Parvin Ghorayshi: Fred Halliday has suggested in the chapter on agricultural development in the first edition of his book, Iran: Dictatorship and Development, that the Iranian state successfully imposed capitalist relations on the rural areas by means of a land reform. While I agree that rural Iran experienced a growth of capitalist relations as a result of land reform, I cannot agree that these relations became predominant, as Halliday claims: “In general, one can say that the Iranian countryside is now a capitalist one. Pre-capitalist features must certainly survive: Old cultivation methods, old attitudes and old unreformed ownership patterns do not disappear at once. But the predominant relations are commodity ones and the social structure of the village is now becoming capitalist.”

Some of the processes of capitalism described by Lenin in The Development of Capitalism in Russia are used in the conception of capitalism that Halliday applies to rural Iran. First, agricultural land, its products and the laboring capacity of the direct producers become commodities and the object of exchange. Secondly, rural areas form a home market for industry as market relations between these sectors grow. Thirdly, these steps result in a rural capitalist class structure.

Although commodity and market relations are essential to capitalism, a sufficient definition of the term necessarily includes consideration of the production relations involved in capital accumulation. Marx makes clear in Capital I (Part 7) that capitalism entails the expanded reproduction of production units which extract a surplus from their employment of wage-labor and accumulate capital through the profitable reinvestment of that surplus. By focusing on a conception of capitalism that emphasizes commodity exchange and market relations, rather than production relations, Halliday neglects explicit consideration of the extent to which the process of capital accumulation is prevalent in rural Iran.

The land reform policy of the “White Revolution” brought many important changes in economic relations to rural Iran. Before land reform, the juridical ownership of land was mainly large in scale, while actual production took place in small units. Whether the land was owned by religious institutions, the royal family, traditional landlords or peasants, the majority of the agricultural production units were small: Approximately 83 percent were less than 10 hectares. [1] Cultivation was carried on primarily by sharecroppers, and secondarily by tenants, while owner-cultivators and large individual capitalist enterprises were of lesser importance.

Landowners preferred to rent land on a crop-sharing basis, instead of leasing to tenants on a fixed-rent basis. This predominance of sharecropping impeded the expansion of agricultural output. Since the landowner would receive a large share of the increase in output, little incentive was left for the peasants to raise their productivity. [2] What distinguishes the tenant from the sharecropper, apart from the fixed-rent paid by the former and the proportional rent paid by the latter, is that the tenant might himself sublet his land to sharecroppers or cultivate it with the use of wage labor.

The sharecropping system, which covered about two- thirds of the cultivated land, involved a number of types of rental payment and a variety of practices concerning the division of the crops. With respect to the latter, the major differences concerned irrigated and non-irrigated crops, winter crops (shatvi), summer crops (sayfi) and vegetables. The landowner had a significant influence over the types of crops that the peasants grew. With respect to types of rent, money rent was quite common in villages close to cities and in the villages of the Caspian littoral. However, for the most part rent was paid in kind. Most peasants also paid labor rent by providing certain services for the landowner. [3]

While the larger units employed wage workers, the great majority of the small peasants used unpaid family labor, occasionally supplemented by wage labor. Wage laborers were employed mostly on a casual and seasonal basis, were paid in cash or in kind, and were more prevalent in northern Iran and in villages near urban areas. With the exception of some of the larger units of production, the level of agricultural technology in use was extremely low. As late as 1960, only 4 percent of landholdings were fully mechanized. [4] The irrigation system was based almost completely on old methods; there were next to no modern techniques in operation. [5]

Before land reform, rural Iran was composed of thousands of villages which were to a great extent self-sufficient socioeconomic units. The peasants produced what they required to satisfy their basic needs and had limited relations even with the local markets existing in rural areas. The agricultural output, which was sufficient for domestic consumption and constituted an important part of the national product, was marketed mainly by the landlords themselves.

