Following the 1979 victory of the Islamic Revolution in Iran and the subsequent Iraqi invasion, much of the data on Iran's post revolutionary economic affairs during the 1980's points to many undeniable economic shortfalls and setbacks. For an objective evaluation of these shortcomings it is best to overview some of the handicaps and disadvantages the economy faced during that somewhat turbulent decade.

An expected consequence of any revolutionary process is the resulting disorder in intersect oral relations stemmed in part by factors such as management labor disputes, an unstable banking system, capital flight, private sector disincentive and other factors that derive from such extenuating circumstances. To deal with these extraordinary circumstances and so as to avoid the total shut down of manufacturing, industrial, commercial or agricultural units (be they public or private), an emergency law entitled "Assignment of Temporary Public Managers" was enacted. It was within this context that the government at the time had no choice but to take control of a considerable number of economic enterprises. However, as it was not the ultimate objective of the government to supervise or hold these enterprises permanently, a second 'Law for the Protection and Development of Iranian Industries' was enacted in July of 1979. One of the key points of this law was the aim of preventing "government monopolies and encourage and support non state activities and private initiatives". As such, an entity aptly titled as the National

Iranian Industries Organization (NIO) was founded to implement this Law. NIO was mandated to review the status of economic enterprises covered by it and to undertake their re-assignment to the private sector.

Unfortunately, the establishment of the NIO coincided with the September 1980 invasion of Iran by Iraq, resulting in heavy damage to factories, power stations, oil installations and other key parts of the nation's infrastructure and caused the government of Iran to commit the majority of its resources and policies towards mounting a defense of its territorial integrity.

These extenuating circumstances, and the resultant private sector disincentives brought upon by the exigencies of the war led to expansive public sector involvement in the economy, and expectedly, impeded economic development while also disturbing the balance between the public and private sectors in the economy.

Despite these imposed conditions, public expenditures on defense were kept from rising steeply by mobilizing private financial contributions for the war effort. The budget deficit was held, on average, below 8% of G.D.P. by cutting down on non-priority outlays1. Adverse effects of inflation on low and fixed income grades were reduced through price subsidies, rationing and direct distribution.

Following the end of the war with Iraq in 1988, the country's full scale re-construction efforts commenced. Economic policy changed from one of war orientation to a framework of peace time re-construction. Major economic policy changes were aimed at the reduction of government control, the prevalence of market forces and the implementation of de-regulatory economic liberalization and privatization policies combined together for the stimulation of private sector incentive.

The result of these policies can be best exemplified by the implementation of the nation's two post-war Five-Year Development Plans as detailed in sections II and III below.