^{page 328 note 1} The Iranian legislation defined budget, as ‘The government budget is a document of the estimation of the receipts and expenditures of the country for a specified period of time and is approved as a law. The said period is called a financial year and is equal to a solar year.’ This definition is quite similar to the definition of the French counterparts; in particular the law of 31 May 1862.Google ScholarZandi-Haqiqi, Manuchehr, Malyeh ‘Umumi: Budget va Khazaneh (Public Finance: Budget and Treasury), Tehran, 1346 (1967), 3rd ed., pp. 13–14.Google Scholar

^{page 328 note 2} The Iranian government adopted a policy of rapid industrialization with a goal of independence from foreign consumer goods imports. Hence, it encouraged domestic industries, instituted high protective duties on foreign consumption goods, and gave total or partial tax exemption for capital goods imports. Besides, it established and managed government enterprises totalling 150 by the end of Reza Shah's reign (1941). Feroozi, Ferydoon, Economic Conditions of Iran (Baltimore: Westinghouse Electric Corporation, 1966), pp. 118–19.Google Scholar

^{page 328 note 3} Ibid. pp. 223–40.

^{page 328 note 4} Articles 12, 13, 14, 15 and 16 of the Public Finance Law as reported in Jazayiri, Sh., Qavanin-i Mâlyeh va Muhâsebâti ‘Umumi (The Laws of Taxation and Public Finance) (Tehran: Tehran University Press), vol. 1, 1342 (1963), 2nd ed., p. 66,Google Scholar and Iqtidari, A., Tehrani, M., and Ittihād, M., Boodjeh (Budget) (Tehran, 1347 (1968)), p. 156.Google Scholar

^{page 329 note 1} Waterson analyzes this lack of coordination in the following terms, ‘If current funds for maintenance and operation are not made available, full use cannot be made of facilities created by capital expenditures. For instance, in their review of the results obtained from the Second-Five Year Plan, Iran's planners indicated that what happened in their country when current expenditures were not coordinated with capital outlays, “The Agricultural and irrigation programs have suffered greatly from this lack of coordination between investment and operating requirements. We see appropriations for animal husbandry stations that are not given the necessary operating budget for personnel and investigations…”’ Waterson, Albert, Development Planning: Lessons of Experience (Baltimore, Maryland: The Johns-Hopkins Press, 1965), pp. 225–6, also see p. 230.Google Scholar

^{page 329 note 2} Prime Minister Assadollah Alam had complained to The Majlis concerning the officials disregard for facts and figures. He said, ‘when he took over, he received a phone call from the chairman of the Budget Commission asking: “What kind of budget would you like, Sir? With a reasonable deficit, a balanced one, or even with a surplus?”’ Echo of Iran, Iran Almanac, Tehran, 1964, 4th ed., pp. 352–3.Google Scholar

^{page 330 note 1} Our analysis is based on the Budget Acts 1343–1349. The actual revenues and expenditure will not generally be available for several years (legally 12 years) after the budget act is carried out. Even though somewhat different, the Budget Acts are quite adequate for the purpose of this study.Google Scholar

^{page 330 note 2} Information on birth and death rates are in the nature of estimation. Therefore, the compounded rate of growth of the population between 1956 and 1966 is measured via the following formula: Solving the equation we have R = 0·02857 or 2·857 per cent. Based on this rate of growth we have computed the population for 1964–70 in order to get the per capita budget expenditure.Google Scholar

^{page 333 note 1} The following table for the price of used cars is based on Tehran Economist, 29 05 1971, vol. 19, no. 888, p. 44. The information for wages are computed on the basis of a table in Echo of Iran, Iran Almanac, Fifth edition, Tehran, 1966, p. 577.Google Scholar

^{page 334 note 1} Jazaeri, Sh., op. cit. p. 385.Google Scholar

^{page 334 note 2} See Heller, Walter W., ‘Fiscal Policies for Underdeveloped Economies’, in Wald, H. P. (ed.), Conference on Agricultural Taxation and Economic Development, International Program in Taxation, Harvard Law School, Cambridge, 1954, pp. 63–8.Google Scholar

^{page 335 note 1} Ramazani, R., ‘Iran's Changing Foreign Policy: A Preliminary Discussion’, The Middle East Journal, vol. 24 (Autumn 1970), p. 435.Google Scholar

^{page 336 note 1} The cost-of-living index was available on the base of 1338 = 100 in Bank Markazi Iran, Bulletin, July-August 1970, p. 225. Adjustments were made to change the base to 1343 = 100. Since no index was available for 1349, the average price increase of 1343 to 1348 (1·18) was added to 1348 for the year 1349.Google Scholar

