ISLAM AND ECONOMICS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP81B00401R000400040013-3
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 44
• Document Creation Date: December 19, 2016
• Document Release Date: November 10, 2005
• Sequence Number: 13
• Publication Date: November 1, 1979
• Content Type: RP

Confidential
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Assessment
Center
Islam and Economics
A Research Paper
Confidential
ER 79-10642
November 1979
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Assessment
Center
Islam and Economics
A Research Paper
Research for this report was completed
on 1 November 1979.
The author of this paper is Southern
Asia Branch, Office of Economic Research. It has been
coordinated with the Office of Political Analysis, the
Office of Geographic and Cartographic Research, and
with the National Intelligence Officer for Near East
and South Asia. Comments and queries are welcome
and should be directed to Chief, Southern Asia
Branch, Developing Nations Division, OER, on
Confidential
ER 79-10642
November 1979
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Overview
Islam and Economics
25X1
The tumultuous disturbances in the Islamic world over the past year raise
the real prospect that substantial changes will take place in the institutions
of Islamic countries and in the way these countries interact with each other
and with the non-Muslim world.
The Islamic revival could presage a shift away from the mix of modern
Western and traditional Muslim practices that has evolved in most
developing Islamic countries. Many of these countries may decide to move,
or be forced to turn, toward a more introverted, orthodox Muslim way of life
that would be radically different from Western standards and experience.
This paper takes one aspect of Islamic life?economic relations?and
examines its role in the Muslim vision of a completely Islamic existence. It
describes some unique Muslim economic customs, laws, and concepts, and
shows what impact Muslim orthodoxy may have on economic relations with
the West.
The above information is Unclassified.
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Contents
Page
Overview iii
Introduction 1
Background: Islam as a Religion 1
Islam and Economics 2
Islamic Law 2
Interest 2
Taxes 3
Inheritance 4
Property and the Individual 4
Contracts 4
Wages 5
Risk and Uncertainty 5
Prohibited Activities 5
What an Islamic Economy Is Not
Islamic Economics in the Modern World 6
Looking Ahead 7
Appendixes
A. Geographic Distribution of Muslims
B. Major Sects and Schools of Islamic Law
C. The Sharia
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13
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Islam and Economics
Introduction
Muslim countries, bypassed by the industrial revolu-
tion of the past two hundred years, are finding it
difficult to cope politically and socially with the rapid
changes wrought by post-World War II economic
development. Consequently, many Muslims are seek-
ing stability in the one constancy in their lives?the
relatively rigid rules of Islamic law. In some countries
the resurgence of Islam is in part a genuine religious
revival against those who have neglected religious
practice or compromised philosophical principles in the
process of modernization. For the most part, however,
the revival of Islam represents a reaction against the
forces of change that threaten traditional power
relationships and conservative social, economic, and
political values.
Many Muslims are attracted by Islam's promise of
economic independence, moderation, and equity.
Among the poor less developed countries (LDCs),
conversion to Islam, with its basically conservative,
middle class values, is viewed as a concrete sign of
modernization devoid of the colonial overtones and
secularism of Western modernization, or the "mecha-
nistic Godlessness" of Communism. Instead, Islam
offers the prospect of actively constructing the world as
God is presumed to have intended. For other LDCs
Islam offers identification with the well-demonstrated
power of the Arab oil countries. Many of the develop-
ing Muslim countries also are banking on the Arab
OPEC nations for economic aid, for which an Islamic
orientation is a prerequisite.
The strict adherence to fundamentalist Muslim values
could result in substantial changes in the economies of
the Muslim countries and in the way they deal with
each other and the rest of the world. To the extent that
the West fails to recognize the role of economics in the
overall Islamic way of life, its economic relationships
with the Muslim world will be neither comfortable nor
rewarding.
Background: Islam as a Religion
Islam is a way of life. As such, it has overlapping
aspects of religion, politics, culture, and economics.
Islam the religion is a system of beliefs and practices
initially revealed by God to Muhammad in the 7th
century AD, enshrined in the Koran, supplemented by
tradition, and modified in response to changes in time
and place. Literally, "Islam" means submission to the
will of God. By definition, a Muslim is one who
believes that God is unique and omnipotent (a belief
held by many non-Muslims) and that God's revelations
to mankind culminated in the apostleship of
Muhammad (which distinguishes Muslims from other
monotheistic believers).
Originally the simple, humble religion of a few
unsophisticated tribes in Arabia, Islam has become the
dominant faith of about 720 million people of disparate
ethnic and national backgrounds. Islam's followers
predominate in political systems ranging from the
Saudi Arabian monarchy to Marxist South Yemen; in
economies ranging from the one-resource, oil-rich
Middle Eastern states to desperately poor agricultural
communities such as Bangladesh, Mali, and Somalia
(see appendix A).
As a faith, Islam is far from monolithic. Since
Muhammad's death in 632, political and theological
differences have split Islam into an array of sects and
subsects (see appendix B). Islam's adherents include
more than 600 million Sunnis and 85-90 million Shias,
the latter primarily in Iran, Pakistan, and Iraq. The
Sunni-Shia split sprang from an early struggle over
succession to the Caliphate, the secular and religious
head of Islam. Within the two major sects, numerous
subgroupings have developed during Islam's 1,350-
year history.
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!slam and Economics
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nine relations between people are an important
aspect of the Islamic way of life. The Prophet
N,Itihantmad, a poor orphan who overcame his back-
id to become a successful merchant, lived,
,,ttrxed, and proselytized among the commercial cities
_f-Islamic Arabia. The rise of 6th-century Mecca
hriving international commercial center was
1:,:tscii on its monopolies over services and organized
tixitff_ and its control of vital commercial links.
Mecca's growing power and prosperity and the control
poi itical. economic, and religious life by its commer-
fa' elite, however, contributed to the creation of
remendous disparities of wealth in the city and to
crowing hostility of the Bedouin tribes that were linked
:0 Mecca. Because Muhammad lived in the shadow of
ifu conflict and the potential breakdown of traditional
,ocIaL moral, intellectual, and religious values, his
:,:;acitings at times were directed against the important
,:conornic abuses of his day: monopoly market control,
fixing, cheating on quality and quantity, broken
wilt-acts, hoarding, and usurious interest rates.
Muslim economy is a vision of a just society
consisting of individuals motivated by high principles
,.ather than material self-interest; the underlying
fu-inciple is the relationship binding the individual to
t ;off. The objective of the Islamic economic system is
to secure the widest and most beneficentdistribution of
wcaith through institutional arrangements and moral
ffxhortation.
Ham caiis for justice and moderation in consumption,
,vrtRie scorning monopoly power, inefficient use of
Fca.laurces. hoarding, and gambling. Since all forms of
ye:Li th are the gift of God to all mankind, each
,ndividual is required to share his wealth with the
.fiumnunity. Islam does not, however, require or
tiecessartly approve of absolute equality of wealth,
because to do so would be tantamount to denying the
vor of God. Islam recognizes differences in talents?
!LAI consequently economic rewards?among people,
Uiff :t demands that each individual be responsible not
Irk/ to himself but also to those less endowed and to
4octety as a whole. Indeed, it is the duty of an Islamic
ftaic to ensure at least a subsistence level of existence
or all its citizens by, if need be, redistributing wealth
'ctm the rich to the poor.
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While devoid of a specific economic theory, Islam
offers guidelines for many kinds of economic behavior.
which must be viewed as the theoretical ideal; different
juridical interpretations, secular motives, and sheer
hypocrisy have resulted in practices frequently differ-
ing from orthodox Muslirr teachings.
Islamic Law
Islamic law is called the Sharia, which comprises
several sources (see appendix C). These include the
Koran (God's word revealed to Muhammad), the
sunna (practices of the Pr4,phet Muhammad), and
ijma (consensus).
In addition, Shia Islam considers two other valid
sources of Islamic law: aqi (reason), and ijahad
(independent judgment of he mujtahids, the doctors
of Islamic law).
The laws attempt to order he Muslim's life, of which
economic relations are parr.They condemn thievery,
protect private property, set inheritance procedures,
prescribe religion-based tit, \es, and in general define a
Muslim's rights and obligtdions.
The multiplicity of sourceS. for Islamic economic law
and the grounding of law n theology present Muslims
with a dilemma. On one hand is the claimed immuta-
bility of laws passed down by or in the name of God; on
the other hand is the need ir perceived by many
Muslims) for rules to be d \ namic and unambiguously
applicable to changing circumstances. Nonetheless,
uniquely Islamic views of same basic economic
concepts can be derived through the Sharia. The
fundamental economic tenets in Islam are two: God
has absolute ownership of everything, and some
minimum level of welfare must be provided to all
Muslims in the communit
The Koran specifies three main mechanisms for
sharing the gifts of God: prohibition of interest,
compulsory tax collection:, earmarked for the poor, and
redistribution of wealth through complicated inheri-
tance laws.
Interest
The taking or charging of t nterest (riba, or increase) is
the most controversial and probably the most violated
of Islamic economic sand runs. The Koranic prohibi-
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tion of interest grew in reaction to the practice during
Muhammad's time of Arab moneylenders rolling over
loans when due to double or more the initial debt. After
a series of such rollovers, the debtor eventually owed
his whole property or even his person against an
initially small loan. Condemnation of interest charges
is in keeping with the Islamic prohibition of earning
with neither risk nor effort. Muslim jurists cite the
adverse effect of interest payments on the poor, and the
divorce of the owner of capital from the production
process as additional reasons for the prohibition.
Subsequent interpretations of the Sharia have put
interest restrictions on several paths. Strict
constructionists interpret the prohibition of riba as
forbidding any loan in which repayment is in the same
medium as the loan itself, even if no interest is charged.
They cite Koranic prohibitions on all trade in like
commodities (grain for grain, gold for gold, and by
extension, money instruments for money instruments)
unless the transaction is at face value, the exchange is
hand to hand, and no time duration is involved. This
interpretation of the Koran is meant to curb specula-
tive loans while stimulating production and trade by
permitting repayment in different goods. For example,
a money loan can be repaid at some later point with
goods of equal value, or a loan of goods could be repaid
with an equal value of money. A more liberal
interpretation of the Koran is similar to Western
concepts of prohibiting only usurious interest payments
while allowing reasonable rates to be charged. Individ-
ual Muslim communities may also have differing
interpretations between these two extremes.
