Persian Empire 1845

Chapter 613 Going upstream
"This requires the Shah's approval. Did you show it to the Shah?"

The Chancellor of the Exchequer nodded. "It has been submitted, and Shah has expressed his approval."

Since the Shah had agreed, the Prime Minister had no intention of stopping him. Making a change is sometimes extremely difficult, especially for the Shah, who is responsible for supporting the entire nation and its people. His government officials must provide adequate assistance.

In July, the Iranian parliament approved a revised banking law, allowing the government to issue bank licenses, but these licenses must be subject to inspection and supervision by the Financial Authority. Banks are also required to pay an annual financial transaction tax and deposit one-quarter of their principal with the central bank.

Despite the stringent requirements, 18 private banking licenses were issued. The largest bank is Iran's Sadi Bank, whose shareholders are all members of the royal family, and its capital reaches 2500 million rials.

Iran has become one of the first countries to emerge from the economic crisis, without the long lines of unemployed seen in Europe, and its various economic indicators are within a healthy range. Furthermore, the trade treaty negotiated with the Far East has been ratified, and goods are flooding into the East like a surging tide.

Carpets from Tabriz, wool from Kerman, rose oil from Shiraz, and most importantly, standardized rifles produced by arsenals, were carefully packaged and shipped to the Far East. Iran unexpectedly became a new player in the Asian arms market, finding a foothold among the princely states and warlords of Southeast Asia with its positioning of being "cheaper than European goods and more reliable than locally made ones."

Meanwhile, raw silk and tea from the Far East, porcelain from Japan, and rice from Siam entered the Iranian market with lower tariffs, satisfying the consumption needs of the emerging middle class and reducing the cost of living for the lower classes.

Taking advantage of this construction opportunity, Iran launched a series of transportation and urban development projects in the East. Cities like Mashhad underwent a complete transformation, with straight, Western-style boulevards, underground drainage systems, and gas streetlights. Mineral resources from Afghanistan also began to be extracted and transported to Iran by rail.

European economists were curious about Iran's still-developing industry. They reasoned that for such late-developing countries to industrialize, they either needed tariff protection and state support like Germany, or complete reliance on foreign capital and technology like Belgium. However, Iran's practice presented a perplexing "heretical model." The country neither erected high tariff barriers nor attracted foreign investment, yet its industrial output grew against the global economic downturn.

Iran provided its answer at the end of the year. Mirza Reza Shiraz, a professor at the University of Tehran and a former student of Friedrich List, published a book titled "Autonomous Prosperity," which systematically describes Iran's economic policies and development.

The core argument of this book is that the path to industrialization for developing countries is not a choice between "free trade" and "protectionism," but rather the implementation of a sophisticated "protective integration" strategy. This involves remaining open to the global economic system to obtain resources while simultaneously building an "immune system" through non-tariff means to protect and nurture the independence and competitiveness of domestic industries.

He cited Iran's own policies as an example: during crises, private capital was hesitant to invest. The state, therefore, assumed initial risks by providing first-time orders and profit guarantees, encouraging private enterprises to expand. Once the market opened up, the state gradually withdrew, making way for private capital.

At the same time, social innovations such as mutual aid societies will be introduced to buffer and retrain the released workforce. Meanwhile, bank liberalization will guide capital flows towards a more dynamic private sector and emerging industries.

The book criticizes the currently popular free-market doctrine for its overemphasis on "the least interfering government is the best government," which completely ignores the fundamental role of modern state building. "Smith was correct in criticizing the excessive intervention of mercantilist governments in the economy. However, his conclusion of 'laissez-faire' is a dangerous overcorrection. How can a country without a unified market, standardized weights and measures, a modern legal system, universal education, and a railway network develop an efficient economy? These public goods all require a strong and capable state to provide them."

He was equally scathing towards the Ricardian school, stating directly that both Smith and Ricardo had designed a sweet trap for developing countries. It persuaded other nations to content themselves with playing the role of orchards, while Britain monopolized the position of factories.

"We revere Adam Smith as a sailor reveres the first naval charterer who drew the first map of his home port. His map was incredibly accurate for ships departing from the port. But our journey is to the stars and the sea, a new voyage full of unknowns and storms. If we hold this old map and expect it to guide us through all the reefs and icebergs, it is not only not a respect for our predecessors, but the most foolish desecration."

This book, translated into English, French, German, and other languages, has shaken the deeply entrenched free-market economics like a wave. The Iranian model has become an undeniable and powerful counterexample, forcing European economists to revise their models, or at least explain why that flawed theory succeeded in practice.

The German school of economics used this book to launch an attack on Britain, as they found a recent, successful case from the East to support the validity of their theory of state intervention. British publications, on the other hand, published a barrage of critical articles, accusing Shiraz of misinterpreting Smith's original intent and tainting the purity of economic science with political agendas.

Driven by national policies, Iran's steel and pig iron production reached 92 tons, with a growth rate exceeding 10% for two consecutive years. Although it still lags behind the UK, Germany, and France, it has surpassed the United States to rank fourth in the world.

In addition, Iran has also experienced rapid development in industries such as coal mining, ammonia fertilizer, cement, and machinery. Extensive infrastructure construction has fueled the growth of many related sectors, which in turn has driven growth in other related industries. This has allowed Iran to maintain its economic growth momentum.

石油可以说是伊朗一家独大的产业，光伊朗一地就占有原油生产的52%、煤油生产的60%、润滑油生产的55%。要是加上在全世界伊朗控制的产业，占有的份额就变成了97%、94%和81%。

American oil was practically under Iranian control, making it virtually impossible for ordinary capital to enter. In 1867, Iranian-controlled American refineries and oil wells merged into a single company called Standard Oil.

Some Americans don't want to lose control of the businesses, but they can't withstand the direct economic protection the companies provide. Which of Ohio's governors, state legislators, congressmen, and senators hasn't accepted political donations from these companies? Moreover, company employees generally earn twice as much as local employees and have access to newspapers as their mouthpiece. Even the president has to appease the companies to secure local votes.

After discovering vast oil fields, Pemex began production, and other facilities sprang up. However, due to the economic crisis, it dared not operate at full capacity, but Iranian capital remained. It was visible, but its influence was unshakeable.

(End of this chapter)