2. State and Politics
Muhammad Reza Shah Reza Shah’s dream of building a massive state structure. One of the pillars holding up his state was the military. In its share of the annual budget went from 24 to 35 percent. By 1975, the shah had the fifth largest army in the whole world.
Both the cabinets and parliaments were deemed as the rubber stamps of the shah. In the words of one foreign diplomat, the shah treated his prime ministers and other ministers as if they were office boys.
In the parliament, at first he constructed two parties: National Party and New Iran Party. These two parties became known interchangeably as the “yes” and the “yes, sir” or “yes, of course” parties.

3. SAVAK
With the help of the FBI and the Israeli Mossad, the Shah established in 1957 a new intelligence agency, SAVAK. The agency eventually grew into some 5,000 operatives and an unknown number of part-timer informers.
In the words of a British journalist, SAVAK was the shah’s “eyes and ears, and where necessary his iron fist.”
In 1976, Amnesty International reported that “no country in the world has a worse record in human rights than Iran.”

4. White Revolution
In 1963, he launched a White Revolution explicitly designed both to compete with and preempt a Red Revolution from below.
The White Revolution brought about a minor industrial revolution. The state improved port facilities, expanded Trans-Iranian Railway, and financed petrochemical plants, oil refineries and hydroelectric dams. Moreover, the state bolstered the private sector both by erecting tariff walls to protect consumer industries and by channeling low interest loans to court favored businessman.
As an outcome, the number of industrial enterprises in the country increased dramatically. For instance, while the number of large factories employing more than 500 workers was fewer than 100 in 1953, it rose to more than 150 in 1975.

5. Social Policies
After the launching of the White Revolution, the state also pressed ahead with social programs. For instance, the number of educational institutions grew threefold, and the literacy rate increased from 26 to 42 percent. The number of students increased dramatically at all levels of the education.
Health programs increased the number of doctors, nurses, medical clinics and hospitals. These improvements, together with the elimination of famines and childhood epidemics, raised the overall from 19 million in 1956 to 33,5 million in 1976.

6. Class Structure-1
At the apex was an upper class formed of a narrow circle of families linked to the Pahlavi court. Together these families owned 85 percent of the large firms involved in insurance, banking, manufacturing, and urban construction.
With the improvements of education facilities, modern middle class, including civil servants, teachers, managers, engineers, and other professionals, expanded. These people, who could be called as salaried middle class numbered more than 700,000, some 9 percent of the working population.
As an outcome of industrial investments, the urban working class numbered as many as 1.3 million, more than 30 percent of the labor force.

7. Class Structure-2
While modern middle class and working class were expanding in size, “traditional” social groups such as shopkeepers (bazaaris) and religious scholars (ulama) were still important actors in social, economic, political and cultural life.
Despite economic modernization, in the mid-1970s the bazaar continued to control as much as half of the country’s handicraft production, two-thirds of its retail trade, and three quarters of its wholesale trade.
Bazaaris and their sons were increasingly crossing over into “modern” sectors of the economy. Numerous industrialists had their origins in the bazaar, and modern educations were opening new career paths for the younger generation.

8. Social Tensions
Neither intelligentsia nor the urban working class had organizations that had in one way or another represented their interests.
The regime’s preferred method of development had widened the gap between haves and have-nots. Its strategy was to funnel oil wealth to the court-connected elite who would set up factories, companies, and agro-businesses. In theory, wealth would trickle down. But in practice, wealth tended to stick at the top, with less and less finding its way down on the social ladder. By the 1970s, according to the International Labor Office, Iran had one of the very worst unequal income distribution in the world.

9. Urban Centers and Inequality
In the course of the 1960s and 1970s, millions of peasants and landless farm laborers migrated to giant slums in the cities. The number of Iranians living in cities rose constantly from 23 percent of the population in 1941 to 47 percent in the late 1970s.
The population of Tehran doubled in size from 1970 to 1977 alone, reaching a population of five million. And in this city, rich lived in their northern palaces and the poor in their shantytown hovels without some basic public services. According to an academic study, in the 1970s, forty percent of all lodgings were over-occupied, and 31 percent of all families lived in a single room.

10. Quiz
Explain the following terms in a short paragraph. In your answers, discuss when, where, why and how questions whenever it is relevant (5 points each)
The Suez Crisis
The Oslo Accords