The traditionalists who aspire to restore Islam to its
original orthodoxy have attempted to adapt Islamic
doctrine to the economic needs of modern times by
creating interest-free, Islamic banks. The banks are
modeled on a successful experiment in the Egyptian
town of Mit-Ghamr in the mid-1960s. The first major
Islamic bank was started in Dubai in 1975, and its
success led to establishing a series of banks in Saudi
Arabia, Kuwait, Sudan, and Egypt; Jordan and
Bahrain probably will have Islamic banks shortly.
The major difference between the Islamic banks and
Western banks that now operate in Muslim countries is
that the Islamic banks are not based on fixed rates of
interest on loans or deposits. Instead, they invest most
3
of their capital in profitmaking enterprises and share
profits?and losses?among depositors in proportion to
the size of the depositor's account.
In this new category of financial institution is the
intergovernmental Islamic Development Bank (IDB)
established in 1975 with funds from 22 Muslim
countries. Membership has increased and now includes
33 countries, but the bank is dominated by Saudi
Arabia, Libya, the United Arab Emirates, and Ku-
wait, which together have contributed more than two-
thirds of its $900 million funding. The IDB is designed
to promote economic cooperation among Muslim
countries in compliance with the Sharia law. Except
for its emphasis on Islamic orthodoxy and the absence
of interest charges, the IDB resembles most other
regional development banks in that it extends funds for
economic development projects and for balance-of-
payments financing and supplies technical assistance
to member countries.
Taxes
The compulsory tax (zakat, or alms) is one of the five
pillars of Islam.' Zakat was instituted in the early days
of Islam to help provide for the welfare of the poor at a
time of gross wealth dichotomies. In most Muslim
countries today zakat is a matter of conscience,
although some proponents of Muslim states call for a
formal zakat system administered by the government.
Generally, the zakat is a flat-rate levy amounting to
2.5 percent annually on income and property. Zakat
also applies to commercial goods, some categories of
livestock, excavated treasures, and mined wealth.
Zakat receipts can be used only for the poor and to
promote Islam.
A similar tax, ushr, is collected on farm production.
This tax has a long history as a source of revenue for
Muslim treasuries. Traditionally, it is collected from
Muslim farmers at harvest time on crop output in
excess of production costs. Generally, the tax rate is
10 percent on crops from rainfed land and 5 percent on
land on which the farmer must pay for irrigation. Both
'The five pillars of Islam mandated by the Prophet Muhammad are
(a) a verbal declaration of God's uniqueness and the primacy of the
Prophet Muhammad; (b) performance of daily ritual prayer; (c)
contribution of alms; (d) fasting during the month of Ramadan; and
(e) making the pilgrimage (haft) to Mecca.
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and ushr clearly fit in with Islamic concepts of
state and individual social responsibility for the
human needs of disadvantaged Muslims, and
the Islamic goal of income redistribution.
d Islam specifies an additional levy, a religious tax,
ms (literally, one-fifth), paid to the family of the
Prrhet. ['his tax was eliminated by the Sunnis after
Muhammad's death. The Shias maintain it, however,
.th the Shia clergy receiving the tax revenues.
irtdrtiurially, the tax as its name implies is equal to
Lart ithh rif a Muslim's yearly cash income.
-rid either privately administered or state-adminis-
a.tred zakat and ushr levies, the tax system of Muslim
"tales is similar to that of most developing countries.
Although the laws of Muslim countries have their
ta-ig in tile Sharia, the laws relating to taxation have
in most cases been codified into civil statutes drawing
*tit Western legal principles. Muslim countries gener-
ally have the usual complement of taxes on income,
ilrinats, transactions, property, and trade to generate
i?,venues for government budgets.
inheritance
ikhother major mechanism for redistributing income
eventing the creation or hoarding of family
iiiveai Lb is the Islamic law on inheritance. At most, a
rcrsrrn can allocate only one-third of his estate outside
ti arniiy and may not make a will that deprives one of
us -gal heirs or favors one over another. The
(ternainder of the estate is distributed among relatives
ii specific, legally defined shares.
Property and the Individual
13csides these three unique characteristics Islamic
,,,:phoinic institutions are not that much different from
those of non-Muslim countries. Despite God's absolute
ownership of all property, legal ownership of private
property is safeguarded in Islam. Islam regards
ii.)cssession and ownership of property as the result of a
ilatural human instinct and that it stimulates individ-
ual initiative and thus benefits society. Muslim owner-
'thin is more of a stewardship, however, and may be
,nrcurnscribed if the owner demonstrates an inability
io properly administer God's property or if the public
interest requires it.
indulential
In effect, the Muslim comia unity owns all property
and grants stewardship eitaia-r directly or implicitly to
private individuals. Some pl-operty, such as rivers,
roads, and public utilities, .:annot be granted to
individuals; some types of property, such as forest land
and minerals, can be grant ...d but later taken away if
the public good requires. I re state can retain control ot
whatever the community &tines as indispensable for
the people, or which if entr Pasted to private ownership
will cause unnecessary hartiship, or which is required
for national defense. None heless, private ownership is
the rule and public ownerss-lip the exception in most
Muslim states.
Property itself, however, is fess important than the use
to which it is put. The Sharia specifically points out
that property use must be]. ?;tit the community, cause
no one harm, must not be ,sed to secure undue
economic or political power, and must be neither
prodigal nor parsimonious Islamic law discourages
hoarding by requiring that property be put to at least
some productive use. indet ti, property that is not put to
use during a specific time Theriod may be declared in
the public domain and car be acquired by other
Muslims by what amounts to homesteading. If the new
owner fails to exploit the land within three years,
however, it reverts to the st ate.
Contracts
Contracts are valued high
Koran directs that almost
writing. If a contract is fn
and written in the presenc(
in Islamic economies. he
'LB transactions be put into
ely and fairly negotiated,
of witnesses, it is inviolable
Contracts are used extens Yet)/ in Muslim countries to
facilitate particular forms if business organization.
During Muhammad's tian the prevalent forms of
business organization wet (a) partnership; (b) joint
stock company; (c) busine,s on commission; and (d)
mudaraba. Mudaraba is contract between two
parties, one of which prov.des capital and the other
labor. Both share in the profits and losses of the
enterprise; labor is not pal a wage but receives a
contractual share of the ptofits. Mudaraba is approved
some by Muslim jurists as ideal for an Islamic
economy because it recognizes disparities in wealth,
encourages use of idle capital, and gives laborers a
greater incentive to work.
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Islamic law is ambiguous on business arrangements
between landlords and tenants, especially in the
agricultural sector. Islam condemns any tenant system
that limits benefits to a few while neglecting a poor
majority. Muhammad disliked cultivation for hire and
empowered the Muslim state to forbid tenant farming
whenever it was likely to damage the interests of the
farmer or lead to disputes between farmer and
landlord. Muhammad, however, was more opposed to
the abuses he saw in landlord-tenant relations than in
the system of hire cultivation itself.
In theory, the cultivator is only obliged to pay land rent
out of his crop surplus (output minus costs). The level
of rent will depend on the productivity of the land, the
welfare of the farmer, and the cost of cultivation.
Muslim jurists disagree on the legality of share
tenancy, under which the landlord receives an agreed
percentage share of output. The Hanafi school, for
example, regards share tenancy as equivalent to a
lawful partnership between capital and labor. More
rigid interpreters cite sayings of Muhammad that the
actual amount of produce constituting the share is
uncertain (economic uncertainty being objectionable)
at the time of the contract and that payment to labor of
a part of what labor produces is prohibited. Contempo-
rary opponents of share tenancy combine practical
with theological arguments by also citing the tenant's
disincentive to boost output or improve land. Most
Muslim critics find it more acceptable if the cultivator
rents for a predetermined cash payment so long as a
contract is fairly negotiated.
Wages
An Islamic economy calls for a minimum wage
sufficient to cover the cost of basic necessities for the
worker and his family. Beyond the minimum, a normal
labor market prevails. Workers are permitted any
reasonable wage that does not infringe on the rights of
the employer; alternatively the employer is cautioned
against unfair wages that exploit the worker. Wages in
the public sector must reflect equity and justice on
both sides. Muhammad allowed only a 10-to-1 differ-
ential between the lowest and highest paid public
employees; differentials were based on the nature of
work, seniority, education, and skills. In theory Islam
also prohibits restrictions on labor mobility and choice
of occupation in order to stabilize wages nationwide.
5
Risk and Uncertainty
Many of Muhammad's teachings and subsequent
interpretations were designed to stabilize economic life
by correcting abuses in markets and by eliminating
economic uncertainty. Islamic economies in theory
prohibit monopolies, hoarding, withholding goods from
markets, and price fixing. Muslim communities usu-
ally have the traditional post of muhtasib, a person
who checks the weights and measures used in the
marketplace and investigates cases of fraud. Forward
transactions and futures markets are precluded by
Muhammad's command that whoever buys cereals
shall not sell them until he obtains possession. Because
Muhammad found gambling disruptive of family and
economic life, he prohibited making money by chance.
As a result, auction sales are prohibited because the
final selling price is uncertain at the start. Muslim
scholars are divided on the issue of insurance. Strict
constructionists argue that insurance is merely a form
of gambling on the future and hence violates Koranic
injunctions against profiting from uncertainty. A more
liberal interpretation claims that, on the contrary,
insurance is valid precisely because it protects the
holder from uncertainty.
Prohibited Activities
Islam prohibits trade in certain goods the production
and consumption of which has been deemed immoral.
For example, trade in pork and any products from pigs
is banned, as is trade in alcoholic spirits. In many cases
the prohibitions on specific types of economic activity,
such as the use of condemned goods or the employment
of women, are not so much based on scriptures as on
tradition, to which centuries of silent consent have
given religious validity.
