared:

On one side there were the "oppressed" who continued to earn their daily bread through a piece of land in the countryside or as workers in the city or the countryside. In the meantime, the size of the army of the unemployed increased. Factories that were left idle and without raw materials and ownerless could not maintain their own workers, much less employ youth who had just entered the job market. These new entrants in the job market and those who had become unemployed turned to "freelancing," i.e., anything from transporting people in exchange for a fee to driving trucks or running small stands and street vending. Under these circumstances, the number of those in the working class decreased and the army of street vendors and illegal cabbies increased. In addition, many very small enterprises were established in which no more than one or two people worked.

On the other side, the booty had landed in the hands of a few very large enterprises (most important of all the foundations), which took over the largest economic firms. These giant oligopolies had not only economic power but also political power, since they were part of the government, and unlike other departments of the government, were not accountable.

Farhad Nomani and I have examined these issues in detail in the book Class and Labor in Iran.

So there was no economic policy in effect?

Up until then, meaning the first one or two years after the revolution, there was no economic policy in effect. There was a scuffle over determining the economic direction. There was nothing but what was written in the Constitution.... Populist views with mass appeal were offered, such as aid for creating cooperatives to hire unemployed high school graduates. But there was no general policy. Under these circumstances, production was declining, and the economic situation was worsening.

Once the [Iran-Iraq] War [1980-1988] began and the economic sanctions went into effect, the Islamic Republic adopted a dual policy. On the one hand, the state sought to guarantee property rights, restart the economy, and increase production. On the other hand, it sought to increase subsidies, ration and distribute staple commodities, ration raw materials and foreign currency, and control prices. These measures prevented the per capita consumption from dropping down as much as the decline of the gross national product. This is a policy that governments follow as much as possible in order to prevent increasing dissatisfaction with the burden of war, high prices, and shortage of commodities. This dual policy was followed throughout the incumbency of Mir Hossein Mousavi as prime minister [October 1981-August 1989].

These quotas and rations provided a great advantage for those close to the political establishment. They were able to acquire huge sums through rent-seeking activities. If collecting booty in large para-governmental enterprises was the first stage of the "primitive accumulation" of capital in the post-revolutionary economic crisis, then, rent seeking and the acquisition of special privileges were the next stage. In this way, the two massive economic poles of Iran reshaped themselves after the Revolution, albeit more massively than in the previous era.

The giant monstrosity of the oligopolies favored by the government cast its shadow on the landscape of Iran's broken down economy, an economy which had several hundred thousand very small economic enterprises, each of which had less than two employees on the average.

Is the above compatible with "Islamic economics"? It has been said that the economic theory of the post-revolutionary era was "Islamic economics." Please explain when this theory arrived on the scene, where it came from, what it achieved and what its fate was.

Islamic economics was a new discourse that entered Iran around the time of the 1979 Revolution. However, the discussion of Islamic economics had started in the early 20th century in India and by Muslims. With the victory of the Indian independence movement in 1947 that led to the partition of India and the formation of Pakistan as a Muslim state, the discussion of Islamic economics gained prominence.

In the 1940s and 1950s, there were heated debates about Islamic economics and its particulars. One of its most important theorists was Abu Ala Maududi, the founder of Pakistan's Jamaat-e Islami. In 1941, prior to the creation of Pakistan, Maududi had presented his views on Islamic economics in a famous speech.

Maududi had a very conservative view concerning the economic system. While he rejected capitalist and socialist systems, he uncritically accepted all the foundations and relations of capitalism, and even zamindari [landlordism]. However, there were others like Muhammad Iqbal, the prominent poet, or Khalifa Abdul Hakim who demanded egalitarian social revolution from an Islamic standpoint.

In the 1940s and 1950s, this discussion spread to Egypt and to a limited extent to Iraq, Malaysia and Indonesia. However, in Iran, there was no talk of Islamic economics until the climactic days of the revolutionary movement. Aside from issues related to the revolution, this subject is worthy of attention from an epistemological perspective...

It is remarkable that Islamic intellectuals in Iran were ignorant of the discussions of Islamic economics that were taking place in a neighboring country with an Islamic state. Even if they did know about this discussion, they did not attempt to present the discourse on Islamic economics. And if they did, they were not successful in extending that discourse to Islamist circles. The Islamists were attending Shariati's sermons in droves and were hearing about Fanon and Marx. Shariati never spoke of Islamic economics.

In Iran, before the revolution, we did not have an Islamic economy or Islamic economists.... Examine the Islamic publications in Iran before the revolution, to see if you will find even one that contains an article about the convening of the first international conference [on Islamic economics] in Mecca in 1976. One can ask why the theological seminaries [of Qom] and the Islamists had no relation to issues raised about Islamic economics in the Islamic world.

