1. United Nations, Public Finance Information Papers: Iran (New York: United Nations, 1951), pp. 7 and 21Google Scholar.

2. Plan Organization, Review of the Second Seven Year Plan Program of Iran (Tehran: Plan Organization, 1960), p. 55Google Scholar.

3. Baldwin, George B., Planning and Development in Iran (Baltimore: Johns Hopkins Press, 1967), p. 12Google Scholar.

4. Ibid., p. 106; and National Bank of Iran, The Thirty-Year History of the National Bank of Iran, 1307-37 (1928-58) (in Persian; Tehran: National Bank of Iran, 1959), p. 200Google Scholar.

5. Between 1936 and 1939, the cost of living index rose by 43 percent. National Bank of Iran, Bulletin, Vol. 24, No. 172 (1956-57), p. 346. The major factors responsible for the inflationary pressures were the stagnation of agricultural production, restriction of consumer good imports, and the overall high level of public investments, particularly in transport and construction projects, which were partly financed through borrowing from the domestic banking system. Between 1941 and 1944, wholesale prices increased by more than 200 percent, and the cost of living index rose by about 300 percent. National Bank of Iran, The Thirty-Year History of the National Bank of Iran, p. 219. The main fuel for the wartime inflation was provided by the military expenditures of the Allied forces in Iran.

At the same time, the unavailability of all types of imported commodities as well as serious food shortages limited the aggregate supply of goods. Aside from successive crop failures during this period, the main reason for food shortages was the fact that not much was left after the requirements of the Allied forces were satisfied. Furthermore, the limited available supplies of food and other commodities could not be distributed within the country, since Iran's transport facilities were also monopolized for military purposes by the Allies. For a brief review of the main economic events of this period, see Lloyd, E. M. H., Food and Inflation in the Middle East, 1940-45 (Stanford: Stanford University Press, 1956), pp. 157-69Google Scholar; and Pirnia, H., A Short Survey of the Economic Conditions in Iran (Tehran: Economic Information Bureau, 1945), pp. 25-30Google Scholar.

6. Including the Morrison-Knudsen International Company and the Overseas Consultants Incorporated.

7. For more details on the limited results of the First Plan, see Plan Organization, Review of the Second Seven Year Plan, p. 5; and Motamen, H., “Development Planning in Iran,” Middle East Economic Papers, Vol. 3 (1956), pp. 100-108Google Scholar.

8. See Waterston, Albert, Development Planning: Lessons of Experience (Baltimore: Johns Hopkins Press, 1956)Google Scholar, pp. 61ff; and Bent Hansen, “Planning and Economic Growth in the UAR (Egypt), 1960-65,” in Vatikiotis, P. J., ed., Egypt Since the Revolution (New York: Frederick A. Praeger, 1968), p. 20Google Scholar.

9. Brutton, Henry J., “Notes on Development in Iran,” Economic Development and Cultural Change, Vol. 9 (July, 1961), p. 633Google Scholar.

10. Plan Organization, Review of the Second Seven Year Plan, pp. 3 and 14-15, and idem, Progress Report on the Second Seven Year Plan (in Persian; Tehran: Plan Organization, 1964), p. 10.

11. Bjorn Olsen, P. and Rasmussen, P. N., “An Attempt at Planning in a Traditional State: Iran,” in Hagen, Everett E., ed., Planning Economic Development (Homewood, Ill.: Richard D. Irwin, Inc., 1963), p. 226Google Scholar.

12. For a brief discussion of some of these conflicts, see Myint, H., The Economics of the Developing Countries (New York: Hutchinson and Co., 1964), pp. 167-68Google Scholar.

13. There are different, but essentially equivalent, methods of specifying the relative importance of the various objectives. See Marglin, Stephen A., Public Investment Criteria (Cambridge, Mass.: M.I.T. Press, 1967), pp. 23-26Google Scholar.

14. Law of the Second Seven Year Development Plan of Iran (Tehran: Government of Iran, 1956), Article 1.

15. On these important distinctions, see Tinbergen, Jan and Bos, Hendricus C., Mathematical Models of Economic Growth (New York: McGraw-Hill Book Co., Inc., 1962), pp. 113-14Google Scholar.

