What Happened to Iran’s National Economy During the 1940s?

According to the extant historiography, the Iranian government’s grand plans for the economic modernization of the country—which were initiated in the interwar period—rapidly deteriorated without Reza Shah at the helm; the decline being further exacerbated by Iran’s foreign occupation during World War II. Ironically, foreign occupation also functioned as an economic driver, as the presence of American soldiers on the ground generated a demand for the mass production of Western consumer goods such as Coca-Cola. Yet, instead of being driven by the combined efforts of Reza Shah and his most talented ministers—especially Ali Akbar Davar—the planning of Iran’s national economy came increasingly under the purview of native and foreign specialists, who assumed active roles in the nation’s political life as well. For example, the American financial expert, Arthur C. Millspaugh, returned as the Head of Iran’s Department of Mines and Resources in 1942. Concurrently, Iranian engineer Ali Zahedi Tajrishi became Head of the Department of Mines, followed by his appointment to the Ministry of Trades in 1943. Besides the drive to mine coal and other minerals, the country’s infrastructural projects intensified during this decade: in particular, the further expansion of electrification, water supply systems, and transportation routes. In fact, Iran’s National Railway continued to be a site of international collaboration; in this case, between Millspaugh and Soviet officials. However, in the late 1940s, the Iranian government sought to curtail the wartime frenzy of foreign concessions by reviving protectionist economic policies, while taking stock of its industrial enterprises, human capital, and international alliances. Consequently, this paper has two aims: firstly, it will highlight multifarious sites of economic activity during this decade; and secondly, it intends to provide thematic links between periods of economic nationalization that have remained historically isolated from each other, namely those of Reza Shah and Mohammad Mossadegh. Ultimately, it will be asserted that earlier economic developments in other sectors—coupled with public discontent (arguably, the bread riots of December 1942 were not forgotten)—set the stage for the nationalization of Iran’s petroleum resources in May 1951.