What an Islamic Economy Is Not
An Islamic economy is not an economic system in the
sense that capitalism or socialism are economic sys-
tems. Islam does not pretend to have a scientific theory
about how an economy operates, or what institutions
are required for its functioning. The form of economic
organization in a Muslim country is irrelevant to Islam
so long as its operation does not violate Islamic
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principles. Within Islam's guidelines on responsibilities
toward society and the limitations of personal
capabilities there is in theory much freedom for
individual choice. The performance of an economy of a
Muslim country in any systematic sense still depends
heavity on specific national characteristics, including
he resource base, economic organization, cultural
heritage, colonial influences, and extent of integration
into the world economy, rather than on the degree of
Islamic orthodoxy.
Ham Is not a no-growth philosophy. It is not intrinsi-
cally opposed to economic and social development or to
modernization. Many Muslim theologians since the
middle of the 19th century have generally concluded
1, hat there is no serious conflict between Islam and
modernization as such. On the other hand, orthodox
lAani must by definition oppose secularization and
hence is opposed to the more objectionable side effects
el the economic development and modernization pro-
cess that undermine religious influence, such as the
.ntroduction of materialist values, moral corruption,
and the spread of purely secular political philosophies.
There is, therefore, a danger that opposition to the side
affects may be carried over to condemnation of the
development process itself. In practice, conservative
Muslims have generally lacked sufficient power to
revent development and modernization in the Muslim
world; nonetheless they have caused serious disrup-
ions in, for example, Iran and Pakistan.
With the possible exception of post-Shah Iran, no
t.overnment of a Muslim country?as opposed to its
conservative Muslim constituents?has shown any real
iksi re to halt economic development for purely cell-
,. reasons. When development confronts Islamic
iirthodoxy, most governments have chosen develop-
ment even if it meant evading or ignoring Islamic
precepts that would interfere. Indeed, Islamic tradi-
tions of obedience to authority make it easier for
,,pyernments to implement preferred policies. None-
theless, the revival of Islamic consciousness means that
political leaders will have to take Islam into account
more carefully when forming policies.'
onreligious factors can be at least as important brakes on progress
is religious conservatism. Indeed, an upsurge of religious extremism
frequently a reaction to these factors, which include
Jveroopuiation, illiteracy, poor infrastructure, maldistributed
?Neitith. corruption, inertia, and nationalism.
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Islamic Economics in the Modern World
Islam creates a vision of sq ial utopia but is of little
help in describing how it is o be reached. The Islamic
concept of welfare econom.cs was implemented in
early Islam in Medina under the leadership of the
Prophet and was expanded by the early caliphs to
include a vast empire. Islait CS success at that time
resulted largely from its m isionary zeal, the strong
central authority of the caliphs, and the personal,
ecumenical nature of Islam which made territorial
boundaries irrelevant. Beginning in the 10th and 11th
centuries, however, Musliri economies moved away
from the ideal set by Mutt: mmad as political upheav-
als, the crusades, the Mongol wars, and the rise of
asceticism fragmented the Muslim world. Much later,
European colonialism cont tibuted to cultural
alienation.
Despite Islam's emphasis n welfare and brotherhood,
Muslim societies have not Mown any more benevolent
attitude toward the disadv intaged than countries in
the West. Indeed, child !alto and slavery have
flourished in the Middle East, and wage earners were
no less exploited by Muslin capitalists than they were
by the 18th and 19th century factory owners of Europe
and America. Even today, Muslim economic precepts
are only superficially honored and rarely enforced,
serving instead to merely color the fundamental
economic choices made by iociety. For example, the
Wahhabi sect of Saudi Arabia has long been distin-
guished by its Islamic orthodoxy and protective
condemnation of innovation; yet political reality there
has frequently overcome religious opposition to con-
temporary economic devel ,pment, albeit at a high
social cost.
Part of the reason for Islam's failure to create a
utopian state is the continued absence of any central
authority to both define and implement it. The various
Muslim groups have had differing patterns of relation-
ships between Islam and teie civil government. While
Islam itself transcends national boundaries?which
leads many to speak of du. Muslim nation as a single
entity?there is no central authority which can guide
and control the Muslim revival. Muslim society
contains many social and ethnic strata, schools, and
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sects corresponding in a way to political parties in the
West. These groups expound different, often con-
flicting theories, all of which they claim are based on
valid interpretations of the Sharia. Consequently,
religious conformism varies to a large degree both
within and between Muslim countries.
Muslim religious and government leaders have fre-
quently adapted the Sharia to the needs of contempo-
rary economic development. Critics say that while this
adaptive process is effective in assuaging religious
consciences, it violates the spirit of Muhammad's
intent. Interest is a case in point. The prohibition of
interest by Muslim law results in widespread illegal
usury, particularly in agricultural or seasonal commu-
nities where the need for funds is not synchronized
with the generation of revenues.
An easy way out of the difficulty has been found in
many Muslim communities. A borrower buys a quan-
tity of staple merchandise such as wheat, sugar, or
cotton from the lender on extended credit and at an
inflated price. A notarized document is made acknowl-
edging the debt, and the borrower then sells the goods
back to the lender at the market price; the loss amounts
to the interest forbidden by Muslim law. Modern
Muslims tend to attribute such practices to the
influence of colonialism, foreign domination, and
decadent Western practices; yet there is ample evi-
dence that these sorts of abuses existed in earlier times
when foreign factors played no part.
Circumlocutious attempts to define the end result of
money investments that generate additional money as
something other than interest do not eliminate the
basis behind Muhammad's ban, which was the concen-
tration of wealth in the hands of the few. Similarly, the
Koran's laws on inheritance, which, by restricting
testamentary freedom and imposing a division of the
heritage among specifically indicated relatives in fixed
shares, are supposed to have hindered the accumula-
tion of wealth in few hands.
In reality these arrangements, inspired by a concern
for justice without any clear realization of the eco-
nomic consequences, were more effective in preventing
the transmission than the formation of great fortunes.
Since enterprises in the Middle East tend to be mainly
7
family affairs, division of the property did not prevent
the family from continuing to accumulate capital. If
worse came to worst, the harmful consequences of
possible division of an inheritance could be eliminated
by the strategy of gifts to prospective heirs before the
donor's death.' Moreover the Islamic invention of the
pious foundation (wag j), which ideally supports
schools, orphanages, shrines, and other institutions, is
often abused by impious administrators to siphon off
funds or perpetuate family control.
Looking Ahead
The interpretation given to Islamic economic struc-
tures and the extent to which Islamic economic rules
are applied will vary from country to country in
response to domestic needs, a country's resource base,
and the extent to which the country is integrated into
the world economy. In consonance with national
differences in resources, politics, and Islamic ortho-
doxy, the greatest effect of the imposition of Islamic
economic principles would be on the domestic econo-
my. Nonetheless, a bandwagon of orthodox Islamic
economies would mean substantial changes in the way
they deal with each other and with the rest of the
world.
Foreign investment in Muslim countries, especially by
the developed West, would be curbed and banking
would have to operate under new and unusual rules.
International companies that deal even peripherally in
condemned goods might find their operations forbid-
den in a Muslim country. Commodity specifications
would have to be watched carefully to avoid any vestige
of condemned goods as raw materials, for example.
Banks and other companies would have to revise
criteria for loans and investment decisions based on the
prohibition of interest charges. Muslim countries may
force companies to comply with embargoes against
countries or companies that are perceived as enemies
of Islam.
' The harmful consequences of selectively strict application of
Islamic inheritance laws are evident in Iran, where farmland has
over time become fragmented into small, inefficient plots. Avoidance
of estate fragmentation is also achieved by the common pattern in
some Muslim communities of marriages between cousins.
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inatfor as Islamic orthodoxy guides economic rela-
ts adherents would tend to deal more among
TTISeiVeS than with the world at large. ?Iflie bazaar
w;oild likely emerge as the dominant domestic market
Products offered would probably show a greater
concentration of necessities and simple domestic man-
tfl.ictured goods. Non-OPEC Muslim countries, al-
most ad of which are less developed and exporters of
tar., commodities, could experience slower growth
nal Islamic guidelines that emphasize agricultural
?n.:;1-sufficiency and self-styled autarky be imple-
mented. Consequently, a widespread upsurge in
1::iornic economic rules could reduce the availability of
and increase the price of some primary commodities in
ipternational markets.
;bstantia1 changes probably would take place in the
labor forces in countries that turned to orthodox Islam.
women would be eliminated from most occupations,
vc immemaker, and fall further behind males in
education and skills. The immediate impact
3Nottid be greatest on labor-short countries in the
Middle East, which would have to pay the economic,
and social price of imported foreign laborers.
)ver the longer run, even those Muslim countries with
I]lrge abor surpluses could experience slower gains in
welfare from excluding female labor re-
:-ources irom participation in development.
( 'mil idential
Muslim countries would pronably experience a greater
degree of economic instabilh y under a rigidly Islamic
structure. Economic policy chxisions could be taken
out of the hands of technocr its, businessmen, and
politicians and put into the hands of religious leaders
who have a different vision 1 a country's destiny.
Muslim countries would ha, to rely more heavily on
decisions by religious-politii, il leaders in sorting out
priorities and in settling the pattern of investment,
consumer demand, prices, and the distribution of
income and wealth. The ece nomies would be more
insulated from international market forces. The prohi-
bition of interest charges wi old eliminate or substan-
tially weaken monetary pot t:y as a tool for rationing
investment funds and implementing government poli-
cies. Muslim countries would have to give greater
weight to incomes policies to control demand and
prices, and public spending 'would play a larger role in
the economy.
The above information is (
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Appendix B
Major Sects and Schools of Islamic Law
Islam is divided into two major sects, Sunni and Shia.