16. Law of the Second Seven Year Development Plan, Articles 1 and 2.

17. Plan Organization, Review of the Second Seven Year Plan, pp. 6-7

18. Although the planners did not consciously adopt a development strategy, the planned pattern of investments implied an unbalanced development strategy, via emphasis on social overhead capital. This implied strategy, however, had very little in common with the unbalanced growth strategy in the sense of Hirschman. The latter strategy is based on the recognition of, and the emphasis given to, the existence of technological complementarities (vertical linkages) between industries at different stages of production. As a result, it favors a development policy that concentrates on particular strategic sectors where the linkage effects are strongest, viz., where the network of input-output relations is thickest. The kind of deliberate imbalance proposed by Hirschman is one that aims at maximizing the total linkage effects, by choosing the appropriate investment projects. It also aims at determining a sequence of expansion that will maximize induced decision making in the economy. These issues did not receive any consideration from the Iranian planners. In any event, it is interesting to note that, due to weak backward and forward linkage effects of the transport sector, Hirschman himself does not favor the strategy of unbalanced growth via emphasis on investment in transport facilities. See Hirschman, Albert O., The Strategy of Economic Development (New Haven: Yale University Press, 1958), pp. 76-119Google Scholar.

19. See Waterston, op. cit., pp. 61-63.

20. The Second Plan, as originally intended, was to have been entirely financed domestically by the country's oil revenues; no foreign borrowing was envisaged. A scheme was formulated for dividing the oil revenues among the Plan Organization, the Ministry of Finance, and the National Iranian Oil Company. According to this arrangement, Plan Organization would have received a total of 88 billion rials ($1.2 billion) from the country's total oil revenues during the whole sevenyear period. This compared rather favorably with the original cost estimate, 70 billion rials ($933 million), of the investment program. But the actual development turned out to be quite different from the original intentions. As a result of rises in the ordinary expenditures of the government, the original scheme for the allocation of oil revenues was changed drastically on two occasions, both at the expense of the share going to the Plan Organization. In 1958, the Plan Organization's share was reduced from 80 to 60 percent for the remainder of the plan period. This lowered total oil revenues of the Plan Organization, for the whole seven-year period, to about 76.5 billion rials. In March 1959, the government once again reduced the Plan's share, limiting it to 10 billion rials ($130 million) for 1338 (1959-60) and 55 percent of total oil revenues for the remaining two and onehalf years of the plan period. These two successive reductions meant that the Plan Organization's receipts from oil revenues, for the seven-year period, would not exceed some 65.8 billion rials ($860 million); thus necessitating foreign borrowing by about 18 billion rials ($240 million) to finance the 84 billion rials program. However, the actual amount of foreign loans utilized by the Plan Organization during the entire seven-year period amounted to 25 billion rials (about $330 million). In sum, approximately one-third of the investments were foreign financed. Had the Plan Organization received 88 billion rials from oil revenues, as originally planned, no long-term foreign borrowing would have been required. But, during the plan period only about 50 percent, instead of the originally specified 70-80 percent, of the oil revenues were used for financing the Plan. On the other hand, about 40 percent of the country's total oil revenues during the plan period were used in financing the ordinary expenditures of the government—substantially more than the share, about 15 percent, originally intended for the Ministry of Finance. See Law of the Second Seven-Year Development Plan, Article 8, Plan Organization, Review of the Second Seven-Year Plan, annex 2; idem, Economic Report, 1961 (Tehran: Plan Organization, 1962), p. 6; and National Iranian Oil Company, Role of the Oil Industry in Iran's Economy (Tehran: National Iranian Oil Company, 1967), Tables 2 and 6.

21. Plan Organization, Review of the Second Seven-year Plan, pp. 34, 41-42, and annex 1-3; idem, Progress Report on the Second Seven-year Plan, pp. 29-33 and Table 14; and idem, Third Plan Frame: Transport and Communications (Tehran: Plan Organization, 1961), p. 23.

22. See Olsen and Rasmussen, op. cit., pp. 226-31; and Amuzegar, J. “Iran's Economic Planning Once Again,” Middle East Economic Papers, Vol. 4 (1957), pp. 1-11Google Scholar.

23. For a detailed discussion of these developments, and their underlying causes, see Farhad Daftary, “The Balance of Payments Deficit and the Problem of Inflation in Iran, 1955-1962,” Iranian Studies, Vol. 5 (Winter 1972), pp. 2-24.

24. Plan Organization, Review of the Second Seven-year Plan, pp. 15-18.

25. “Legal Decree on the Third Plan, passed by the Council of Ministers on September 6, 1962,” Central Bank of Iran, Bulletin, Vol. 1 (November-December, 1962).

