Economy of Iran - History

History

There are accounts in the biblical Book of Esther of dispatches being sent from Susa to provinces as far out as India and the Kingdom of Kush during the reign of Xerxes the Great (485–465 BC). By the time of Herodotus (c. 475 BC), the Royal Road of the Persian Empire ran some 2,857 km from the city of Susa on the Karun (250 km east of the Tigris) to the port of Smyrna (modern İzmir in Turkey) on the Aegean Sea.

Modern agriculture in Iran dates back to the 1820s, when Amir Kabir undertook a number of changes to the traditional agricultural system. Such changes included importing modified seeds and signing collaboration contracts with other countries. The first agricultural school was founded more than a century ago and the Keshavarzi Bank was established in 1933. The Imperial Bank of Persia was established in 1885, with offices in all major cities of Persia and India.

Reza Shah Pahlavi (r. 1925–41) improved the country’s overall infrastructure, implemented educational reform, campaigned against foreign influence, reformed the legal system, and introduced modern industries. During this time, Iran experienced a period of social change, economic development, and relative political stability.

Reza Shah Pahlavi, who abdicated in 1941, was succeeded by his son, Mohammad Reza Shah Pahlavi (r. 1941–79). No fundamental change occurred in the Iranian economy during World War II (1939–45) and the years immediately following. However, between 1954 and 1960 a rapid increase in oil revenues and sustained foreign aid led to greater investment and fast-paced economic growth, primarily in the government sector. Subsequently, inflation increased, the value of the national currency (the rial) depreciated, and a foreign-trade deficit developed. Economic policies implemented to combat these problems led to declines in the rates of nominal economic growth and per capita income by 1961.

Prior to 1979, Iran developed rapidly. Traditionally agricultural, by the 1970s the country had undergone significant industrialization and modernization. The pace slowed by 1978 as capital flight reached $30 to $40 billion US dollars just before the revolution.

The government's long-term objectives since the revolution were stated as economic independence, full employment, and a comfortable standard of living, but at the end of the 20th century, the economy faced many obstacles. Iran's population more than doubled between 1980 and 2000 and its median age declined. Although many Iranians are farmers, agricultural production has consistently fallen since the 1960s. By the late 1990s, Iran imported much of its food. At that time, economic hardship in the countryside resulted in many people moving to cities.

Following the nationalizations in 1979 and the outbreak of the Iran–Iraq War, over 80% of the economy came under government control. The eight-year war with Iraq claimed at least 300,000 Iranian lives and injured more than 500,000. The cost of the war to the country's economy was some $500 billion.

After hostilities ceased in 1988, the government tried to develop the country's communication, transportation, manufacturing, health care, education and energy sectors (including its prospective nuclear power facilities), and began integrating its communication and transportation systems with those of neighboring states.