Nearly 80 percent of Muslims are Sunni, which is
considered the orthodox sect. A major difference
between Sunni and Shia Islam in a way parallels the
distinction between some Protestant sects and Roman
Catholic Christianity. Sunnis believe that man is
capable of communicating with God independently on
his own terms and that any devout Muslim can aspire
to be a temporal leader of Islam. Shias, on the other
hand, hold that man needs an intercessor (Imam)
between the human and the divine, and that the
political-religious leadership of the Islamic community
rests with an unbroken chain of Imams who are
descendants of the Prophet's son-in-law, Ali. Disputes
over leadership succession have further split Shia
Islam into several subsects. Shia predominates in Iran,
Iraq and Bahrain, but there are Shia minorities in
many Sunni-dominated countries.
About 3 percent of the world's Muslims are members
of the mystical Sufi movement that probably began in
Iran in the 8th century in reaction to the general
worldliness that had overtaken the Muslim commu-
nity. Sufis are ardent missionaries and are responsible
for Islamic conversions in India, central Asia, and
northern Africa.
The violent discussions that raged in the early history
of Islam after Muhammad's death in 632 in regard to
religious, legal, and political questions resulted in the
evolution of different schools of interpretation of
Islamic law. Of the major schools four survive: Hanafi,
Maliki, Shafii, and Hanbali. Shia law was for long
excluded by the Sunnis, but al-Azhar, the Sunni
university in Cairo, now recognizes it as a fifth school.
The first four are orthodox Sunni Islam, and a Sunni
may belong to any one of them. A Muslim can transfer
allegiance from one school to another, but once chosen
its decisions on faith and law are binding.
13
The comparatively liberal Hanafi school is followed by
the majority of Muslims, especially those in India,
Pakistan, Afghanistan, central Asia, Turkey, and
lower Egypt. In the 8th century, Abu Hanifah sought
to broaden the base and reduce the rigidity of divine
law by introducing analogical reasoning (qiyas) as a
valid source of law. Believing that "necessity renders
legitimate that which is, strictly speaking, forbidden,"
Abu Hanifah leaned more on opinion and less on
tradition than other Muslim interpreters.
The Maliki school, on the other hand, is based heavily
on the traditions, sayings, and deeds of the Prophet. It
makes only limited use of the consensus of the
community. This literalist school was founded by the
theologian-jurist Malik ibn-Anas in the 8th century
and today is the prevailing tradition in north and west
Africa and in upper Egypt.
In the 9th century, Muhammad ibn-Idris al-Shafii
tried to reconcile Hanafi and Maliki law but ended up
creating a third, relatively liberal school. Shafii
jurisprudence predominates in Southeast Asian Mus-
lim communities. Shafii's main principle was that the
ultimate source of legislation was the Koran, and that
secondary sources (tradition and consensus) had to be
linked to the Koran in an authenticated manner.
Analogy was permitted only grudgingly if other
sources were totally inadequate.
Ahmad ibn-Hanbal, a student of Shafii, founded the
smallest and strictest school of law. Its most notable
adherents are the Wahhabi movement in Saudi
Arabia. The Hanbali recognize literal interpretations
of the Koran and Prophetic traditions as valid sources
of law. They underplay consensus, and reserve analogy
only for dire necessity.
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Appendix C
The Sharia
The entire body of Islamic law is called the Sharia. It
covers religion, dogma, and law in the usual sense but
also includes economic, social, and political behavior.
It must be followed by all Muslims. The Sharia is
composed of several sources of legal statements. For
Sunni Muslims it includes the Koran (the word of
God), the sunna (the practices of the Prophet), and
ijma (consensus). Shia Islam, in addition, considers
two other sources of law valid, aql (reason), and ijtihad
(interpretation by legal authorities).
The primary source of law for the Sharia is the Koran,
God's word revealed to the Prophet Muhammad in the
early 7th century. The Koran is not a law code and
Muhammad was not a lawgiver in any Western sense.
His teachings and prophecies are cut to the require-
ments of his own environment and were generally
inspired by and promulgated to fit specific cases.
Instead, the Koran is an appeal to mankind and to
Muslims in particular to obey the law of God.
To most Western eyes, the Koran does not contain the
elaboration thought necessary for a more complicated
society than existed in 7th century Arabia. Muslim
purists, however, believe that true Islam can be based
only on the Koran (and the sunna) and that in them
can be found precepts valid for any time, place, or
occurrence. Moreover, analogous to the believed su-
premacy of the Latin mass among fundamentalist
Roman Catholics, the true Muslim, regardless of his
nationality, considers valid only the Arabic text of the
Koran.
Within the Sharia the Koran is augmented by the
sunna, which is the body of commands, approvals,
prohibitions, and acquiescences of the Prophet
' Muhammad. The individual actions (the sunna) are
found in the hadiths, or the narratives of what
Muhammad and his companions actually or reportedly
said and did. For the Sunni, the authority of the
traditions of the caliphs and the companions is less
than those of the Prophet himself. According to Shia
principles, an authentic tradition attributed to the
Imams (the successors to Ali) is as binding as the
direct word of God through Muhammad. Much
15
Muslim scholarship has gone into proving the validity
of the traditions passed down through centuries by
tracing them back through "respectable men" to their
original sources.
To cope with circumstances not directly related to
Koranic or sunna references, ijma evolved as a source
of law. The Sunni recognize both consensus of the
doctors of law and of the community. This broad
communal input to ijma leads to a relatively more
pragmatic and liberal interpretation of law than that of
the Shias. The latter claim that all knowledge derived
from fallible men is useless and that truth can come
only from God as relayed through the Prophet
Muhammad and subsequently through the infallible
Imams. Hence for the Shias, ijma means the consensus
of those who interpret in their religious arguments the
commands of the Imams on a particular question?in
other words the tnujtahids.
Shia Muslims recognize as well Utihad, or the inter-
pretation of situations by the mujtahids, as an input to
the Sharia. Ijtihad has been defined by Shia jurists as
the capacity or ability to discover law through juristic
speculation and reasoning. Shia scholars argue that the
concept of ijtihad provides the means for reinterpret-
ing law in the light of modern requirements. This
contrasts with the Sunni practice that requires textual
support for legal decisions.* For the Sunni, the right to
make fresh decisions based on Utihad was closed after
the great lawmakers finished their work in the 10th
century.
Finally, Shia Islam prescribes aql, or human reason, as
an input to the Sharia. Aql is not the private use of
reason or opinion, but rather the basic human intellect
by which rational man arrives at universal truths, such
as that "murder is abhorrent." Aql permits the truth to
be discovered when Sharia texts differ or contradict
each other.
* Sunni Islam permits a limited adaptation of law to modern
circumstances through qiyas, or analogy between current issues and
Koranic and sunna rules.
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IRAN: THE BAZAARIS?FINANCIERS OF REVOLUTION
Among the socioeconomic groups most disrupted by the Shah's reform programs
were the bazaaris?the traditional traders, bankers, and businessmen of Iranian
society. Conservative, religious, and nationalistic, they felt driven to renew their
traditional alliance with Shiite religious leaders?the Shah's number one enemies?in
order to reestablish the old order. This alliance served as the inner core from which
the revolution spread. For their part, the bazaaris contributed financing and an
organization and communication system that helped put thousands of demonstrators
25X1 into the streets.
Six months after the revolution, the bazaari backing for Ayatollah Khomeini may
be on the wane. Many merchants are unhappy with continuing unsettled economic
conditions. More important, they are disturbed by the nationalizations of private
businesses and the recent trial of shopkeepers for profiteering. Further economic
deterioration could shift bazaari allegiance to other religious leaders or even to a strong
secular personality should one begin to emerge. Signs of disenchantment with the
revolution are already apparent?notably the support of some bazaaris for the Moslem
People's Islamic Republic Party of Ayatollah Shariat-Madari instead of the Islamic
25X1 Republic Party of Khomeini's.
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traditional Role and Influence
The bazarr in Iran is the long-established center of inancial and commercial
activity. More important, it is also a symbol for the merchants, traders, and
businessmen who compose the bulk of Iran's middle class. "Mese individuals share a
common heritage and deep-rooted values, even though their activities, such as
manufacturing, have spread well beyond the physical bourrilries of the bazaar itself.
Although their once overwhelming influence over the Iranian economy was eroded by
industrialization and the rapid growth of the economy and government power over
the last two decades, the bazaaris have remained the commercial core of every Iranian
city. On the eve of the revolution, the bazaaris still accounted for an estimated one-
third of imports, most nonoil exports, and two-thirds of reta I trade. Furthermore, the
moneylenders of the bazaars controlled up to one-four ii of domestic financial
25X1 dealings
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The influence of the bazaar extends well beyond its
activities. The bazaaris, who number 400,000 in Tehran
contact with the people in every city and village of any size t
extended family connections, the bazaaris have influenc
intellectuals. Although often only attending lower level rel
the merchants have been able in recent generations to send
higher education. These family members have moved intt.
law, medicine, the universities, and the government burea
ommercial arid financial
alone, have more daily
han the mullahs. Through
with professionals and
Igious schools themselves.
heir sons to institutions of
places of prominence in
icracy.
Organization
Within and between bazaars, the merchants are linked by centuries-old family,
ethnic, tribal, religious, and commercial ties. Since kinship H of great importance in
Iranian society and friendships outside the bazaar are mininiial. these ties along with
personal friendships provide a powerful basis for unifying tuii:1 organizing. Hence, the
bazaaris by consensus recognize a head for each major buriness branch, who needs
never be elected formally. These leaders have a network or lieutenants NI/ ho in turn
run their own subgroups. The pyramidal structure extends di,wn to the /uti?the tens
of thousands of porters and laborers who work in the bazli
20
Over the course of centuries an unwritten code of belt ior and honor based on
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Islamic principles has evolved. The community disburses both aid and punishment; it
supports the needy until they can get back on their feet, while ensuring that those in
disfavor are given no opportunities in the bazaar. No merchant can afford to disregard
the hierarchy of the bazaar for fear of being blackballed.
Connection With the Mosque
Islam is a common denominator among most bazaaris, playing an important role
in their lives. Formal observance of Islam, with its emphasis on regular communal
activities, provides a basis for social solidarity which in turn lays the foundation for
concerted action in the self-interest of the bazaar. Religion also provides a legitimate
channel for the display of wealth and prestige in the community. A pious bazaari is
ascribed personal qualities beneficial to his business dealings; a show of wealth is
viewed as the just reward for the fulfillment of religious duties rather than as
25X1 conspicuous consumption.