26. Plan Organization, Outline of the Third Plan (Tehran: Plan Organization, 1961), pp. 35 and 40Google Scholar.

27. Olsen and Rasmussen, op. cit., p. 237.

28. Plan Organization, Outline of the Third Plan, pp. 37-39; and Islam, N., “Methodology of Development Planning: A Case Study of Iran,” Pakistan Economic Journal, Vol. 12 (December, 1962), p. 2.Google Scholar

29. George B. Baldwin, Planning and Development in Iran, p. 169.

30. The role of these objectives, as guides to resource allocation, was stated by the planners as follows: “Where a choice must be made between two projects whose contributions to national income are approximately equal, the choice runs in favor of the one that offers more employment or a better pattern of income distribution.” See Plan Organization, Outline of the Third Plan, p. 41.

31. Ibid., pp. 40-41.

32. Ibid., p. 45.

33. In addition to fixed investment expenditures, the Plan also made allowance for certain supplementary expenditures, and the sum of the two was defined as development outlays. The supplementary expenditures were allowed for at the rate of 20 percent of total fixed investments planned for each of the two sectors. Thus, the overall magnitude of the development expenditures originally envisaged under the Third Plan was raised to 348 billion rials.

34. Jan Tinbergen has expounded his original stage method of planning in many places; for example, see his “Planning in Stages,” Statsokonomist Tiddskrift, Vol. 76 (March, 1962), pp. 1-20; and idem, “Simple Devices for Development Planning,” in E. A. G. Robinson, ed., Problems in Economic Development (New York: St. Martin's Press, 1965), pp. 373-83. This model is summarized and appraised in Hansen, Bent, Lectures in Economic Theory: Part II, the Theory of Economic Policy and Planning (Lund: Student Litteratur, 1967), pp. 106-9Google Scholar.

35. See Tinbergen, J., Development Planning (New York: McGraw-Hill Book Co., 1967), p. 75Google Scholar; and Hollis B. Chenery, “Approaches to Development Planning,” in E. A. G. Robinson, ed., Problems in Economic Development, p. 391.

36. For more details, see Farhad Daftary, Economic Development and Planning in Iran, 1955-1967 (Ph.D. dissertation, University of California, Berkeley, 1971), pp. 433ff.

37. On the basis of reclassifying the expenditures of the revised Second Plan, the “core” programs of the latter would account for only about 18 percent of the total. Plan Organization, Outline of the Third Plan, p. 66.

38. For a discussion of the intra-sectoral allocations, see Daftary, Economic Development and Planning in Iran, pp. 441-55.

39. The target rate of 4.1 percent was quite realistic, since the actual rate attained during 1950-59 had been about 3.3 percent. See Plan Organization, Outline of the Third Plan, p. 113.

40. See, for example, Bartsch, William H., Problems of Employment Creation in Iran (Geneva: International Labour Office, 1970), pp. 29-30 and 56-57Google Scholar.

41. Shortages were particularly pronounced for agricultural products of animal origin. The imports of these products increased from 974 million rials in 1963 to 1,883 million rials in 1967. Imports of grains also rose rapidly during the same period of time. See Plan Organization, Fourth National Development Plan, 1968-72 (Tehran: Plan Organization, 1968), p. 19Google Scholar; and Central Bank of Iran, Annual Report as at March 20, 1968, pp. 104-105.

42. Actual investment figures are the estimates of the Central Bank of Iran as published in National Income of Iran, 1962-67 (in Persian; Tehran: Central Bank of Iran, 1969).

43. Actual developments proved to be quite different from the situation envisaged in the plan frame in that both revenues and current expenditures of the public sector increased at much higher rates. Such was particularly the case for the oil revenues, which during 1963-67 increased at an average rate of 18 percent as compared to 5 percent assumed in the plan frame. As a result, during the plan period oil revenues accounted for almost 50 percent of total public revenues, as against the forecast of 38 percent contained in the plan frame. Therefore, although non-development expenditures had also increased at a much higher rate (12 percent) than assumed initially (5 percent), actual public savings were larger than the relevant forecasts of the plan frame. It was due to these developments that the size of the public sector program was raised. During the Third Plan period about 67 percent of the country's oil revenues, amounting to 145 billion rials, were used in financing the public development program. Abstracting from the Plan Organization's non-development outlays, these oil revenues actually financed about 70 percent of the public development outlays. Thus, one-third of the country's oil revenues (not to mention almost all of the oil bonuses) was used in meeting the rising current expenditures of the government. See Central Bank of Iran, Annual Report as at March 20, 1967, pp. 55-56, and 67; idem, Annual Report as at March 20, 1968, pp. 219-27; Plan Organization, Outline of the Third Plan, pp. 50-51 and 54-57; and idem, Progress Report on the Third National Development Plan (in Persian; Tehran: The Majlis Press, 1968), p. 22.

