[The writer, an Iranian living in the West, has recently returned from a visit to Iran. The present article is largely based on impressions and material gathered during her visit.]

Victory of pragmatism over fundamentalism

The Islamic economic laws enacted in Iran in the early months of the revolution caused considerable disruption in the structure of the economy and resulted in a loss of output and employment. This in turn led to worsening depression, deeper unemployment and a sharp decline in investment levels.

Through nationalization and expropriation, the government took over large sectors of the economy including banking, insurance, major indus­tries, agriculture and construction. But even the ideas of Islamic economics put forward by Bani Sadr, which combined traditional Islamic doctrines and practices with elements of modern radical ideologies, left a host of open problems, both doctrinal and practical.

The question of property remained unresolved. According to Bani Sadr’s interpretation of Islamic property ownership, “in benefitting from what belongs to God, all men are equal and there can be no discrimina­tion” (A.H. Bani Sadr, Eqtisadeh Tawhidi (in Farsi), Tehran, 1978, p114). Here he seems to be amalgamating the fundamentalist view of property ‒ “God is the sole owner and arbiter of everything on earth and in heaven” ‒ with the liberal view of “man in the state of nature” and what Marxists call “primitive communism”. But when peasants took over lands belonging to large owners, they were told by the religious judges that this was unlawful. A cleric in a village in the south put it succinctly to a peasant who seized some land: “as these prayer beads belong to me, the land belongs to its owner” (S. Bakhash, The Reign of the Ayatollas, Iran and the Islamic Revolution, Tauris & Co, London 1985, p200).

By printing money and borrowing from the Central Bank, the government created a huge deficit. The banking system seemed to be near collapse. The nationalization of the banks and the abolition of interest rates caused a stampede of anxious depositors who withdrew huge funds from the banks. This money found its way abroad or was simply stuffed into the proverbial mattress at home.

The government then began to permit private enterprises to resume opera­tions. It paid $85 million to private contractors working for the state and promised to pay another $200 million. It lent $110 million to industries to enable them to meet their payrolls and bills for raw materials. Importers were allowed to defer payment for some custom charges (Ibid, p178).

By the mld-1980s there was also a marked change in the regime’s attitude on foreign policy and international affairs.

As long ago as September 1980, the Iranian government had begun to negotiate the release of the American hostages. Economic as well as politi­cal motives played an important role in freeing the hostages. Iran needed to gain access to its frozen assets and to see trade sanctions lifted. Besides, as one Member of the Majlis (Parliament) put it, the taking of American hostages had already served its purpose ‒ defeating the left and the nationalists, allowing the Islamic regime to consolidate its control over the state (ibid, p.150). With the release of the hostages, $11-12 billion of Iranian assets were unfrozen by the US.

But the release of the American hostages did not signal an end to anti-­American rhetoric. In the first two years of the revolution Iran relied on the Soviet Union and North Korea for arms, on Soviet trade and transit routes, and on imports from Eastern Bloc countries. However, in 1982 Irano-Soviet relations deteriorated. Iran became critical of the Soviet presence in Afghanistan; and the pro-Soviet Tudeh Party, which had been a firm supporter of the regime, was subjected to repressions: its entire Central Committee and 800 of their members and sympathizers were arrested.

Iran then turned to the West as market for its oil, whose revenue was used by the regime to buy arms for the Gulf war as well as imported food and raw materials. Iran’s total oil exports amounted to two million barrels a day, a considerable proportion of which was sold to the US. American firms indirectly re-entered the Iranian market, mainly through Turkey. West Germany and Italy continued the construction of oil termi­nals and a nuclear power plant; and Israel continued to buy Iranian oil and sell arms to Iran, despite the regime’s anti-Zionist rhetoric (Middle East Magazine, October 1982, no 96, pp10-17).

