Iran has a storied history as a nation-state, dating back at least as far as 559 BCE, when Cyrus the Great launched the conquests that would amass a vast Persian empire stretching from northern India to Greece. This history remains as fiercely cherished by Iranians as it is contested within their political and cultural life. As a result, there is a natural temptation to reach back through the millennia to situate the issues and dynamics of modern Iran within their broader historical context. While scholars have done valuable work on the economic patterns of early Iranian history, the late nineteenth and twentieth centuries offer the most relevant starting point for this study.

This is when the contours of the modern Iranian state became manifest, thanks to repeated social uprisings, the centralizing force of an assertive new monarchy, and the country's integration into an emerging international petroleum industry. Over the same period, a powerful narrative emerged in Iran fusing economic grievances with resentment toward foreign intrusions and perceptions that the state had betrayed the country's values. These dynamics would crescendo in 1979, and they continue to shape Iran's evolution today. This history matters not because Iranians invoke it so frequently and with such passion, but because this context forged state and market institutions, ideological perspectives, and grievances.

This chapter reviews the key episodes and developments in shaping Iran's prerevolutionary political and economic context and sketches the backdrop that helped set the stage for themassive upheaval of the revolution and the adoption of a dualistic approach to development under the postrevolutionary regime. Such a historical perspective offers a richer understanding of the historical legacy that confronted the Islamic Republic and the salience of economic issues during the theocracy's reign.

THE QAJAR LEGACY

At the dawn of the twentieth century, the country now known as Iran seemed more historical relic than nation-state.