The land reform launched in 1962 encouraged the growth of market relations but did not result in commodity relations becoming ubiquitous. The agricultural census for 1973 reveals that after land reform commodity relations had penetrated to a very limited extent. Of the total number of agricultural units, 51 percent did not market a significant portion of their produce. Of the rest, 26.7 percent marketed less than half of what they produced; only 22.3 percent marketed over half. Peasants not involved in the market as sellers of their produce obviously find it difficult to participate in the commodity markets as buyers of the products of industry. On the other hand, many of those peasants who do not sell any of their agricultural produce own plots of land that are too small to support their families and therefore must take whatever employment they can find.

Agricultural producers purchase from industry consumption goods or articles related to their production requirements. Such purchases were restricted by the low level of rural income, especially in comparison with urban income, and the unequal distribution of this income. Ministry of Economy input-output tables for 1965 reveal that 15 percent of the value of total inputs for production in agriculture were purchased from industry, while industry purchased 30 percent of its total inputs from agriculture. The input-output tables for subsequent years indicate a dramatic shift in these figures. In 1972 industry’s inputs to agriculture represented 46.4 percent of the value of the total agricultural purchases, while industrial purchases from agriculture had fallen to 1.2 percent. An estimate for 1977 has the same proportion of industrial purchases, but lowers industry’s inputs to agriculture to about 40 percent. Halliday, who only had access to the figures for 1965, consequently qualified his own argument about the growth of a home market for the products of industry. The more recent figures indicate the great expansion of this home market, but they do not demonstrate the distribution of these purchases from industry among agricultural producers. An examination of the characteristics of the agricultural production units, combined with the maldistribution of rural income, shows that the market for the products of Iranian industry likely involves a minority of the production units.

The 1973 agricultural census states that agricultural production units of over 50 hectares constitute less than 1 percent of the total number of units and about 15 percent of the total farm land. The units between 10 and 50 hectares are 46 percent of the total farm land and make up 15.6 percent of all units. The production units of less than 10 hectares constitute 83.7 percent of all units, but only 37.7 percent of all farm land.

Most of the units over 50 hectares represent large-scale capitalist farms, but not all of these large units were affected by land reform and not all changed their traditional production relations. It is in these units and in some proportion of those between 10 and 50 hectares that we find production for commodity markets and accumulation of a surplus. Land reform has expanded the number of individual large-scale farm operations, created large farm corporations, and established agribusinesses. These large units enjoyed the full support of the state for expensive infrastructural investments in roads and modern irrigation systems, tax credits, subsidies, and extensive low interest credit from the Agricultural Development Bank. However, these big capitalist units made up a very small percentage of the total number of farms. The largest units, the agribusinesses which received the benefit of vast sums of government expenditure, did not represent a significant percentage of total agricultural output, land, or wage labor. After the fall of the Shah’s dictatorship, many of these large farms were taken over by their cultivators and divided into small plots.

If it is not disputed that capitalism predominates among the units over 50 hectares, the extent to which the production units between 10 and 50 hectares are capitalist is subject to debate. The average size of unit in this category is approximately 15 hectares, [6] but size alone cannot give a precise indication of the potential output of a farm without knowledge of the availability of water and other factors of production. Many peasant farms of more than 10 hectares find that, like the majority with less than 10 hectares, they are unable to accumulate a yearly surplus, and remain at a subsistence level.

The problems with Iranian agriculture, especially acute for the production units with less than 10 hectares which represent the majority of the rural population, have been aggravated by government policies. The state that created the many small owner-cultivators at the same time erected many barriers to their viable operation, denying them the possibility of capital accumulation. State irrigation policy concentrated on the needs of the large-scale units and virtually ignored the desperate need of the smaller ones. The problem of obtaining sufficient water has been historically one of the central concerns of Iranian agriculture. The cooperative societies that were charged with the responsibility of supervising and maintaining the traditional qanat irrigation system of underground water channels did not fulfill their obligations, and the qanat system was allowed to decay. (Reportedly, one of the first major expenditures authorized by Bani-Sadr was for the repair of the qanat system.)

