Tehran 1943 III: Occupation and Economic Modernization

When the Allied leaders—Winston Churchill, Franklin Delano Roosevelt and Joseph Stalin—met in Tehran in November 1943 to forge their common strategy against Nazi Germany, it is often forgotten that Iran was itself an important terrain of the war. As the delegates met in Tehran, the war boiled around them. The Tehran conference is a central event in international diplomatic history, but much about it—particularly its Iranian context—is not known. Iran’s proximity to the vital battlefields of southern Russia (Stalingrad), and its long border with the Soviet Union, transformed it into a highly mobile wartime space. It became both a transfer zone for Allied war material and a place of safety for war refugees. As this project demonstrates, the 1940s were not a forgotten decade but a generative period for Iran’s political and economic modernity. In three interconnected panels, participants explore the 1940s in Iran as a global moment in Iranian and international history and assert the historical importance of exploring Tehran as a site for the unfolding of twentieth-century global history with regard to both the Second World War and the Cold War that followed.

The third panel, “Tehran 1943: Occupation and Economic Modernization,” takes up the issue of the 1940s as a period of economic decline. The participants each question this characterization, seeking to reinstate the particular conditions of the 1940s in driving forward Iranian modernization on all levels. Rather than only the denouement of Reza Shah’s projects of state modernization, or the preview to the Mossadegh years, the 1940s were the vital connector between the one and the other. Mary Yoshinari explores “the planning of Iran’s national economy”during the war, particularly the expertise exercised by new native and foreign specialists and the expansion of infrastructural projects as sites of “international collaboration.” Ali Saeidi analyzes the economic power exercised by Iranian family firms in the 1940s, focusing specifically on the Ladjevardi, Arjomand and Irvani families and arguing for the importance of the 1940s as a formative period in the creation of Iranian capitalism. Mikiya Koyagi details the transformation of Iran’s industrial labor force during the occupation by examining the case of railway workers, thus expanding the perspective of labor history beyond the oil industry.


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Using such primary sources as publications of the Railway Organization (bongah-e rah ahan), memoirs, songs, and Iranian archival documents, this study examines the formation of the Iranian railway workforce. In particular, this study focuses on the socialization process of railway workers during and immediately after the Allied occupation (1941-45), which greatly impacted the workers of the nascent railway industry due to the Allies’ control of transportation routes. By looking at the socialization process of workers of the largest state-owned industry at the time, it explores the intersection between the issue of labor and broader sociocultural transformations of Pahlavi Iran. Questions that this study addresses include: how the Railway Organization tried to discipline railway workers of various regional, ethnic, religious, and national backgrounds; how workers responded to various attempts at disciplining them and formed understandings of self; whether this process is typical when compared to workers in other industries within Iran and railway workers in other geographic contexts.

The significance of this paper lies partially in the empirical value of investigating labor history outside the oil industry, which hitherto has received almost exclusive attention from historians of Iran. More importantly, in line with the new labor historiography in other national contexts, this paper pays attention to the agency of workers by considering the discursive construction of the “working class” through analyzing workers’ daily life and social settings. Furthermore, rather than focusing exclusively on moments of confrontation such as protests and strikes, it examines the daily engagement of workers with their employer’s attempts to mold them into productive, loyal railway workers.

As this study demonstrates, railway workers formulated their own historical narrative and their place in it in response to the Railway Organization’s increasing attempt at strengthening control of all aspects of its workforce in the post-occupation period. In other words, railway workers shaped their understandings of self concomitantly with, and sometimes in competition with, the Railway Organization’s measures to mold workers into loyal employees. Nevertheless, workers’ understandings of self that developed in the period were not monolithic. They highlighted such divisions as different regional and national backgrounds among workers. Therefore, on the eve of the oil nationalization movement, railway workers included competing groups of workers whose interests conflicted with the Railway Organization as well as amongst themselves.

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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.

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The main objective of this paper is to analyze the key features of family firms in Iran that contributed towards their success in the 1940s-1970s. The paper will set out to probe the power of seven leading family firms, namely the Ladjevardi and Ladjevardian families (Behshahr Industrial Group), Barkhordar brothers (Pars Electric Company), Irvani family (Melli Industrial Group), Khayami brothers (Iran National Company), Arjomand brothers (Arj Industrial Group), Khosrowshahi family (Minoo Industrial Group), and Khosrowshahi brothers (Tolidaroo Industrial Company). The evidence of recent case studies on these family firms indicates that they were at the heart of Iranian private sector and played a significant role in the development of Iranian capitalism. The paper claims that not only were they suited to the early stages of Iranian business in the 1940s, they would also have survived in the following steps of the development of Iranian capitalism, had it not been for the confiscation of their wealth by the revolutionary state in 1979.
The paper argues that they provided trust among their members and made loyalty of their managers to the head of family. The latter feature helped them to resolve the greatest problem of the growing companies, known as agency problem. The paper discusses the way they reduced the potential conflict of interest between the owners and professional managers. In order to explore this feature, the paper will pay particular attention to their internal dynamics and their "familyness", which each of family firm developed a unique method and a distinctive way of utilizing it. In addition, the paper will discuss how the family features of these companies was one of the most successful components of industrialisation strategy in Iran during 1963-1968. The paper will also explain why these companies were in harmony with this strategy. However, the paper will also analyze the reasons why the structure of these family firms prevented the establishment of a powerful and independent interest group: Iran Chamber of Commerce.
The development the Iranian economy in the 1970s could not push family companies to the margins of the economy and they remained at the heart of business by holding on to the most prominent businesses. Finally, the paper will discuss how the family business - as the real engine of Iran's private sector - drove the country towards a type of capitalism different to that of the West.