^{page 336 note 2} A view that military strength is essential for economic development was expressed by His Majesty, the Shah of Iran in his inaugural speech to the Joint Session of the Legislature, on 31 August 1971. Kayhan Havai, 1 September 1971 (Shahrivar 10, 1350/3992).Google Scholar

^{page 339 note 1} Iran, Bank Markazi, Annual Report and Balance Sheet as at March 20, 1970, Tehran, 07 1970, p. 212.Google Scholar

^{page 339 note 2} In the U.S. ‘the interest in analysis of economic importance of governmental activities dates specifically from the depression of the 1930’s, the efforts of the government to cope with that depression, and the rise of Keynesian economics to provide a theoretical framework for dealing with economic stabilization. Most of the practical work and the conceptual development in the area has been carried on by national income statisticians…‘. Burkhead, Jesse, Government Budgeting (New York: John Wiley, 1956), p. 215.Google Scholar

^{page 339 note 3} Higgins, Benjamin, Economic Development; Problems, Principles and Politics (New York: W. W. Norton, 1968, revised edition), p. 157.Google Scholar

^{page 340 note 1} The Keynesian analysis argues that there is not a one-to-one relationship between spending and national income. Only at a specific level an equilibrium between the two is established (at E in the figure below). The multiplier phenomenon is explained as follows: When the government spends a certain extra sum of money (▵I) the expenditure becomes new income for the recipient who spends a part (MPC = marginal propensity to consume) and saves a part (MPS = marginal propensity to save). The expenditure of the recipient (MPC.▵I) becomes new income for the second recipient who spends part and saves the rest. This process continues until the new income becomes insignificant. The ultimate change in income (▵Y) is equal to the extra expenditure (▵I) times the multiplier which by definition is equal to I/(I–MPC). Expressed in notation the above analysis is as follows: This analysis is not, however, precise. First, it assumes that there is no lag in expenditure from one phase to another. Secondly, full employment is prevailed. Thirdly, the multiplier is not changing. These assumptions may not necessarily hold true. Therefore, a precise calculation of the impact is not possible via this method. The analysis is, however, valuable for the proof of the fict that the government expenditure is not neutral.Google Scholar

^{page 340 note 2} Iran, Bank Markazi, National Income of Iran (Tehran, 09 1969), p. 136.Google Scholar

^{page 340 note 3} One major reason for this relatively low level of inflation was the fact that there was considerable deficit balance of payments between 1344 and 1348 ($281.6 million). Deducting the surplus of $95.4 million in 1343, the net amount of deficit during the above period was $186.2 million (or 14058.1 million rials). This deficit had decreased the volume of money available vis-à-vis goods and services in the country. Therefore demand-pull inflation was kept low. For the balance of payment see Iran, Bank Markazi, Annual Report and Balance Sheet as at March 20, 1970 (Tehran, 07 1970), p. 86.Google Scholar

^{page 341 note 1} Iran, Bank Markazi, Annual Report and Balance Sheet as at March 20, 1969 (Tehran, 07 1969), p. 52. The percentages of 1341 and 1347 gross domestic products do not add up to one because the approximately 30 % remaining were other items.Google Scholar

^{page 341 note 2} Iran, Bank Markazi, Annual Report and Balance Sheet as at March 20, 1969 (Tehran, 07 1969), p. 44,Google Scholar and ibid., as at March 20, 1970 (Tehran, 22 July 1970), p. 20.

^{page 341 note 3} Ibid., as at March 20, 1969 (Tehran, July 1969), p. 44.

^{page 342 note 1} Firoozi, Ferydoon, ‘Iranian Censuses 1956 and 1966; A Comparative Analysis’, The Middle East Journal, vol. 24 (spring 1970), p. 227.Google Scholar

^{page 342 note 2} The unemployed were defined as ‘those who were able to work and were actively seeking work during the 7 days preceding the enumerator's visit’. The Imperial Government of Iran, Iranian Statistical Center, National Census of Population and Housing, November 1966, vol. 168 (Tehran, 03 1968), p. c.Google Scholar

^{page 342 note 3} International Labour Office, Problems of Employment Creation in Iran (Geneva, 1970), p. 23.Google Scholar

^{page 342 note 4} Bartsch, William H., ‘The Industrial Labor Force of Iran: Problems of Recruitment, Training and Productivity ’, The Middle East Journal, vol. 24 (winter 1971), pp. 25–6.Google Scholar

^{page 342 note 5} Meir, Gerlad M. (ed.), Leading Issues in Economic Development: Studies in International Poverty (Oxford University Press, New York, 1970), 2nd ed., pp. 84, 116–17.Google Scholar