Another factor that contributed to the Shah’s fall from grace was his ongoing conflicts with the Islamic clergy during his rule, especially the Ayatollah Ruhollah Khomeini. According to Wagner, Khomeini became an Islamic mullah (teacher) in 1926, the same year that Reza Khan was crowned as shah. After Reza Shah was forced from power, Khomeini wrote a book that was highly critical of the deposed Shah, and accused him of abandoning Islamic principles. In later years he would level these same charges at Mohammed Pahlavi. The Ayatollah Khomeini would continue to be a vocal critic of the Pahlavi regime, and near the end would become the living symbol of those who were rebelling against it.[1]

Starting in 1963, with the launch of his White Revolution, the Shah began to alienate the Shiite clerics in Iran. The White Revolution reforms were, according to Wagner, a direct threat to the influence of the mullahs. The land reforms threatened their financial base, as most of the mullahs came from land owning families, the expansion of educational opportunities threatened their influence because in many small villages the mullahs were the only people who had received an education, and the establishment of women’s rights was seen as an anti-Islamic attempt to corrupt young women.[2]

As a response to the societal changes of the White Revolution, the clerics in Iran began to organize themselves and their followers into a strong front aligned against the Shah. According to Wagner, “As they [clerics] saw their income, their Islamic heritage, and beliefs increasingly threatened by an ever more secular government, they began to plan their own revolution”[3].

Also, during the years 1976-78 several events occurred that would bring the Shah’s conflicts with the clerics to a boiling point. First, in 1976 the Shah decided to change the Iranian calendar; the dating system was changed from the time Mohammed fled from Mecca to the date of the founding of the Persian Empire by Cyrus the Great[4]. This change outraged the clerics, who saw it as an attack on the Islamic heritage of the country. Another development that raised serious tensions was a 1977 plan by the regime to further liberalize the nation. According to Hoveyda, the Shah, under pressure from the Carter administration, announced a plan to move towards a constitutional monarchy, reinstate multiple political parties, and to hold internationally monitored elections by 1979.[5] These planned reforms were universally decried by he Shia Muslim clergy, who needed a closed society to maintain their control over the uneducated Muslims under their sway.

But the most important event was the “Black Friday” massacre at Tehran’s Jaleh Square. On September 7, 1978 a militant demonstration calling for the overthrow of the Shah, the establishment of an Islamic government, and the declaration of the Ayatollah Khomeini as the true leader of Iran was held in Jaleh Square. This demonstration spurred the Shah to declare martial law in the city. When the protestors refused to disperse the next day when order, Iranian military troops opened fire on them, killing many in the gathered crowd. This action further outraged the clerics, who used it as evidence that the government was at heart hostile to Islam and far too influenced by the West. It also outraged the general public, and put the Shah in a position where he was being challenged on all sides; he could not control the citizens and he was in no position to negotiate any type of peaceful resolution with the clerics[6].

Another important, yet often overlooked factor in the Shah’s fall was the mismanagement of the Iranian economy by the Pahlavi regime. During the years 1963-73 the Iranian economy entered a period of great growth. According to Bakhash, during this period living standards improved greatly throughout the nation and the society became more consumption oriented. But even during this period of prosperity, the government continued to follow credit policies that favored large scale farmers and industrialists, at the expense of small business and farm owners.[7] These policies caused a serious division between the upper classes, who were usually friends of the regime, and the lower classes who felt they were being locked out of the economic boom. The policies basically created a situation where class envy became the norm in the country.

The mismanagement became most apparent following the 1974 Iranian oil boom. In that year international oil prices exploded, and with around 10% of the world’s proven oil reserves under their feet the Iranians were positioned perfectly to ride the wave to riches. Iranian oil revenues quadrupled from around $5 billion to nearly $20 billion in a matter of a few years, leaving the government suddenly flush with ready cash. The Shah took this great windfall and embarked on a spending program that was supposed to “turn Iran into one of the world’s five leading industrial countries”[8]. The spending program financed a great deal of new construction projects and huge increases in civil service; however, the Shah never seemed to consider that the revenues would ever slow down, as they did in 1977-78. According to Bakhash the Iranian economy overheated and was unable to sustain it’s most recent rate of growth, causing inflation to explode and the prices of basic staple items to soar. At that moment the government launched an intense anti-business campaign; established industrialists were exiled or jailed, investment was curtailed, building projects were cut back or abandoned, and a hiring freeze was instituted in the civil service sector.[9] These moves, much like the policies of Franklin Roosevelt during the Great Depression, had serious negative consequences for the Iranian economy. The policies had the effect of causing an economic slow down; as the people began to suffer job losses and witness economic opportunities evaporate before their eyes, they began to turn on the one person they held most responsible for the worsening economic conditions: the Shah.