As economic hardships continued, food queues grew longer and the black market flourished, Iranian officials declared that their policy of “neither West nor East” did not apply to trade. So Western trade with Iran grew fast. Britain also joined in and by 1982 its exports to Iran exceeded those from France for the first time since the 1979 revolution (Middle East Magazine, September 1983, no 107, pp12-17).

In reality Iran’s acceptance of the UN resolution for ending the seven years of war which had taken over a million lives is not surprising. Hashemi Rafsanjani, member of the regime’s pro-Western wing since 1980, had long realized that an isolated Islamic Iran with its Shari’a (canonical) laws could not survive. He had long been working for ending the war. In 1985, during a parliamentary debate with the fundamentalists, he exclaimed, “either pay taxes or end the war!” (Middle East Magazine, April 1985, no 126, pp51-53).

The debate between the fundamentalists and the pragmatists continued over the questions of property, land, tax as opposed to religious tithes, curbing the role of Islamic organizations in the affairs of state, and the continuation of the war. This coincided with worsening economic conditions and deepening popular resentment.

By 1985 falling oil prices and the continuing economic crisis led the government to seek more flexible relations abroad. This time they turned to China and Japan. On his visit to Tokyo, Rafsanjani said, “God has made you advanced in science in order that Asian nations may benefit” (Middle East Magazine, August 1985, no 130, pp25-27).

Even Ayatollah Khomeini became a pragmatist and reached a novel con­clusion, representing a marked departure from his traditional Islamic doctrines. He agreed to end the war, despite his own policy of “neither East nor West… war until the global victory of Islam”. Even he had to adapt his fundamentalist view to the economic and political realities of the modern world.

There was also a change in foreign policy. Iran helped to secure the re­lease of some hostages held in Lebanon, thus removing an obstacle to improved relations with the West. Iranian newspapers urged the restora­tion of ties with the US. On 17 August 1988, an editorial in the daily Ettela’at argued that “the time has come to end the absence of a sound and reasonable relation between Iran and the US”.

Iran’s oil revenues, which provide more than 90 per cent of the country’s foreign exchange earnings, are depressed in today’s world market. The result has been a severe and worsening shortage of foreign currency, which affected both the war effort and the domestic economy. Iran’s debts built up, and exceeded its reserves of foreign exchange by $5 bn (Andrew Gowers, Financial Times, 18 July 1988). The ex­panding black market, and the failure of agriculture due to uncertainty over land ownership, have resulted in a flight from the countryside to the towns. Uncertainty over the roles of the private sector and state owner­ship of property has resulted in unemployment. Disputes over workers’ and employers’ rights have caused labour unrest. These, together with a growing weariness in those sections of society that had once believed in sacrifice and martyrdom for an unwinnable war, were the real reason for the victory of pragmatism over fundamentalism in Iran.

Black market economy under pragmatist Islam

A pragmatic and unstable Capitalism is now alive and flouri­shing in Iran, as rampant inflation and the black market perturb post-war reconstruction. The official rate of exchange is £1 = 120 rials, while the unofficial rate is £1 = 2,000 rials, more than 16 times as high! Along the two kilometre route from the heart of the bazaar in the south of Tehran to the city centre, a continuous line of black-market dealers operate on the pavements. They buy and sell everything from ration coupons to foreign currency. “Coupons for sugar, beans, oil!…”, they shout, “also dollars, pounds and Deutschmarks!…”

Their activity is as open and as important as that of the banks. In fact they exchange more foreign currency than the banks. They buy at a lower rate and sell at a higher one. In this way a large amount of foreign currency is in circulation and some dealers make good profits. Property speculation is also booming more than ever before, and has created many new million­aires. The banks too are involved in black-market currency transactions: the government operates a dual rate of exchange, official and black. In fact, banks are now paying a better price for black-market currency than indi­vidual dealers. In this way the government is trying to gain control over the black currency market and undermine the dealers, hoping in this way to settle the exchange rate at a figure between the present two rates and eliminate the black currency market. This will drive many dealers to go into property speculation, as one dealer suggested.

