| Summary: | This is a study of the impact of international political relations on the domestic economic policy choices of an oil-exporting developing country with special reference to the case of Iran during 1973-1978. These years began with the four-fold increase in oil prices and ended in revolution with the overthrow of Mohammad Reza Pahlavi, the Shah. The analysis is centered on the inter-relationship between the political and the economic to find an explanation for the Shah's decision to adopt a big push industrialisation strategy in 1974, against the advice of his technocrats, and the reasons for its failure. It is concentrated on two inter-related themes, the nature of the state and its role in the country's industrial development and the relationship between international political factors and domestic economic policy choices. It is argued that the international political dimension played a crucial part in the Shah's decision to adopt a big-push strategy but has usually been ignored. The Shah was an ambitious man who sought to purge the country's humiliations at the hands of the great powers - Britain, the former Soviet Union and the USA - by building up the country's military and economy through import substitution industrialisation, in the hope of propelling it into the league of top five world powers. Import-substitution industrialisation has fallen out of favour but we believe it can be a valid development strategy. Its shortcomings in Iran's case were mainly due to the form of its implementation. The economy was unable to absorb over-accumulated funds caused by the sudden increase in oil prices in late 1973. It was in this rush to industrialise, and the desire to impress the outside world, that the roots of the failure of the Shah's big push industrialisation policy lay.
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