Another factor which inhibited the efficient use of land was the land parcelization created by the land reform. This varied from one region to another. In Arak, of the total households who received land, 97 percent averaged 16 fragmented plots of land. In Bandar Abbas, of the total number of households that got land, 80 percent averaged 4 fragmented plots. [7]

The credit needs of the small units were not satisfied by the rural cooperatives set up by the state. As a result, small peasants were forced to turn to village usurers, who became a powerful group after the land reform. [8] The little credit that the small producers could obtain was spent mainly on their immediate consumption needs, or to repay old debts, and therefore did not go for the purchase of agricultural inputs from industry. Thus parcelization and the unavailability of credit inhibited the mechanization of the small units.

The government policy of providing urban areas with cheap staple foods, for reasons of political stability, meant price controls for many agricultural products. [9] Increased demand for food products in urban areas was met by subsidized, higher-priced imports rather than increased domestic production which would have benefited the rural areas.

The land reform left a large portion of the rural population without land. This rural mass was in competition for the same employment with those peasants who received insufficient land for their subsistence. In 1972 the total number of landless peasants represented 16 percent of the rural population. [10] The restricted development of capitalism in rural areas also limited the employment of wage labor. The mechanized farms did not absorb a significant number of workers. Of the production units that had the potential need for labor, some remained on the old sharecroppping basis, some used family labor, and some employed wage labor only at peak seasons. Traditional artisan production continued as a source of income on a reduced scale. Faced with so many problems in selling their labor power, the mass of the landless population or the small owner-cultivators, just like the majority of the khwushneshin population before land reform, had to continue their reliance on old feudalistic ties, live on charity, and be satisfied with their marginal life. Although they were economically separated from the means of production, they were not socially “free” from old ties.

Impediments to the accumulation of capital and the inability of the majority of agricultural production units to reproduce at an expanded level retarded the growth of capitalist relations in rural Iran. The scarcity of capital and credit forced the great proportion of the peasants to rely on traditional methods of production. State policies that supported the few large-scale farms at the expense of the majority of agricultural units, and subsidized food imports at the expense of the agricultural sector in general, contributed to the retardation of Iranian agriculture. The small market contribution of the majority of units, along with the unequal distribution of income, capital, and credit, suggest that even with a conception of capitalism that focuses on commodity circulation, rural Iran was not predominantly capitalist. A concept of capitalism which focuses on the level of production and the possibilities for capital accumulation leads to the conclusion that the majority of the rural agricultural producers worked in non-capitalist units of production years after the Shah’s land reform.


[1] M. Mohammadi, Masaleh Arzi dar Iran va Shiveh-e Hall-e Democratic-e An (1974) p. 13.
[2] A. K. S. Lambton, Landlord and Peasant in Persia (London, 1953), p. 319.
[3] Charles Issawi, ed., The Economic History of Iran (Chicago, 1971), p. 221; Lambton, p. 331.
[4] J. Baharier, Economic Development in Iran, 1900-1970 (London, 1971), p. 141.
[5] F. Bemont, L’Iran depuis 1962 (Paris, 1971); G. Hadary, “The Agrarian Reform Problem in Iran,” Middle East Journal 5 (1951).
[6] A. Zahedani, “Iran: Evaluation of Agricultural Development Strategy, 1962-1972,” unpublished Ph.D. thesis, University of California, 1974, p. 32.
[7] K. Khosrovi, Jam’eh Shensasi-ye Rustai-ye Iran (University of Tehran, 1972), p. 168.
[8] A. Nikgohar, “Quelques Observations sur la Reforme Agraire Iranienne,” Revue Francais Sociologie 14 (1975), p. 691.
[9] H. Kaneda, “Employment and Income Policies for Iran,” International Labor Organization, Mission Working Paper 3, Agriculture (Geneva, 1973); M. Kayhan, “Avamel-e Mosaed-e Roshd-e Keshavarzi Dar in Zamineh,” Donya 8 (1977).
[10] Zahedani.