44. See Plan Organization, Third Plan Frame: Agriculture (Tehran: Plan Organization, 1961)Google Scholar; Price Gittinger, J., Planning for Agricultural Development: The Experience of Iran (Washington, D.C.: National Planning Association, 1965)Google Scholar; and idem, “Planning and Agricultural Policy in Iran - Program Effects and Indirect Effects,” Economic Development and Cultural Change, Vol. 16 (October, 1967), pp. 107-17.

45. Plan Organization, Progress Report on the Third National Development Plan, pp. 37 and 59-63; and Central Bank of Iran, Annual Report as at March 20, 1968, p. 112.

46. See Avramovic, D., “Industrialization of Iran: The Records, the Problems and the Prospects,” Tahqiqat-e Eqtesadi, Vol. 7 (Spring, 1970), pp. 14-46Google Scholar; and Plan Organization, Third Plan Frame: Industries and Mines (Tehran: Plan Organization, 1961)Google Scholar.

47. Plan Organization, Progress Report on the Third National Development Plan, p. 82.

48. See Herman Der Tak, G. Van and Weille, Jan de, Reappraisal of a Road Project in Iran (Washington, D.C.: International Bank for Reconstruction and Development, 1969)Google Scholar.

49. All in all, some 3,800 kilometers of main roads were constructed or improved, including the completion of work on some 1,250 kilometers of the Second Plan's road program. This represented a 75 percent fulfillment of the Third Plan's target of 5,054 kilometers. Plan Organization, Progress Report on the Third National Development Plan, pp. 135-42 and 154-63.

50. Plan Organization, Third Plan Frame: Education (Tehran: Plan Organization, 1961), p. 34Google Scholar; and idem, Progress Report on the Third National Development Plan, p. 187.

51. Plan Organization, Progress Report on the Third National Development Plan, p. 188.

52. For further details, see Blandy, Richard and Neshat, Mahyar, “The Education Corps in Iran: A Survey of its Social and Economic Aspects,” International Labor Review, Vol. 93 (May, 1966), pp. 521-29.Google Scholar

53. It should also be mentioned here that perhaps the most important development since 1955 in Iran's public finances (aside from the unprecedented importance acquired by the oil revenues) has been related to a major change in 1964, in the budgeting system of the country. In 1973, additional steps were taken towards improving Iran's budgetary system. For details, see Daftary, Farhad, “Development Planning and Budgeting in Iran,” in CENTO Seminar on Budget Administration (Ankara: Central Treaty Organization, 1973), pp. 221-32Google Scholar.

54. Plan Organization, Fourth National Development Plan, p. 39.

55. Ibid., p. 48.

56. Ibid., pp. 68-69.

57. Ibid., pp. 53-59.

58. Ibid., pp. 55-56.

59. Ibid., p. 41.

60. More specifically, the total planned public development outlays consisted of (1) 380.2 billion rials in fixed investments, (2) 64.9 billion rials in recurrent development outlays, and (3) 34.9 billion rials in the form of financial assistance, out of the Plan Organization's funds, for fixed investments by the private sector. On this basis, total planned fixed investments of the private sector would amount to about 366 billion rials. Ibid., pp. 60 and 63; and The Law of the Fourth National Development Plan (in Persian; Tehran: Imperial Government of Iran, 1968), pp. 3 and 17-18.

61. Plan Organization, Fourth National Development Plan, pp. 53-60.

62. Initially three different growth targets were considered. See Bharier, Julian, Economic Development in Iran, 1900-1970 (London: Oxford University Press, 1971), p. 99Google Scholar.

63. Central Bank of Iran, Annual Report as at March 20, 1973, pp. 12-13 and 93-94.

64. Ibid., p. 55.

65. For further details, see ibid., pp. 168-70; and Plan Organization, Fourth National Development Plan, p. 57.

66. On the basis of the estimates by the Central Bank of Iran, whereas in 1971-72 Iran's GNP grew at the average annual rate of about 14 percent with 6 percent annual rise in prices, in 1973 the real growth rate amounted to almost 34 percent with a 13 percent rise in the general level of prices.