The point is that in Iran, the Revolution came first, became Islamic, and then brought about an Islamic economy that had very little to do with the Islamic world. The discourse on an Islamic economy began with Bani Sadr's discussions and the publication of the book Iqtisad-e Tawhidi [Monotheistic Economics] only a few weeks before the victory of the Revolution in February 1979. From that point on began the debates and arguments among the Islamists.

The book Iqtisad-e Ma [Our Economics] was published before the revolution, wasn't it?

Yes, you are right. Iqtisad-e Ma, which examines the school of economics in Islam, is the translation of Iqtisaduna by Mohammad Baqir al-Sadr, an Iraqi theologian. It was published in Arabic in 1961. Its Persian translation was published in two volumes. The first volume, translated by Mohammad Kazem Mousavi Bojnurdi, was published in 1972 by the Islamic Press. The second volume, translated by Abdul Ali Espahbodi, was published by the same publisher in 1979. However, previously, Islam and Property, by Seyed Mahmud Taleqani, was published in 1965.

Elsewhere, I have examined the economic theories of these two books in great detail. Here I will suffice it to say that prior to the Revolution, these two books had not been successful in starting a discourse on Islamic economics.

The intellectual milieu before the Revolution was such that Marxists aimed for socialism. The supporters of Shariati saw themselves on the pathway to achieving the classless monotheistic society.

Taleqani and Sadr expected very little of Islamic economics, so much so that in a footnote, the translator of the first volume of Iqtisad-e Ma took issue with Sadr for defending capitalism. Bojnurdi wrote, "It needs to be pointed out that we do not approve of the views of the author which implicitly defend capitalism (and surely he did not mean to do so)" [p. 244]. On another page, this very same translator added the following in a footnote: "Capitalist property is illegitimate. The means of production which capitalists have gained by pillaging, robbing, and exploiting the people, belong to the real producers. It seems that the author has erred in considering that a commonality of views about private property exists between the anti-human capitalist system and the just system of Islamic economics..." [p. 235].

These notes by the translator reveal the ideological orientation of the time and explain why those who opposed the regime did not favor these books and their Islamic economics. It was only after the revolution that these two books, and specifically Iqtisad-e Ma, gained fame...

What finally happened to the Islamic economy?

During the first few years of the Revolution, one or two other works on Islamic economics were published. The most important was Conceptions of Property, Capital, and Labor from the Standpoint of Islam, written by Habibollah Peyman. It was published around 1979. (The date of publication is not stated in the copy that I have.) Peyman relied on Islamic epistemology and jurisprudence to argue that, based on the principle of ownership by God, the separation of workers from the means of production, a separation that is the basis of capitalism, is not permissible in Islam. (I do not know if Peyman still believes in these views.) Therefore, all the natural resources should be under the control of the workers in order for them to benefit from their creative labor power.

Furthermore, Peyman argued that the means of production represented the achievements of human civilization, and no one had the right to monopolize them. Thus, Peyman considered the accumulation of capital to be un-Islamic, and rejected it. The conclusion of Peyman's argument was that all should have the right to use the means of production and utilize natural resources. In that way, no one would have to sell his or her labor power, and the condition for the exploitation of the worker by the capitalist would not be created. Peyman next reached the following important conclusion: In modern society, which has large industrial and trade enterprises, those enterprises should be held as cooperatives under the ownership of the people.

Peyman's critique of capitalism, and the plan that he proposed for the ideal Islamic society, was attractive to the religious youth who felt estranged from secular tendencies. Peyman's interpretation of the Islamic economy was a religious manifestation of an intellectual current that had taken shape years before the Revolution and which Shariati had sought to link with Islam...

The above views as a whole represented the dominant thought at the time of the formation of the Islamic Republic. The Constitution was also written and ratified on the basis of this trend.

However, this was not the only Islamic theoretical framework in Iranian society. The method of thought and interpretation of Islam that called for the establishment of the rule of the oppressed, faced severe opposition from the owners of capital (bazaaris) and prominent theologians of the time...

The confrontation began over legislation for urban land distribution and continued in some important ways with agricultural land distribution -- peasants had considered that confirmed and had expropriated and distributed the land prior to any discussions in the legislature -- the nationalization of foreign trade, and labor laws. One after the other, legislation ratified by the Majles [parliament] was being rejected by the Council of Guardians.