25X1
The bazaaris hold a prestigious position in Islam, which was founded by a
successful businessman* and respects trade as the most noble occupation and the most
lawful profession. Trade is viewed foremost as an event entailing human contact and
dialogue rather than as a commercial transaction; hence, it is considered proper to
trade in the bazaar but improper to shop in impersonal supermarkets. The Makaseb
(the collection of Shiite commercial laws) governs business dealings in the bazaar
though these are often not strictly observed since few of the bazaaris can read Arabic.
For their part, the bazaaris have been among the staunchest supporters of the
mosque, both financially and philosophically. Traditionally, they provide the bulk of
mosque funds through tithing up to one-fifth of their income; prior to the revolution,
about 80 percent of the money available to Shiite leaders came from the bazaar. The
bazaaris also listened sympathetically to the clergy's complaints and supported a
return to Islamic fundamentalism. Besides financing, the bazaaris have aided the
mullahs in times of upheaval by mobilizing their forces and using their communica-
tions network to help paralyze the economy and bring mobs into the street. Prior to
the 1978 revolution, the merchants had supported the mullahs on at least two
occasions in this century?the Constitutional Revolution of 1905-07 and the urban
25X1 riots of June 1963.
Opposition to the Shah
The bazaaris' antipathy for the Shah had philosophical, religious, and commercial
roots. The Western-oriented industrialization drive of the Shah ran counter to the
conservative, Islamic-oriented outlook of the bazaaris, while his modernistic policies
stirred opposition on religious grounds. Early on, the bazaaris supported the embit-
* Mohammad and the first caliph are counted among the most famous merchants of Mecca.
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tered clergy in their protest against the Shah's land ref or n, which removed much of
the waqf (religious) lands from mosque control. Like ise, the merchants joined
religious Iranians in opposing modernizing measures such coeducation and women's
divorce rights.
Opposition to the Shah also had a strong commen t al motivation. In the rush
toward industrialization, the bazaar was being bypassed. Newcomers with palace arid
government connections were reaping the rewards of eo uornic development?often
Llirough bribery rather than the time-honored firma -; tradition of bargaining.
'(:.overnm.ent-sponsored banks began to take over financint:... and state enterprises often
took near-exclusive control over much of the trade, suci, as in caviar, tobacco, and
25X1 many agricultural commodities.
Other unpopular acts affecting the bazaaris include
? Implementation of price controls in 1975, policed 1 10,000 inspectors. At
least initially, the power of the bazaaris to control ;he minimum price of
almost every commodity retailed in Iran was dinitnisi d. A reported 250,000
shopkeepers nationwide were penalized for breaki ,g controls before the
program died down; 8,000 merchants served prison 4urtences.
? An attempt to make the bazaaris pay social securits.
workers. This was unacceptable to the bazaaris who !'
arid practice charity according to the rules of Islam
that the government had to back down. Even this di?!
bazaaris since taxes and government efficiency in col
to rise at the time when recession threatened Iheir
? A decision by the Tehran city government, never it
freeway through the center of the bazaar
Aftermath of the Revolution
contributions for their
ake care of their own
Protest was so strong
not calm the angered
'fling them continued
ell-being.
,plemented, to build a
While the bazaaris have demonstrated their ability i,
;-iev have gained little economically from the revolution
Jterference in their activities has been reduced, the bazaJ.
mold government policies in their favor. They have reed'
M fact, have been hurt by the downturn in economic ar
Immediately after the revolution credit was tight and
-iirtailed. This situation now appears to have eased a bit.
)ess expensive consumer items, and there are signs of
,;pending. The more expensive consumer durables, howe
as many of the upper middle class have left Iran.
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influence events in Iran,
Even though government
is have not proved able to
'd no special benefits and,
vity.
riternational trade severely
hops are well stocked with
en upswing in consumer
are probably moving
? r are attempting to leave
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Nonoil exports are still curtailed, with carpet exports totally banned. Both legal
importation and smuggling of food and consumer items seems to have picked up, but
imports of other categories of goods are still depressed.
Outlook
It is not clear whether the reduction of government influence and the resurgence
of Islam will be enough to ensure continued bazaari support for Khomeini. The bazaar
remains a stronghold of traditional religion in Iranian society, and many bazaaris still
appear to be aligned with the Ayatollah. Support could evaporate, however, if the
economy deteriorates and the security situation worsens in the months ahead. While
religious, the bazaaris are pragmatic in monetary matters, and they could turn to other
religious leaders or to a strong secular leader who would restore stability and profits to
25X1 the country.
25X1
Two postrevolutionary developments have been particularly disturbing to the
bazaaris:
? The recent nationalizations of banks and other businesses are viewed as a
major threat. Speaking for the bazaaris, Mahmud Manian recently demand-
ed that the government return certain nationalized enterprises to private
ownership. He stated that bazaaris should be allowed to return to their old
ways of controlling business and commerce and exhorted the government to
adopt a free market policy.
? Another foreboding event was the prosecution of three Tehran shopowners
and a trader for profiteering by a special court of the Khomeini Guilds
Committee. The Committee urged residents to report any trader or shop-
keeper found -indulging in actions against the ideals of the Revolution- such
as profiteering and hoarding. This development is strikingly similar to the
Shah's previous price control campaign.
There have been growing signs of disenchantment with the Khomeini revolution.
On occasion, a rural bazaar has shut down in protest of heavy-handed activities by
revolutionary committees. Some bazaaris have been hedging their bets by paying
protection money to the leftist Fedayeen organization. There are also indications of
increasing bazaari support and funding of the Moslem People's Islamic Republic Party
of Ayatollah Shariat-Madari. The US Embassy in Tehran reports that Shariat-Madari's
picture is replacing Khomeini's in many bazaar shops?a low-key form of protest.
31 August 1979
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EiLuk 25X1
Articles
IRAN: UNREST AMONG PEASANTRY
Iran's 17 million rural inhabitants?hitherto supporters of the new Islamic
Republic?are becoming increasingly restive. This trend could accelerate in the
coming months unless the regime can devise and implement effective agricultural
policies. The policies so far suggested by the revolutionary leadership?including a
rural-based Iran and a reversal of rural-urban migration?probably would depress
agricultural activity and fan resentment. Rural tensions?some of which began with
the Shah's land reform in the 1960s?already are being reflected in widespread land
seizures as the breakdown in law and order continues.
Rural Traits as Basis of Political Apathy
Most Iranian peasants have little knowledge or interest in life beyond the village.
Over the centuries, they have acquired a deep-seated distrust for government officials,
who are viewed as outsiders interested only in exploiting the villagers. The limited
interest rural dwellers display in life outside the village has been the result of their
membership in tribes or ethnic minorities, which for many purposes transcends class
25X1 relations.
A strong sense of individualism and the focusing of primary loyalties on the
family have been major factors in the peasants' isolation and political apathy. The
extended family is the basic social unit in rural areas, providing its members with
identity, security, and social orientation. The traditional importance of the family is
reinforced by Islamic beliefs and practices.
Illiteracy and fragmentation of the rural sector?only one-fourth of the 65,000
villages scattered about the countryside have more than 250 inhabitants?have also
bolstered the inwardness of rural life. Books and teachers have been scarce, and, in
any case, educational attainment previously has had little effect on income. The
Literacy Corps, formed by the Shah from urban students doing national service,
managed to penetrate into some of the isolated rural areas. Nevertheless, even in the
early 1970s enrollment in primary education was still only 40 percent in rural areas
compared with 90 percent in the cities. About 3 million primary school age children
remain out of school primarily because of parental objection.
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Forces of Change
The pattern of rural life was jarred in the 1960s by a Ian reform instituted by the
Shah as part of the White Revolution. Although achieving it primary goal of breaking
the power of the absentee landowners, the land reform failei to coalesce new political
support for the Shah and widened the gap between land, d and landless peasants.
Under the program, only two million peasant families (nasagdars) were given the right
(nusaq) to work a particular piece of land; the majority of agricultural workers and
village laborers (khushnishins) were outside the program. W tile the nasaqdars for the
most part remained close to the subsistence level, their soci I and economic standing
reiative to the khushnishins improved somewhat.
I:and reform did little economically to help agriculturi which was downplayed
by the Shah in his drive to modernize industry in the 1970s. In fact, land reform
compounded the problem of small-scale production, contre utiting to the inability of
agriculture to meet rapidly rising domestic demand. Iran tItifted from being a net
exporter of agricultural goods in the late 1960s to being a net importer of one-fourth of
its food in 1978. Although the average Iranian peasant is be ler off in absolute terms
today than a decade ago, the gap between rural aid urban incomes has
grown?peasant incomes in 1978 were only one-fifth of urban worker incomes,
compared with an estimated one-third in 1970. As the oil I.)nanza pushed up urban
incomes, the government kept food prices low, the increase I demand for food being
satisfied largely through imports. In short, the peasant fa ed to get the economic
return normally dictated by boom conditions.
Thousands of farm workers continued to be pulled int the cities by the Shah's
industrialization drive. Migration created rural labor sh .rtages and, as workers
revisited their native villages, heightened awareness of the e ritside world, its material
25X1 goods, and its political events.
Despite increasing discontent, rural dwellers, by and
actively in the Islamic Revolution of late 1978. At the same
was sympathetic to the idea of a more religious Iran arid wt
strong central governments. The thousands of demonstrate
able to put in the streets were made up largely of peasants
25X1 cities.
Aftermath of Islamic Revolution
arge, did not participate
trne, the rural population
traditionally opposed to
rs that the mullahs were
t.vho had migrated to the
While the revolution originally was an urban-based pi t 'nomenon, it has had an
increasing impact on the rural sector. The large comrbercial farms that were
untouched by the Shah's land reform and that yielded one -half the value added in
agriculture have suffered from the general disruptions of ti tt economy. For example,
port strikes and payment difficulties have cut imports of iimal feed, forcing two-
thirds of the poultry businesses to close. Cotton output has been reduced because of
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widespread shortages of fertilizer and pesticides, attributable to strikes, fuel shortages,
and turmoil in the ports. Subsistence farmers, less affected by these problems, should
benefit this year from favorable weather.