Except for bread, whose price has been pegged, everything is available on the black market. Even petrol, which has always been one of the cheapest items, now has two prices: officially it costs 30 rials per litre, but the black-market price is twice as high. Prices of basic necessities such as potatoes and onions, traditionally the cheapest food items, have now risen tenfold. A TV set sells on the black market for 600,000 rials, three times its official price. Black-market cigarette vendors are on the streets 24 hours a day, working in twos or threes, sleeping rough on street-corners and selling their wares by rota. A packet of 20 will cost you 600 rials, again three times the official price.

Black-market vendors are not a group apart; often they are ordinary people forced to enter this informal sector to feed their families. After ten years of war, many industries are still not back to operating at full capacity, unable to offer jobs to the unemployed. Rising inflation and the absence of any social provisions, such as unemployment benefits, hous­ing allowances and social security payments, have driven many to seek a living on the black market, in some cases moonlighting in addition to their official job. Women too are forced to take second or third jobs. After a whole day’s work at home or outside, or both, and after queuing up for hours to get food rations, they spend their evenings sewing, knit­ting and embroidering for sale in order to keep up with soaring inflation.

Inflation is so bad that people commonly say, “prices in dollars and wages in rials”. Officially, everything is still bought and sold through the rationing system: the government distributes monthly coupons for all food items and other basic necessities. But the rations are only enough for about one third of a household’s monthly consumption. So the women, who often have to prepare three daily meals for a family of six, seven or more, are forced to shop on the black market, where they may have to pay up to four times the official price. A five-litre can of cooking oil, for example, which officially costs 300 rials, sells for 1100 rials on the black market.

The government itself is involved in black-market operations. According to an employee of Roghan Nabati Goo, a state-owned plant for produc­ing cooking oil, last year the plant made a loss of 10.5 million rials. This year they decided to distribute only a third of their produce through official channels, and the rest will go to black-market dealers at unofficial prices.

The black market is firmly locked into the economy. This year car assembly workers, for example, received their New Year bonus in kind: four tyres a head. When they asked what they were supposed to do with them, they were told by management to sell them on the black mar­ket. Such practices are widespread. Pars Electric, a TV manufacturing firm, has been doing it for years: as a New Year bonus, each worker was allowed to buy a TV set for resale on the black market. This year, how­ever, due to a fall in TV production, the company refused to allow the workers to buy their usual New Year sets. The workers went on strike.

Decline in production has fuelled further labour unrest. During the war, the only sector operating at full capacity was the military industry, which actually managed to increase its production. Many workers from other sectors were transferred to military production, where they were needed most. When the war ended, they were sent back to their original workplaces; but here they were told that they were no longer needed and were made redundant. Five hundred workers of Azmayesh, a plant producing oil and gas heaters and domestic electric appliances, who were made redundant in this way, picketed the plant for several months.

Contradictory social and political changes

Iran is a society in turmoil. On 21 March 1989, people celeb­rated the Iranian New Year ‒ a pre-Islamic Zoroastrian tradition of marking the vernal equinox ‒ after ten years of war, civil war and Islami­zation. The festivities, which include leaping over bonfires, came to be seen as a protest against forced Islamization. These rituals are so deeply rooted in popular tradition that, despite being considered non-Islamic, they were never banned by the regime. This year, the rejoicing was so exuberant that the Revolutionary Guards lost control over the cities, as the parties spilled over into the streets, and people leaped over the bonfires in conscious public display.

The New Year festivities marked a more relaxed political atmosphere. Chess and songs ‒ albeit without female voices, which according to the Muslim sages tend to inflame men’s sexual passions and disrupt society ‒ ­are tolerated once more. Radio and TV began to play classical and tradi­tional Iranian music instead of war and death marches. On Fridays, the official day of rest, mountain climbing and watching football matches (live or on TV) are much more popular than attending prayer sermons, although 700,000 regulars still go to the mosques every Friday in Tehran. The regime has undoubtedly accepted this creeping pragmatism, despite Khomeini’s death-threat against Salman Rushdie and the huge wave of executions that followed the end of the war. Among those executed there were of course a sizable number of fundamentalists who opposed the end­ing of the war, as well as left-wing oppositionists.