Fred Halliday responds: Any discussion of the transition to capitalism in the Iranian countryside is bound to overlap with other pre-existing debates on this question. As Parvin Ghorayshi implies, there is no general theoretical agreement among historical materialists as to what exactly constitutes capitalist agriculture, and in the particular case of Iran there exists another substantial debate, devoted to arguing either that the rural sector remains semi-feudal or that it is by now fully capitalist. It is not possible here to debate the former point, except to point out that the criteria I use from Lenin stress the importance of both commodity relations and the relations of production in assessing the transition to capitalism. On the latter, I think that Parvin Ghorayshi and I do not have a fundamental disagreement. The transition to capitalism is not an instantaneous process but a gradual one, over decades at least, and one accompanied by lags, apparent resistances and a diversity of forms. In the Iranian case the land reform program attempted to promote a capitalist trans: formation of the countryside and had considerable success in destroying the pre-existing system of social relations. Where it had less success was in mobilizing the productive resources of the countryside for the needs of a developing capitalist economy. My book documents the lack of agricultural-industrial linkages and the continued incidence of family units in Iranian agriculture. I also discuss the failure of Iranian agriculture to accumulate capital, and advance the view that the availability of oil revenues enabled Iran to neglect its agriculture and avoid the need encountered in other countries to fund industrialization from the rural sector.

Where we do disagree is, in the first place, on how far commodity relations have spread. I never maintained that these had become “ubiquitous,” but one of my main arguments was that following the reform the most important factor of rural production, namely land, had become a commodity. Parvin Ghorayshi does not contest this, and it is surely a more important part of the overall picture than her argument implies. Similarly, her account of the limited spread of commodity production does not prove all she wants it to: If, in 1973, 51 percent of the production units did not market “a significant part” of their production, this means that even then nearly half of the total number of units did market a significant part. Since these latter units were comparatively larger users of labor and covered larger land areas, their proportionate place should be given more weight. One can also assume that since 1973 the 51 percent figure has fallen somewhat, given the attempts by the Shah’s government to increase commercialization under the 1973-8 Five Year Plan and the boom in agriculture following the revolution. Even with the near subsistence units, it is probable that they engage in some commercial activities — selling part of their produce to procure those goods they do not produce themselves, and to pay back the usurers from whom they have been borrowing. The existence of usury is not in itself sufficient to prove the existence of capitalism, and I document in my book the limited spread of a home market, but it is not possible to suppose that the near-subsistence units exist in a state of natural economy or are part of some surviving pre-capitalist economic system.

The issue of the commoditization of labor is debateable on two scores. First of all, it is rather misleading to focus just on the fact that the demand for “year-round” workers was limited, since this is true of even the most developed capitalist agriculture and, as Parvin Ghorayshi points out, even those peasants who farm subsistence units often have to earn extra money from outside their own agricultural activities. Secondly, one should not forget the very large numbers of laborers who previously resided in the countryside and who were then transferred to the urban market in the aftermath of the reform. This process, of the separation of the rural labor force from the means of production, was the complement to the commoditization of land itself.

My second substantive disagreement is on the question of the relations of production themselves; these are not, as I have already said, given a subordinate position in the Leninist criteria. The question of production relations is, however, distinct from that of capital accumulation, since it is possible to have a productive sector marked by capitalist relations of production but nonetheless stagnant and unable to fulfill the development of those productive resources associated with full capitalist expansion. This is what, in my view, has occurred in Iran. The question of what productive relations prevail is decided by the relationship between the laborer and the non-laborer and the means by which the surplus produced by the former is appropriated by the latter, i.e., it is a matter of class relations. In the Iranian case I would maintain that the main result of the land reform was that the mode of surplus extraction was to a great, if still incomplete, extent changed; from being one in which the surplus was exacted by non-monetary means based on forms of feudal rent, it became one in which surplus was extracted either via the wage form or by the exploitative purchase of the agricultural product from family units. To my knowledge, the incidence of pre-capitalist relations of production was not very widespread at the end of the land reform period.

The pre-capitalist relations have therefore been to a predominant extent dissolved. The transition to capitalism in Iranian agriculture promoted by the reform is therefore one that has been increasingly accomplished. This transformation goes together with low productivity and the failure to carry out substantial capital accumulation, a problem both the Pahlavi and Islamic Republican regimes have had to face.

How to cite this article:

Parvin Ghorayshi, Fred Halliday "Capitalism in Rural Iran," Middle East Report 98 (July/August 1981).

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