At this point, legislation for land distribution was temporarily ratified on a much smaller scale than was originally proposed. After a few years of quarreling between the Majles and the Council of Guardians over the Labor Law, the Council for Expediency was created. This council ultimately ratified the Labor Law. The real argument was over the extent and limits of private property rights.

The ideological and political direction of the Revolution called for rejecting large property ownership and limiting rights to property and capital. However, the confrontation on this question took place within the framework of Islamic jurisprudence, which approves of private property and respects its boundaries despite all the arguments about "ownership by God." On this basis, return on capital (profit) is also acceptable, just like murahaba [an accepted method of financing a debt in Islamic sharia] and muzaraba [partnership between labor and the owner of capital]. Therefore, from the standpoint of jurisprudence, land distribution legislation (legitimate expropriation) or imposition of limits on the rights of capital in labor contracts (the Labor Law) could not be acceptable.

In the fall of 1985, the Office of Cooperation Between the Theological Seminary and the University, headed by Mohammad Taghi Mesbah Yazdi at the Qom Theological Seminary, published the results of its jurisprudential research concerning Islamic economics, under the title An Introduction to Islamic Economics. According to this interpretation, Islamic economics does not necessarily aim at providing social equilibrium and preventing the concentration of wealth. Rather, like neoclassical economics, it examines the tradeoff between economic growth and social justice, and considers the former preferable to the latter.

Based on the views of the scholars of the Qom Theological Seminary, the profit motive was justified and compatible with Islamic sharia law. The outcome of the free market was also considered logical and fair. This point of view in fact did not distinguish between neoclassical economics in its pure form (such as that of Milton Friedman) and Islamic economics. From this point of view, economics was economics. It could not be considered Islamic or non-Islamic. It was the cultural-political system that was Islamic!

With the intensification of the [Iran-Iraq] War, and its rising cost, the intensification of the economic embargo, and most importantly the decline in the price of oil in the world market from around $30 per barrel in 1979 to less than $6 per barrel in 1987, maintaining the status quo became increasingly difficult. The foreign exchange reserves from the beginning of the Revolution had been used up. As Hashemi Rafsanjani revealed years later in a Friday sermon, the country's foreign debt had reached billions of dollars. Up to that point, the economic policy of the Islamic Republic mainly consisted of providing for the cost of the war and preventing a massive decline in public consumption through the system of rationing.

As the gravity of the situation increased, the rations shrank and the lines grew. At the same time, the number of martyrs from the war increased daily. The open market for commodities and raw materials gouged people. Of course it created a large profit for its perpetrators. There was little stamina left for continuing the war and little possibility for finding the utopia of Islamic economics. By 1989 when the war had ended, the project to establish an Islamic economy was for all intents and purposes considered closed, and there was no longer any talk of the rule of the oppressed...

*See "A Disputed Utopia: Islamic Economics in Revolutionary Iran," by Sohrab Behdad, Comparative Studies in Society and History: An International Quarterly, vol. 36, no. 4 (October 1994).

Frieda Afary runs the blog Iranian Progressives in Translation.

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1 Comment

It would be interesting to know what Marx would have made of the Islamic Revolution. Although he didn't forsee many of the current developments in the world regarding social classes, technology and politics his analysis of capitalist economics was fairly accurate, which is why he is still considered influential. Five years ago, he was polled the most influential philosopher of all time in the UK (hardly a rabidly communist country).
Marx correctly identified control of the means of production (Capital) as the key factor (though he thought this should come about through Revolution). This hasn't really changed. Money makes money.(but as Henry Miller said -what makes money make money?)
Marx was particularly relevant to industrial societies (which most of the world became or is becoming). What happens when Marx meets Mohammed? Marx said "Religion is the sigh of the oppressed.The heart of a heartless world and the soul of a souless condition. Religion is the opium of the people." This last is why Muslims, particularly fanatics, have been generally anti-Marxist.
Islam as I understand it has two conflicting elements,an egalitarian strain - All believers are equal(in theory)- and a mercantile tradition that doesn't recognise the oppressive features of Capitalism. Crony Capitalism and an oligarchy impoverishing the mass of people ,these are not to be countered.It is therefore possible to be a Muslim and to be the most savage Capitalist imaginable(providing you tithe and follow the other rituals).A Christian always has that eye of the needle looming.
Getting back to Marx, his belief in Revolution (activism) stemming from his Prussian background did not take into account that revolutions require armaments and funding(Capital).Khomenei utilised people like Rafsanjani ,a prosperous farmer and Francois Genoud, a fanatical Nazi who managed money stolen from murdered Jews in WW2. Also revolutions become an exercise in futility when one tyrannical minority replace another.

pirooz / October 23, 2010 12:43 PM