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A review on the consequences of the monopoly of foreign trade
The huge money deposits of Iranians in the banks of Swiss and other countries , brought Iran to disrepute after the World War ||. Some analysts believed that the cause was the enforcement of the monopoly of foreign trade law.
Publish Date : 09:43 - 2021 April 05

Irdc.ir: The huge money deposits of Iranians in the banks of Swiss and other countries , brought Iran to disrepute after the World War ||. Some analysts believed that the cause was the enforcement of the monopoly of foreign trade law.


The monopoly of foreign trade, Politicization and Unilateralism

The government claimed that the purpose of the law was to control the imports and exports and support the domestic products. According to the law, the foreign trade was monopolized only for the government. The right to import and export every agricultural or industrial product and determination of the details such as the amounts was exclusively granted to the government. It seemed necessary for the government to gain control over the trade with Soviet Union and Germany (almost 60% of Iran's foreign trade - except oil - was with these two countries). The unilateral economic policy of Pahlavis and leaning on Germany caused great damage to Iran's economy. They could have taken multiple actions but only contacted with the Germans and even chose a German guy as the governor of the National Bank, who was later expelled because of embezzlement. Germany used the circumstance to put pressure on Iran by exporting goods to Iran with higher prices than a healthy system. The statistics show the damage of the unilateralism better. In 1925, the imported goods from Germany were about 2%, and it reached to 6.42% and 9.47 of exported goods in 1942. The Soviet Union and Britain were marginalized and Iran’s economy got totally dependent on Germany.


The monopoly of the foreign trade, the waste of national resources

At the beginning, the law was very beneficial for the country, the trade room had warned that the law must be enforced by the right people, but instead, the monopolized governmental companies took control of the situation and added to the complexity and deficiency of the process of trade and economy. People had to pay taxes even for domestic trades. They even had to have a passport to exit their own town. As the result of this, the private section investors could not serve the national development. The Rich started to buy lands instead of investing on industry, or they deposited their money in foreign banks.


The deficiency of the government in specilized decision making, weakening the national economy

At that time, the government had not reached to a point to be able to make specialized decisions to improve the economy. Reza Shah, following AtaTork's footsteps, paid great attention to industry more than agriculture. The wrong assumptions and false studies made a disaster. The right thing to do was to improve the industry of agriculture, such as silk and cotton. Ignoring agriculture had inappropriate consequences for the national economy. Paying too much attention to the industry caused 3.2% rise in urban population, while the rise in rural area was about 3.1. The big investments and great deal of indirect taxes , caused a huge rise in the prices. The cost of living raised more than 50% in about 5 years. And the burden was mostly on the employees and the poor.


Militiarism, the marginalized national economy

The monopoly of the foreign trade could have improved the producing economy, but instead, the military and the armed forces were strengthened during Reza Shah era. More than one third of the budget was spent in the ministry of War. From 1935-1939, the defense budget of Iran was 26-38% of the public budget. The latest equipment were always in the hands of the army of Tehran, in order to keep the crown safe. At that time, the governmental stock company had reduced the power of trade rooms, and limited their activities (only to 16 areas). In spite of the idea of AliAkbar Davar, a supporter of governmental economy during first Pahlavi era, that the only way to get over the crisis was to leave everything to the government, specialized committees had to be activated to improve the producing part of Iran's economy. But this fact was ignored, and the exported goods to Germany were mostly raw materials and nuts, and the only fully produced thing to be exported were rugs.


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