This study is concerned with investigating the historical origins of the formation of Iran’s contemporary political economy. More specifically, it is concerned with investigating the specific causes and circumstances which, after many decades of state—driven socio-cultural secularisation and economic-institutional modernisation, led to the emergence and establishment of Islamic theocracy in the closing decades of the twentieth century.

The advent of the ‘Islamic Revolution’ catapulted Iran into the centre-stage of world attention. Not since the oil nationalisation ‘crisis’ of the early 1950s had Iran’s affairs been the subject of such intense and focused observation and analysis.

In the decades following the coup d’etat of 1953, the Pahlavi regime became increasingly synonymous with political stability and socio-economic modernism in the eyes of world public opinion; an image which it actively promoted. Indeed, such was the aura of invincibility that even as late as 1978, the collapse of the Pahlavi state and its succession by a fundamentalist theocracy seemed remote even to the most astute observers of Iran.

Given such commonplace inclinations, many Iranians and observers of Iran were intensely perplexed and bewildered by the momentous events of 1979; the flight of Muhammad Reza Shah and the triumphal return of Ayatollah Khomeini.

I argue that the specific circumstances of the historical fragmentation and decline of the traditional Persian society holds the key to understanding the causes of the emergence and subsequent collapse of the Pahlavi state and the advent of Islamic fundamentalism and fundamentalist consciousness in late twentieth century Iran.

The dynamics of this process of fragmentation is inextricably linked with the historical expansion of capitalism and the progressive and intensified capitalist penetration of traditional Persian society since the nineteenth century.

The specific impact of this expansionary dynamic is characterised by the ‘fusion’ or ‘articulation’ of two distinctive modes of socio-economic organisation in non-industrialised societies; the indigenous social system and globally expansive capitalism. The historical unfolding of this process of fusion is characterised by the development of a particularly constricted and extroverted capitalism which underpinned the post-War Pahlavi regime and put into place the preconditions for its eventual demise.

Dr Frederick Nemani