Widespread land usurpations, not only by khushnishins but also by former
landlords who lost their lands to land reform, are deepening the feeling of insecurity.
Losses in farm production in the richer lands of the North (including Mazandaran)
and West, are particularly heavy; many districts are controlled by ethnic minorities,
some of whom are seizing land and some of whom have been in open revolt.
Policies of the Government
Khomeini's vision of an Islamic Republic in Iran does not yet include specific
plans for the rural sector although he has expounded a vague goal of agricultural self-
sufficiency and a society based on rural virtues. An original aim of the revolutionary
leaders was to give every rural dweller a plot of land?the Koran holds that every
person is entitled to own the land he works. More recently, Khomeini has alluded to
some form of land reform that could (a) return to the religious establishment lands
taken during the Shah's land reform program and (b) give to the poor those lands on
which owners have not paid -Islamic Taxes.- Khomeini's economic adviser Bani Sadr
has also suggested that 1.6 million workers encouraged to migrate to the cities by the
Shah be returned to the rural districts and live in the old network of villages. While
Bani Sadr has admitted this might resemble a Kampuchea-style operation, he
optimistically maintains it could be accomplished by the use of faith and persuasion
25X1 rather than force.
The Bazargan administration has allocated funds for low-interest agricultural
loans and has eased government restrictions on the importation of agricultural inputs,
such as feed grains and pesticides. It has also raised the support prices for domestic
cereal crops and has restricted the importation of some fruits to help local producers.
The administration, however, has been too disorganized to make hard decisions on
25X1 basic agricultural policy.
Outlook
The Iranian Government needs peace in the countryside and peasant cooperation
to begin restructuring the economy. The Islamic leadership may be able to use the
increased prominence of Islam to maintain at least passive support among most
peasants. Except for ethnic minorities struggling for autonomy, most rural dwellers
simply want to get on with the business of living their own lives with a minimum of
government interference. Peasant attitudes could change radically if government
initiatives adversely affected rural lifestyles.
Khomeini could find, like the Shah, that land reform often causes more problems
than it solves. In addition to the land fragmentation that could occur from further land
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reform, plots would become even smaller if land were (livid!J among the inheritors as
required by Islamic Law?a practice abolished under the Shah but obviously favored
by religious leaders. Aware of the effects on production, sol rie leaders ma.s. soft-pedal
land reform; a few religious leaders have already concedec that the Koran does not
provide a guide for the way larger enterprises, such as contmercial farms, are to be
handled. Regardless of the course of land reform, land m qrpations are continuing.
Because of the continued general instability of the country Ade, friction between the
landed and the landless almost certainly will mark the rty ii situation.
With urban economic activity severely depressed and government &emphasis of
industrialization, job opportunities in the cities have dried t.ni Government attempts to
send former rural inhabitants back to the country might e inaugurated to reduce
urban unemployment and to alleviate labor shortages in som,' rural areas. Most former
villagers are unwilling to return to the harsh conditions of t 'le countryside. Their lack
of incentive, poor attitude toward rural life, and exposure tc urban politics would lead
to further social and political disruptions.
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IRAN: URBAN LABOR FORCE?FERTILE GROUND FOR UNREST
The modern labor sector, which played a pivotal role in the Shah's overthrow,
represents a volatile and destabilizing force in today's Iran. While Iranian urban
workers have given enthusiastic political support to Khomeini, they have been
unresponsive to his calls to sacrifice for the revolution and to resume productive work.
As the semiparalysis in urban commerce and industry continues and as subsistence
funds rapidly dwindle, urban workers will become even more dissatisfied. Unless the
economy revives, these workers, newly aware of their political clout, could become a
focal point in a growing challenge to the Islamic Republic
Characteristics of the Modern Sector Labor Force
The urban labor force grew rapidly in the post-1973 oil boom years, as rural
dwellers flocked to the cities in search of construction and factory jobs created by the
Shah's industrialization drive. These migrants were almost exclusively male, very
young?most often the 15 to 34 age bracket?and generally illiterate, unskilled, and
religiously conservative. Many of the newcomers sought employment in Tehran,
where more than half of all manufactured goods are produced. They also moved into
the steel, petrochemical, refining, and ordnance plants of Isfahan; the electronics
industry centered in Shiraz; in the heavy engineering industry of Tabriz; and in the oil
25X1 industry center of Ahwaz.
Despite their lack of skills, the new entrants found themselves in a sellers market
where they could command high salaries. This resulted in pampered workers, whose
high rate of absenteeism, theft, job-hopping (annual turnover in many plants reached
45 to 50 percent per year), and slowdowns made them among the least productive and
most expensive workers in the world.
Iran lacks the tradition of an independent labor union organization, and labor's
political power was weak up until the revolution. Workers had been frequently used as
political pawns by the Shah, first in a power play against the large landowners and
then against the growing strength of the industrialists. In 1957, the Shah outlawed all
unions, fearing that the extreme youth and inexperience of the industrial labor force
made the workers easy prey for political subversion. By 1962, he had switched tactics,
encouraging government-controlled unions, as a way to control leftist influence. Only
those unions certified by SAVAK were permitted to function, usually under hand-
25X1 picked leaders.
As Iran's financial position strengthened in the mid-1970s, the Shah's government
initiated efforts to buy worker loyalty. Labor relations became increasingly paternalis-
tic. The government passed laws granting workers automatic pay hikes, generous
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social benefits, and opportunities to buy into company own rship on favorable terms.
It also sided with workers in labor disputes and enforced the 1959 labor code provision
that no worker could be fired until his case was reviewed by lie Labor Ministry Court,
which usually found in favor of the worker.
Labor Bloom Begins to Fade
Despite increased benefits and wages, many urban w Tkers had become disen-
chanted with their lot by the beginning of 1978. Their expectations were being
stifled by (a) the economic downturn, which increased unemployment, especially in
the construction sector, and (b) the deterioration of livin conditions in the cities.
Workers became more active in pressing their demand, for better pay, longer
vacations, and improved pensions. The government's n'peated assertion that it
intended to reduce annual bonuses?which often anion iited to several months'
25X1 pay?increased wildcat strikes.
As general political turmoil took hold in Iran, unempf ,yed and underemployed
workers, living on the fringes of society in places such as sou Tehran, joined the anti
Shah demonstrations. For the most part, however, partic,oating workers were not
members of identifiable worker groups. Generally they wer recruited by representa-
tives of neighborhood mosques responsible for organizing iirotests.
As the anti-Shah movement built up steam in the SeCOI half of 1978, workers in
government ministries, factories, and in the vital oil fields Nalked off their jobs. The
strikes in the southern oilfields were the critical expresso 'i of labor's lorce in the
revolution and were pivotal in the Shah's overthrow. Ever with the intervention of
emissaries from Ayatollah Khomeini, who was still exiled m Paris, the independent-
minded oil workers initially refused to return to work. T acir resistance was made
easier, as was that of factory workers, by their continuing t, receive paychecks w bile
25X1 on strike.
The government, hoping to defuse worker protests. grdnted practically all their
exorbitant wage and fringe benefit demands. This sign 1 government weakness
merely encouraged additional groups to walk off their jobs And fostered a shift from
25X1 economic to political demands.
Labor in Postrevolutionary Iran
With much of Iran's modern urban-based econorii . at d standstill, the lot of the
average urban worker has further deteriorated since the revolution. Although the
extent of unemployment is disguised by padded employrnimt rolls, we believe that
between 3 million and 4 million workers (out of a national labor force of
approximately 11 million) are without jobs; several million more are underemployed.
Many of the 1.2 million workers formerly employed in the ,onstruction sector, unlike
idle industrial workers, are not being paid and must subsi t largely on a cushion of
personal savings, family assistance and help from the Mos, me.
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Many workers are demonstrating their dissatisfaction with current conditions
through strikes and sit-ins, but most are biding their time in hope that the
revolutionary leadership will eventually be able to fulfill its promises to improve their
lives. Workers in the modern labor sector, having successfully flexed their muscles
during the revolution, have not responded to urgings to sacrifice for the revolution.
Many workers have ignored Khomeini's call to return to their jobs to help revitalize
the moribund economy, and the nationalization of the nation's major industries
apparently has not spurred workers to resume productive activities.
Oil workers, who many think were the proximate cause of the Shah's downfall,
have returned to their jobs, but are demanding a voice in National Iranian Oil
Company (NIOC) management and in government directives concerning oil. While
oil production has remained at or near the 4 million b/d level between April and mid-
August, the decision to produce at that rate apparently required the okay of oil
workers. Since 22 August, labor unrest has caused intermittent falloffs in production
though it is now reported to be back up near normal levels. In Khuzestan Province,
where 90 percent of Iran's oil is produced, local Arab leaders have threatened to cut
off production/exports completely if the Khomeini government refuses to meet their
demands for improved conditions and a measure of local autonomy.
Worker committees that sprang up during the revolution?composed in many
cases of the most radical workers in a given enterprise?have served to reinforce
worker resistance to a return to normalcy and have successfully kept prerevolutionary
management at bay. Committees have demanded the right to involve themselves in all
aspects of management, including the formulation of wage scales, social benefits, and
the selection of supervisors, and have insisted that management agree to follow all
decisions voted on by the committees. Moreover, in those factories where managers
tried to eliminate nonproductive workers, committees have successfully demanded
severance benefits equal to as much as six months' pay for each year worked. This has
effectively prevented most layoffs.
We have only spotty information about labor/political organizing among workers
in Iran since the revolution. We assume that radicals and leftists of various stripes have
taken advantage of continuing chaos to recruit workers to their cause. An Iranian
political analyst asserts that the -chariks--Marxist guerrillas?are courting workers
with economic assistne find re sponsoring -educational- sessions at factory sites
25X1 during lunch hours.
