Tehran, the capital, is the country's largest city and was at one time the second most populous city in the Middle East after Cairo. Tehran was a comparatively young city, the origins of which date back about 700 years. The old part of the city is a few kilometers to the northwest of ancient Rey, an important city that was destroyed by the Mongol invasions of the thirteenth century. Tehran was founded by refugees from Rey, but remained an insignificant small town until the end of the eighteenth century, when the founder of the Qajar dynasty chose it to be his capital. Tehran had been the capital of the country ever since.
The centralization of the government and the expansion of the bureaucracy under the Pahlavis, the last royal dynasty, were major factors in Tehran's rapid growth after 1925. The city's population doubled between 1926 and 1940 and tripled between 1940 and 1956, when it reached more than 1.5 million. Tehran's population continued to grow rapidly, exceeding 2.7 million by 1966. Its population in the 1986 census was slightly over 6 million. This figure represented a 35 percent increase over the 1976 census of slightly under 4.5 million.
Historically, towns in Iran have been administrative, commercial, and manufacturing centers. The traditional political elite consisted of families whose wealth was derived from land and/or trade and from which were recruited the official representatives of the central government. In larger cities, these families could trace their power and influence back several generations. Influential families were also found among the Shia clergy in the largest cities. The middle stratum included merchants and owners of artisan workshops. The lowest class of urban society included the artisans, laborers, and providers of personal services, such as barbers, bath attendants, shoemakers, tailors, and servants. Most of these, especially the artisans, who were organized into trade associations or guilds, worked in the covered bazaars of the towns.
The urban bazaar historically was the heart of the Iranian town. In virtually all towns the bazaar was a covered street, or series of streets and alleyways, lined with small shops grouped by service or product. One part of the bazaar would contain the shops of cloth and apparel dealers, another section those of carpet makers and merchants, and still another, the workshops of artisans making goods of copper, brass, or other metals, leather, cotton, and wool. In small towns the bazaar might be the equivalent of a narrow, block-long street. In the largest cities, such as Tehran, Esfahan, Mashhad, Tabriz, and Shiraz, the bazaar was a warren of streets that contains warehouses, restaurants, baths, mosques, schools, and gardens in addition to hundreds and hundreds of shops.
The modernization policies of the Pahlavi Shahs both preserved and transformed all of these aspects of urban society. This process also led to the rapid growth of the urban population. The extension of central government authority throughout the country fostered the expansion of administrative apparatuses in all major provincial centers. By the 1970s, such cities were sites not just of the principal political and security offices but also of the local branches of diverse government offices such as education, justice, taxation, and telecommunications.
The establishment of modern factories displaced the numerous artisan workshops. Parts of old bazaars were destroyed to create wide streets. Merchants were encouraged to locate retail shops along these new streets rather than in the bazaars. Many of the stores that opened to meet the increased demand for commerce and services from the rapidly expanding urban population were in the new streets. The political elite in the last years of the Pahlavi dynasty spoke of the bazaars as symbols of backwardness and advanced plans to replace some of them with modern shopping malls.
The economic prosperity fueled by the growing oil revenues of the mid-1970s encouraged a construction boom. The expansion of the construction industry slowed, however, and all but stopped after the Revolution. Construction continued to decline until 1984. The domestic recession, created by deliberate government reductions in oil production in 1979, caused a drop in new construction starts, fewer buyers, and a decreased demand for materials.
In FY83, the government decided once again to encourage private sector participation in construction. The subsequent increase in loans to private industries by commercial banks revived the construction industry by 1984, although it could not keep pace with housing needs in urban areas.
The housing shortage became severe by 1986. Exacerbated by population pressures, the shortage was an especially serious problem in Tehran. The allocation of credit for building construction accounted for 7 to 8 percent of the GNP. Half of all the 900,000 housing applicants country-wide were in Tehran, yet only half of these received housing. Tehran issued 25 percent of the country's housing permits, with fixed construction investment accounting for 2 percent of the GNP. The government deliberately discouraged further expansion in Tehran, and new building construction regulations in 1986 tied construction permits to the ownership of land through an earlier order from a religious magistrate. According to the director of the Urban Land Organization, a government body created in June 1979 to administer the transfer of nationalized land to deserving families for housing purposes, the housing sector in early 1986 needed about US$10 billion to alleviate the shortage. The banks could only provide about US$4 billion of this total.
In 1986 Iran had one other city, Mashhad, with a population over 1 million. Mashhad's population of more than 1.4 million represented an increase of 110 percent since 1976. Much of its growth was attributed to the large number of Afghan refugees, approximately 450,000, who were living in the city. The historical origins of Mashhad were similar to those of Tehran inasmuch as the city essentially developed after the centuries-old city of Tus, near modern Mashhad, was destroyed by the Mongols. Mashhad had served as the principal commercial center of Khorasan since the nineteenth century, although its major growth has occurred only since the mid-1950s. It also has become an important manufacturing center and has numerous carpet, textile, and food-processing factories.
Iran's other major cities include Esfahan, Tabriz, and Shiraz, all of which had populations of 800,000 or more in 1986. Like Mashhad, these cities had experienced relatively rapid growth since the mid-1950s. All three of these cities are important manufacturing centers, especially Esfahan, where many of Iran's heavy industries are concentrated. Smaller cities (populations of 100,000 to 500,000) such as Ahvaz, Bakhtaran (before the Revolution Kermanshah), Hamadan, Karaj, Kerman, Qazvin, Qom, Rasht, and Urumiyeh (or Urmia, formerly known as Rezaiyeh) also have grown considerably since 1956. A total of 30 cities, more than double the number in the 1966 census, had populations exceeding 100,000 in 1986. Since 1976 urbanization proceeded at a steady pace. In 1976 only 47 percent of Iranians lived in cities. By 2008 it was closer to 66 percent.
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