Reconstruction of National Economy

  January 11, 2022   Read time 2 min
Reconstruction of National Economy
Government revenues also increased as trade recovered after World War I; as income tax – mainly on salaries – was introduced; and, most important, as state monopolies and taxes were imposed on a variety of consumer goods, especially sugar, tea, tobacco, cotton, hides, and opium.

Customs revenue jumped from 51 million qrans in 1921 to 93 million in 1925, and further to 675 million in 1940. Revenues from consumer taxes rose from 38 million qrans (rials) in 1925 to as much as 180 million in 1940. The tax on sugar and tea – introduced in 1926 – brought in 122 million qrans in 1928, 421 million in 1938, and 691 million in 1940. In other words, the revenue from sugar and tea alone rose sixfold. Total government income rose from less than 246 million rials in 1925–26 to more than 3,610 million in 1940–41. The British estimated that by 1935 more than 34 percent of this income was being spent on the armed forces.

The armed forces constituted the main pillar of the new regime. Reza Khan began work on the military immediately after the 1921 coup. He merged the Cossacks with the remnants of the gendarmerie and the South Persian Rifles to form a national army of 20,000. He replaced the Russian, Swedish, and British officers with his Cossack cronies. He took charge of road tolls and opium taxes in order to pay for this new army.

Within two years, he had five divisions totaling 30,000 men – separate divisions for Tehran, Tabriz, Hamadan, Isfahan, and Mashed. According to the British, he spent “the whole of 1921–23 building up a well-disciplined force... the first proper such force since the days of Fath Ali Shah in 1834.” This new army successfully crushed a number of provincial rebels – especially Kuchek Khan and the Jangalis in Gilan, Khiabani in Tabriz, Simku in Kurdestan, and Sowlat al-Dowleh in Fars. It also crushed gendarmerie mutinies led by Major Lahuti in Tabriz and Colonel Taqi Peysan in Mashed.

The armed forces continued to grow – especially after the introduction of conscription in 1925. The conscription law can be described as the regime’s central piece. With conscription came Iran’s first birth certification as well as mandatory family names. The conscription law required all able-bodied males over the age of twenty-one to serve two full years in active service and another four years in the reserves. The conscripts were drawn first from the peasantry; then from the tribes; and eventually from the urban population.

By 1941, the military had eighteen full divisions totaling 127,000 men – one division in each of the twelve provinces with extra ones on the northern border with Russia. The cavalry and mechanized divisions contained some 100 tanks and 28 armored vehicles. The air force had 157 planes; the navy 2 frigates and 4 gunboats.16 The services were coordinated by a newly created joint office of the chiefs of staff. In 1939, the war minister approached the British with an ambitious proposal to buy 30 Blenheim bombers, 30 Wellington bombers, 35 Hurricane fighters, and 30 American Curtis fighters. He argued that these planes could “come in useful for bombing Baku.”