IN 1974, AFTER PLAYING the key role in the world oil cartel's decisions to hijack crude oil prices and drive them 400 percent higher in a matter of weeks, Shah Mohammed Reza Paahlavi peered down from the Olympus of petrodollars he saw arising and had a vision. Iran would become the world's fifth-ranking global power in 20 years by building up its military and industrial machines to reach a par with West Germany.His vision quickly became an article of faith for his nation.
But by mid-1976, a desperate shah, finally aware that his grand economic scheme had badly misfired and was out of control, sought help. Out of reflex, he ordered SAVAK, his secret police, to investigate what had gone wrong and to advise him on curbing inflation. Not surprisingly, the problems continued.
The enormous gap between the shah's vision of Iran and the reality, and the remedy he sought to close that gap, tell us much about the nature of the problems that today beset Iran. That country has gone through a year of violent upheaval and protests against the shah, who now appears to have ended his 37-year reign by going into exile.
Robert Graham's slender, premium-priced book focuses tightly on that crucial period. Graham is a British journalist who was Tehran correspondent for The Financial Times from 1975 to 1977. Skimping on political background in favor of economic detail, his book is an exercise in dispassionate, understated analysis. But his feeling that the shah dug his own grave with considerable American help comes through clearly.
The Illusion of Power spans the euphoric first days of 1974 when "camel money" seemed certain to remake the world, goes on into the "hyperboom" of 1975's frenetic spending, importing, building and planning to try to reach the sobering realization of what Graham rightly explores as "The Limits of Oil Wealth." It is an invaluable guide for anyone interested in the economic roots of the shah's despair.
Written a year ago and arriving now in the midst of the struggle for power in Iran, Graham's book is both more and less that it seems. It examines the quick breakdown of the shah's unstudied decision to plunge everything into building up industry to replace oil as Iran's major source of income. The lessons of Iran apply broadly to many of the other Third World nations in the oil cartel, but because of the great differemces in population pressures and national conhesiveness, the results may not be as stark for them as they have been for Iran. Graham points toward the need for a penetrating look at how the world has gone from the 1974 petrodollar psychosis to 1979, when the oil cartel nations collectively are likely to accumulate a smaller foreign currency surplus than Japan. We need a separate book to explore that development.
On Iran itself, Graham presents a clear analysis of the decline, but fails to point toward the fall, which was clearly on its way during the book's preparation. He demonstrates that many of the features of the shah's rule that outsiders thought of an strong points -- the consolidation of power, the brutal secret police, the arms build-up, even the warmest of embraces from Washington -- eventually proved to be the regime's fatal weak points. But then he concludes that "of those who wish change, the majority merely want observance of the Constitution, not an end to the shah." Graham himself presents evidence earlier in the book that in effect contradicts that conclusion:
"An Iranian ruler survives as long as he is successful," he writes, noting the inherently opportunistic nature of Iranian politices and loyalties. And then he goes on to document one of the most stunning, and costly, failures in our time.
The economic and political changes instituted in 1963 as part of the shah's "White Revolution," were not, as was claimed, about land and economic reform, but "merely marked the end of a Westernstyle parliamentary democracy" that Iran had known briefly "and the beginning of absolute monarchy," Graham contends.
Reacting to several nearly successful assassination attempts and the 1953 effort to topple him that was thwarted in part by the CIA, the shah broke up government ministries and military commands so they could be corrdinated only through him. The new system had "two faces -- the public or constitutional side, and the covert," i.e., the powerless parliament and courts, and the unfettered political police.
When he made his decision in August 1974 to double development spending overnight and take a run at truning Iran into West Germany, no one could or would tell him that trying to cram all the oil money into a run-down system incapable of absorbing it could lead ot disaster.
Money aupply grew by 37 percent in one month, imports doubled in a year government spending shot up 200 percent and endemic corrpution reached gargantuan and highly visible levels. The economic dislocation only intensified with 1975's sudden lurches in the other direction to cut money supply. The steady erosion of oil prices in 1976 and 1977 left the Iranian administration exhausted and broke. Chaos in the agricultural sector drove masses of peasants into the urban areas, and built a willing army for the religious revolt that began in early 1978.
In the mid-'73s, the Nixon Doctrine was encouraging the shah to believe Iran could be the regional gendarme of the United States. In persuading him to buy everything short of nuclear weapons, the Nixon and Ford administrations played good short term balance-fo-payment politics, but they may have ultimately damaged the U.S. by weakening the national standing of a ruler who had given our intelligence services carte blanche to operate against the Russians.
The Illusions of Power appears to have been rushed to the press, leaving some minor but irritating errors on display. Occidental Petroleum's Armand Hammer emerges as Arnold Hammer, General Bahktiar on page 70 regains his correct spelling of Bakhtiar by page 159, and Jim Akins' footnote status as an official of the Carter administration is likely to amuse both the former Nixon ambassador and the White House. Moreover, the structure of the book is awkward, engaging the nonspecialist rather late.
But this is a solid look at what turns out to have been a revolution-in-waiting. The book's strength lies in its clarity, balance and depth. In addition to helping us all rethink Iran, it is the kind of book that will contribute to redefining the analytical and economic directions foreign journalism must take in the 1980s.