Government Efforts and Plans
Apart from pleas from Ayatollah Khomeini for workers to cease strike activities
and resume productive work, the government has done little to cope with the
problems of several million unemployed and underemployed. Minister of Labor
Darius Foruhar, who has conceded that there is a role for legitimate trade unions,
opposes worker interference in management functions. Foruhar claims that the
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government has established a special force to regulate Libor and to reduce worker
interference.
Foruhar claimed that the government intends to reac vate stalled rural highway
and housing projects in an effort to encourage local residents to remain and to attract
urban unemployed to return to the countryside. According to Admiral Madam, the
Governor-General of Khuzestan Province, several public v, (irks projects have already
been funded to achieve these objectives in his province. In April, the government also
created a $140-million-per-month loan fund to proviia emergenc? aid to the
unemployed. Until recent weeks, little money has been &shursed from this fund. In
any case, this fund, even if fully spent, would barely nut a dent in the nation's
25X1 unemployment problem.
Outlook
The government thus far has been unable to decide au the desirable composition
and level of production in postrevolutionary Iran. Thi, indecision, coupled with
intransigent labor problems, precludes any meaningful ec,,nomic revival in the near
term. Workers who hoped to reap substantial economic bent4its from the new Islamic
government find their rising expectations dashed by lygh unemployment, rising
inflation, and shortages of goods, including textiles, plastic ,i. vegetable oil, soaps. and
detergents, certain medical supplies, auto parts, and pap i r products.
As the lot of the urban unemployed and underem oloyed worsens, increased
political activity can be expected. The core of young illiterate, unskilled, and
unemployed city workers could turn to the left. Moreover the modern middle class,
many of whom lost their jobs when foreign-owned comp,uties folded, has found its
hopes dashed as well. Although Khomeini currently remains the commanding
presence in Iran and clearly retains the allegiance and adoration of most of the
modern labor force, the seeds for eventual demise of thc Islamic Republic may be
planted in his failure to revive the economy.
A revival can only come about if the government over, .ornes its provisional image
and self-perception, develops confidence in itself, and comes to grips with the need to
generate a comprehensive economic policy. New tipper- irid middle-level managers
will have to be developed to replace those who have left the (duntry, been imprisoned,
or fired. In addition, the more intransigent worker committes will have to be brought
under control and the policy against dismissals reversed. Recent reports indicate that
the last two requisites are beginning to be met.
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IRANIAN CIVIL SERVANTS: CHAMELEONS OF REVOLUTION
Civil servants, the predominately middle class technocrats in the boiler room of
any functioning Iranian government, participated in but were not leaders of the
Islamic Revolution. Government workers joined the Shah's opposition out of a mixture
of economic, political, and religious motives. While many of the senior managers felt
that they could eventually capture control of the movement, they subsequently found
that it was Khomeini's forces who manipulated them. Many government workers are
frightened by the ongoing executions of counterrevolutionaries; few appear to be
actively doing their jobs, and even fewer are risking initiatives. Their growing
disillusionment with the new Islamic Republic is not likely to become focused unless a
strong secular leader appears on the scene.
Characteristics of the Iranian Bureaucracy
The Persians have one of the world's oldest bureaucratic traditions, and the civil
servant class (karmandan) has constituted the machinery of day-to-day government.
The bureaucrats in turn have been directed and controlled by the ruling class. Because
of this control, the karmandan have been more or less the servants of the upper class.
The bureaucracy has provided a unique opportunity for the most ambitious and best
educated of the middle and lower class to move into the elite decisionmaking group if
they demonstrate competence and/or allegiance to the right master.
Government service has traditionally been prized as a secure job, and near the
end of the Shah's reign about 350,000 persons were employed in ministries and
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government agencies under Civil Service Regulations.* While traditionally part of the
middle class, government employees have felt (and often have been) underpaid
compared with workers in the private sector. Official pay has been kept low under the
assumption that it would be supplemented in the form of bakhshish (payoffs).
Even the lowest ranking civil servant has considered his position a personal
fiefdom, and persons wishing service from the bureaucracy have routinely paid
bakhshish to assure that the civil servant's special knowledge and competence would
be brought to bear on his case. At the higher levels of the bureaucracy, this frequently
has resulted in the skimming off of large sums of government funds earmarked for
development purposes. It has also bred discontent among the many conscientious
workers and those unable to take advantage of the system, who have found their
official earnings and benefits constantly eroded by inflation.
While the old bureaucracy in Iran tended to be conservative and highly religious,
the Shah's extravagant economic goals created a corps of highly educated and skilled
technocrats much more liberal minded and Western oriented. The new bureaucrat has
received modern training instead of the traditional maktab-madrasah education
(education under the auspices of the religious community). Many have received their
training abroad; others were taught in the secular schools created by the Shah. By the
mid-1970s, the Ministry of Education had grown into the largest government body,
employing about half the bureaucracy, and the number of civil servants with more
than a high school education had doubled since the mid-1960s, to 20 percent.
The religious community viewed this secularization of the educational
system?and thus the bureaucracy?as a threat to its influence and to basic Islamic
principles. One of the more offensive changes was the large-scale promotion of
women's rights under the Shah. With the opening of education and occupational
opportunities, the number of women working for the government in the mid-1970s
reached about 90,000, triple the number employed a decade earlier. In comparison,
the number of male workers over the same period remained constant. Employment of
women by the government, however, was limited primarily to urban areas, as the
government was unsuccessful in pushing its campaign for women's rights into the
25X1 conservative rural areas.
Molding the Bureaucracy
The Shah followed the traditional principle of divide and rule. Agencies with
parallel functions were created to act as watch dogs over each other. Power was
distributed to a series of individuals or agencies with overlapping responsibilities so
that each became fragmented and weak. Loyalty could be found in a handful of
trusted officials at the top; for most, the system generated mistrust and mutual
antagonism. The resulting tension had many undesirable effects. Government officials
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came to expect the Shah to provide all policy guidance and avoided taking
25X1 initiative.
Concentration of authority and responsibility at ti .e top meant that action
occurred within the bureaucracy only when royal attention was focused on a
particular subject. The high degree of insecurity caused ma Ty to avoid top positions in
government. The result was a very thin layer of overburdened decisionmakers. High
officials often were forced to make decisions on weights matters without adequate
study because they could not find enough people to whom they could delegate
25X1 authority.
The Bureaucrats and the Revolution
The Shah was not completely successful in ret }rming and molding the
bureaucracy to meet his needs. This was partly because frit rids of the regime generally
were immune to reform measures. Also, traditions die hard; while the positions and
loyalties of old bureaucrats were slowly weakened and undercut, they were not
destroyed. Foreign educated officials, trying to impose crder in unwieldy domains,
found these deepest attitudes a major barrier to moving in with the job. They often
lost sight of their goals and became indistinguishable, eAcept in dress, from their
25X1 predecessors of a century ago.
The shakiness of the Shah's grip on government employees manifested itself last
October when civil servants joined private sector work ers in demonstrations and
strikes organized by the Shah's religious and political oppo,Ition. While their demands
initially were focused on salaries and benefits, they ,00n escalated to political
opposition to the Shah. The work stoppages practically e iminated economic policy-
making and shut down administrative functions. Not surprisingly, however, enough
workers were found to get out the payrolls. When tht fall of the Shah became
imminent, senior officials struggled to maintain tranqui ty in their ministries and
threw their weight behind Khomeini. This did not ref le t so much their support of
Khomeini's ideas but their belief that they could eventually capture control of the
revolutionary movement because only they possessed the skills necessary to run a
25X1 modern state.
Senior government officials, however, were insuff kiently organized?mainly
because of the Shah's divide and conquer policies?to pre&'nt a unified front and thus
offered no alternative to an Islamic Republic. They sub& quently found Khomeini's
movement used them rather than vice versa. With establishment of the Islamic
Republic many key officials were forced to flee the co'intry, were fired, or were
summarily executed because of their close association with the Shah.
Aftermath of the Revolution
While rank-and-file bureaucrats supported the revelation, they have not been
immediate beneficiaries. In one of its first acts, the new government reduced the
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special allowances and compensation of government bureaucrats, reducing the real
income of most higher government officials by as much as 50 percent. Women in the
civil service ranks were singled out for harassment. While they were allowed to return
to work, the position of women in general is tenuous, as exemplified by (a) the
requirement for a more conservative mode of dress; (b) exclusion from certain
training, for example, in the legal field; and (c) the reduction of marriage age of
females to 12 years, as part of the general return to Islamic precepts.
Mundane activities such as directing traffic and stamping passports somehow are
being taken care of. At the same time, the karmandan have often ignored the
Ayatollah's call to engage in productive activities, opting instead for long tea drinking
sessions and political discussions. Economic planning remains in disarray and adminis-
trative offices are barely functioning. We have received numerous reports of
government projects at a standstill and of delays in government welfare payments.
Most rank-and-file workers still show up at work and collect their paychecks; without
supervision, direction, and confidence that the revolution has ended, they do little. A
purge of antirevolutionary bureaucrats has been threatened in an attempt to get
25X1 government activity moving ,
25X1
Outlook
A return to normalcy in the bureaucracy is not likely until Khomeini establishes
some form of hierarchical control. Many karmandans still perceive the Barzagan
government as a temporary institution and choose to avoid decisions rather than do
something that could be construed as counterrevolutionary. Government employees
will continue to lie low until they receive explicit directions for the formulation and
implementation of new policies for the post-Shah era. Installation of a permanent
government, after approval of the new theocratic constitution, presumably would
prompt the bureaucracy to resume a more normal level of activity.
While the karmandan continue to respect Khomeini as a revolutionary leader, he
has not established control over the daily details of government, and the civil servants
are becoming increasingly disillusioned with his policies and the continued chaos in
Iran. Moreover, the concept of a strict Islamic republic does not fit with the modern
outlook of most government workers, especially the more highly educated. Khomeini's
old-fashioned view of women and the mullahs' suppression of democratic freedoms no
doubt are alienating many. All this said, dissension within the bureaucracy is not likely
to pose a threat to the revolutionary government unless a strong secular leader appears.