The differences between the major factions of the regime are not really about religion at all but about rather more mundane matters such as the roles of the state and the private sector in the economy. The defeat of Ayatollah Montazerri had much more to do with this than with the image portrayed in the Western media, of “Khomeini’s successor-designate making a stand against the executions”. Montazerri is a great defender of private capital. There is a further aspect: his removal put an end to wilayat al-faqih (rule of the religious Jurisprudent), the corner-stone of Khomeini’s political theory. In practice, this introduced a degree of separation of reli­gion from the state and ended one-man rule after Khomeini’s death.

The removal of Montazerri appeared to be a victory for the then prime minister, Moussavi, and his supporters in the state-capitalist faction. Des­pite this rivalry between the two factions, however, it would be a mistake to exaggerate the differences between them. Iran’s heavy industry ‒ oil, gas and petrochemicals ‒ has always been under state control, and will remain so in the foreseeable future. The difference between the two fac­tions is over the scope that private enterprise should be allowed in the rest of the economy. Given the awesome task of reconstruction, even the supporters of state control agree that the private sector should shoulder part of the responsibility. For example, the government recently an­nounced that all private schools, colleges and universities, nationalized after the revolution, are to be re-privatized. In fact, the economic reconst­ruction may lead to a resurgence of state-owned industrial capital, through loans raised on the international financial market. However, the experience of debt crises in many third-world countries, and the present high inter­national rate of profit, may lead the Iranian state to encourage the native bourgeoisie to engage in reconstruction and channel funds to them.

Pragmatism is therefore not regarded as anti-Islamic but as necessary for political stability and post-war reconstruction. Five regions of the country were laid waste by the war, and the displaced population, who for up to ten years have been given shelter by relatives in other towns and villages, want to go back to their own homes. The regime cannot ignore their demand for reconstruction.

I was told by members of a family from the southern town of Abadan that as soon as the war ended people began to go back to their homes, some of which were only partly destroyed. They began clearing up the wild palm trees that had grown in the middle of their gardens and tried to save their furniture which was covered with weeds. But sometimes their efforts sadly came to nothing, as unexploded bombs were accidentally triggered off, causing injury and death. The government has now promised to clear these areas of wildlife and unexploded bombs as soon as possible, in order to enable their inhabitants to go back and begin reconstruction. It has also promised to foot the bill of rehabilitating war-­stricken families.

There is yet another reason for seeing the end of the war as the beginning of the end of Islamic fundamentalism in Iran. Towards the end, the war ‒whose prolongation was a fundamentalist cause ‒ was so unpopular that it was becoming impossible to draft new recruits into the army; even the most fundamentalist supporters of the regime were no longer prepared to go to be killed in the battlefield. In the last battle, students, workers and white-collar employees had to be sent to the front by force. “No-one was trained,” a university student recalled, “some had never even seen a rifle before. Some fled, but for many an attempted escape would have meant execution or being fugitives for the rest of their lives.” So continuation of the war, and hence of fundamentalism, was becoming impossible.

However, the war and ten years of fundamentalism have been a source of invaluable experience for the majority of the population. True, over a million Iranians died in the war; but many who fought in it survived ‒ mostly young people from provincial districts and remote villages. Under the previous regime such people had only heard, and occasionally caught a glimpse, of the wonders of current economic, social, political and cultural changes; but they had been excluded from all that. In a strange sense, the war brought them into the real political scene: they touched and smelt the new technology ‒ the gun, the tank and the poison chemicals. The direct experience of the modern material world finally entangled them in contradictions and had a strange effect on their beliefs. They came to hate the war, and the regime was no longer able to count on them; they no longer wanted to volunteer to die for Allah and go to heaven. But one invaluable experience left its mark on them: the Islamic system and its war not only made them part of the political scene but also brought them into direct contact with the wonders of the dominant world from which they had been excluded.