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Articles
IRAN: THE CLERGY, CREATING A THEOCRACY
The Shia clergy of Iran, Shah Mohammad Reza Pahlavi's most persistent
opponents, have a long tradition of opposition to secular rule. In the last 150 years this
opposition has recurringly taken the theme of resistance to both domestic absolutism
and foreign domination. The clergy are regaining the economic, judicial, and political
power they have been losing for more than a century?especially under the Pahlavi
dynasty?and the founding of an Islamic theocracy in Iran appears probable.
However, the more secular and modern elements in the society and the ethnic
minorities?all participants in the toppling of the Shah?are becoming increasingly
frustrated by the rigidity of the clergy.
Shia Tradition and Doctrine
Clergy of the Shia sect of Islam?the of ficial religion to which about 95 percent
of Iran's 36 million people belong?have been long-time opponents of secular
governments and especially of the Pahlavi dynasty. According to Shia doctrine, secular
and spiritual leadership should be combined in a single person as manifested by the 12
Imams, descendants of Muhammad. The separation of the two powers, which
occurred about 150 years before the disappearance of the 12th Imam in 873 A.D., is
viewed by the Shiites as both temporary and illegal.
While Shia doctrine recognized other spiritual leaders as "agents" of the Hidden
Imam, the direct appointment of such agents ceased in 940 A.D. when the last agent
refused to name a successor. The concept of the agent of the Imam has been revived,
however, and some Iranians have referred to Khomeini in this vein. Khomeini,
although distancing himself from claims of being an agent or a true Imam, accepts his
role as the preeminent figure among the mujtahid?popularly recognized religious
leaders worthy of imitation. The Shia concept of mujtahid also encompasses the
doctrine of ijtihad?the discovery and authoritative enunciation of fresh religious
25X1 truths based on the Shariah.**
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The Shariah is the sum of the laws derived from the Koran, the Traditions, the consensus of the scholars, human
reason, and iitihad.
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Clerical Opposition to Westernism and Tyranny
Clerical opposition to secular rule took on the twin tht mes of resistance to foreign
domination and domestic absolutism during the late 18th and early 19th centuries
when European nations became more interested in the country, which was then ruled
by the Qajar dynasty. One of the earlier instances of clerici political action took place
in 1826 when the ulama (clergy), fearing Russian influent t' and expansionism, forced
the Qajar shah to renew war against Russia by calling a jihad (holy war).
Unfortunately for Persia, the war was lost and Russia gain, rl more Persian territory as
well as extraterritorial rights exempting Russian citizt Is from trials in Persian
courts.
Other foreign countries demanded similar treatment or their citizens, but such
concessions were abolished by Reza Shah?the present hah's father. The Iranian-
American agreement of 1964, which gave the US milita ry mission a special status
based on the stipulations of the Geneva Convention, was represented by the Shah's
opponents as a reestablishment of the concessions. A $:MO million loan from the
United States for the purchase of military equipment was ,t'en as a payoff to the Shah
for granting the -capitulations.- This was seized on by Ax Atollah Khomeini to renew
25X1 his attacks on the Shah.
The clergy also played a major role in the Constitutit nal Revolution of 1905-06.
rhe constitution then promulgated gave a body of five heologians the right to set
aside any law that in their opinion contravened the holy principles of Islam. Since this
article had been ignored by subsequent secular rulers, the Eull implementation of the
1906 constitution became a rallying call for some clergy in i he early stages of the 1978-
25X1 79 revolution
Clerical Opposition to the Pahlavis
The monarchy alienated the clergy by emphasizingIran's dynastic tradition--
which emphasized pre-Islamic Persian glories?rather than its Islamic heritage and by
undertaking a series of measures aimed at undermining cl, rical power. The power of
the clergy was derived from many sources. Since Islar lic law?as based on the
Sharia?was the only law available, the clergy maintained iudicial monopoly. Power
was also derived from clerical participation in the governr tent bureaucracy, relation-
ships through marriage, and control of funds from wau f (religious) endowments,
which included land, villages, and sources of irrigation water. At the same time.
preaching and good works gave the clergy influence over the population in
25X1 general.
In exercising power, the clergy gathered wealth, prest tge, and personal security.
Under Islam, clergymen were under no special restrictions with regard to acquisition
of property, and in this pursuit they were sometimes not ab we abusing their extensive
control of courts and legal procedures. Their financial adv neement in turn strength-
25X1 cried their political influence.
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Reza Shah undertook measures aimed at undermining the clergy's power which
often resulted in the substantial reduction of ulama income. The severest blow came
in the early 1930s when religious law was replaced by Western codes and Western
style courts were established with nonreligious judges. While religious authority on
matters of personal status, such as marriage and divorce, continued, it was gradually
restricted over the years. Reza Shah's government also refused to exempt theological
students from military service and began the removal of general education from
clerical control. Clerical participation in the bureaucracy was curtailed, and the
collection and use of wad funds was restricted.
During this time, Western dress was forced on the population and Western forms
of entertainment, such as the cinema, were introduced. The antagonism of the ulama
was aroused not only by these measures but also by the progressively open contempt
25X1 shown them by the Shah.
Pressure on the clergy eased after the Soviet and British invasion of Iran in 1941,
when Reza Shah was forced to abdicate. Several of the Shah's antireligious measures
lapsed, and the clergy was able to regain some of its old control over endowments and
education. This resurgence of clerical influence lasted from 1941 until the royalist
25X1 coup of 1953.
Shah Mohammad Reza Pahlavi renewed his father's efforts to Westernize Iran
and undermine the clerical opposition as soon as he had consolidated his power.
Education was almost totally secularized. The Shah's land reform program of the early
1960s included the redistribution of a considerable portion of wad' lands. Earnings
from the endowments were replaced by an annual government grant. Women's rights
legislation also removed more of the ulama's judicial influence over marital and
25X1 family affairs.
With the rapid change and social upheaval ushered in by modernization,
especially after the 1973 oil boom, many Iranians retreated in dismay to traditional
religious values. Economic problems, lack of political participation, and corruption all
came to be blamed on the government's modernization and Westernization policy;
thus it is not surprising that many Iranians looked to Islam as the remedy. During most
of his reign, the Shah's autocratic style left little scope for political criticism, and the
religious establishment became the spokesman for grievances. Later, when the Shah
attempted to create a more liberal atmosphere, the clergy were quick to exploit the
new freedom to incite the poorly educated and unemployed urban masses.
The Ulama Today
The revolution in Iran, given form and leadership by Ayatolla Khomeini, has
provided the Shia clergy an unparalleled opportunity to take over the reigns of
government. Their goal is the establishment of an Islamic republic that perpetuates
their role as preeminent leaders of the nation. The new constitution being written
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gives extensive powers to a marja-i-taplid?a recognized ,4igious leader of highest
prominence?to oversee the government. If no single maria can be settled upon, a
body of five theologians will sit in his place.
Currently, the revolution has permitted the clergy to a isume leadership roles at
all levels of government, from local councils to the powerful Revolutionary Council at
the top of the government pyramid. Khomeini himself i., the final authority and
arbitrator of all government decisions. While there are tvc, ) or three Ayatollas who
could be considered to be close to the same stature as Khomelni, they do not command
nearly the widespread following. Ayatolla Shariat-Madari, ho is probably second in
popularity, especially among the Azerbajanis and the more Westernized middle class,
is the only moderate among the well-known ulama. He has preferred, so far, to avoid
a direct political contest with Khomeini and may be opei, to criticism that he was
supportive of the Shah in the mid-1960s. The other well-known clergy tend to be as
orthodox and conservative as Khomeini.
The specific policies for attaining a totally Islamic socie-,, are often vague and left
open to interpretation. In the economic sphere, for instance, an Islamic economy
appears to be nothing more than a free economy in which 'just- participants follow
the teachings of the Koran and Sharia. It is more of a colle,_tion of laws and attitudes
than an economic system. The prohibition against interest and the system of
inheritance laws are fairly well established. Islamic banks, aJ wch, are akin to Western
venture capital firms?taking deposits, investing, sharing tn profits and losses, and
passing on the profits and losses to their depositors. The practical aspects of working
within the international monetary system have not beer completely worked out,
however, and in other Islamic countries rules and definitions have been bent to
accomodate the prohibitions against interest.
Another established principle is the duty of sharing v ealth with the poor. The
zakhat, as the almsgiving duty is called, can be interpretee as a compulsory tax. It is
largely a matter of conscience in most Moslem countries today.
Private property is protected under Islam, but, sino all property ultimately
belongs to God, its earthly owners have only a stewardship -ole. Thus, the property of
the industrialists who fled Iran could be nationalized because these people demonstrat-
ed their inability to adequately administer the property. P-operty can also be seized
25X1 for nonuse or for the public good.
As to general economic policies, Iranian leaders 'tress the importance of
agriculture and view favorably enterprises based upon individual initiative such as
farming, small-scale merchandising, services, and light rr anufacturing. Large-scale
enterprises in every field will likely fall under the provino of the state Individuals
almost certainly will not be allowed to accumulate holding as vast as some acquired
25X1 under the Shah.
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Outlook
The clergy are now closer than at any other time in recent history to attaining the
combination of secular and religious leadership of the early Imams. Even though his
personal popularity and that of his revolution have fallen in recent months, Khomeini
remains the rallying point for most Iranians and the founding of a theocratic state
appears almost certain. Only the death of Khomeini or the outbreak of widescale
ethnic revolt could sidetrack its development.
While popular discontent may grow if economic conditions worsen, Khomeini has
managed to insulate himself somewhat from the implementation of policy. In
addition, while the ideal of an Islamic state may prove impractical in the economic
sphere, the interpretation of Islamic doctrine is in theory flexible enough to allow
adaptation of new policies. So far, however, the Iranian leadership has given no
indication that it will be sufficiently flexible to stem the growing alienation among the
middle class, the bureaucrats, and the secular forces generally who are needed to run
25X1 an already modernized Iran.
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