It is due to this contradictory experience that many prefer various aspects of the Islamic regime to the previous system, especially in the absence of any serious alternative. For the majority of the population, who did not benefit from the wonders of the development of capitalism under the Shah, even the coercion of women to wear Islamic dress has at least the merit of making all women look equal. This is tolerable, at least in contrast with the old regime, when only a small minority benefitted from westernization and its cultural aspects. The present period is one of grim reaction.

No doubt, when the time comes to challenge the Islamic Republic, the lifting of the veil will assume its symbolic significance. In fact, even during the last ten years many women have protested, whenever they had the chance, against Islamic dress by becoming bad hejabl (disrespectful of the veil), for which they paid the heavy price of ending up in Evin Prison and facing brutal punishments. By the way, even most of those who are in favour of Islamic dress regard the violent treatment meted out to trans­gressors by the Revolutionary Guards as wrong and barbaric. In fact, the public activities of the Revolutionary Guards have been drastically reduced, with the regular police force replacing them on the streets.

A vacuum filled by Islam

People are certainly critical of the regime, blaming it for the economic and political hardships. But after ten years of war, and the fail­ure and defeat of all oppositional political organizations, they do not envisage any alternative political system.

A construction worker who considers himself a socialist told me that in his view the tactics of one of the main opposition groups, the Mujahedeen, who during the latter part of the war sided with Iraq against Iran, were nothing short of catastrophic. This gained them no support; worse, it closed off the prospects for any alternative. This disillusionment with the left was well summed up by a dissident Tudeh (Communist) Party member. He analysed the regime’s notorious record on human rights, especially after the recent execution of thousands of political prisoners, including Tudeh Party members; but then he commented: “the Communists would have done the same in order to save their own system”.

Of course, this in no way excuses the regime’s butchery. But the left and other secularists failed to mount a serious challenge to Islamization. The acceptance of Islam by the bulk of the population does not signify cal­lous indifference to the slaughter of individual leftists; rather, it is an expression of despair. The population feels powerless.

Islam fills in a direct way the vacuum created by the left. In all work­places, the Islamic Societies have set up prayer quarters where everyone prays at midday. This is quite popular. First, it adds 30 to 60 minutes to the lunch break. Second, at prayer all, regardless of rank or position, kneel together as equals.

At the same time, intellectual life has not been completely stifled. The lack of many kinds of entertainment seems to have led to the growing popular­ity of education, art and music. The number of graduates and specialists in social and natural sciences is now greater than ever before. The Iranian film industry is booming; and, in the absence of western-style popular music and art, their traditional Iranian counterparts are thriving.

Reading books is one of the most popular activities, especially with the younger generation. Paper is in short supply, and books are published in limited numbers, with priority given to religious books. Nevertheless, large numbers of secular books ‒ fiction as well as educational tracts on social, political and economic subjects, both translated from foreign languages and written by Iranian authors ‒ are on sale. Some books are rapidly snapped up by eager readers. Salman Rushdie’s previous novels, Mid­night’s Children and Shame, are among these popular books, and have been read by many. In fact, Midnight’s Children last year won a prize from President Khamenei! So Ayatollah Khomeini’s decree of death against Salman Rushdie was greeted with a healthy cynicism: “How come one of his novels wins a prize and the other gets a price put on his head?” People regard the whole affair as a fight between different factions of the regime rather than an Islamic reaction to an anti-Islamic attack. Satanic Verses has been translated, and scarce underground copies are passed from hand to hand. And some people are re-reading the Qur’an far more eagerly than usual, so as to find out the truth about those stories of Muhammad…

[A sequel to this article, Iran after Khomeini, will appear in the next issue of this Bulletin]