On the eve of victory in the 1979 revolution, Ruhollah Khomeini and his Islamists followers discussed blueprints for a new system of Islamic government. Integral to these plans was an emphasis on the new institutions of Islamic shura (local councils) to replace the secular anjumans (local associations) that existed in town and cities. The chapter details Khomeini’s call to establish elected local government in early 1979, months before the new constitution delineating the shape of the new state had been ratified, indicating the significance of the shura. I examine the tensions between the competing visions of shura within the theocratic Islamist camp, by contrasting the views of Khomeini and Mahmoud Taleghani. This chapter also discusses the aborted attempt to hold the first local government elections in the fall of 1979, a factor contributing to the new regime’s reluctance to decentralize government for another decade and a half. The chapter details the multiple and conflicting perspectives on shura during the deliberations leading to the first constitution. The ratified constitution subordinated local and national government (shura and the Majles) to the velayat-e faqih and established a settlement that shaped and constrained the future possibilities and limitations of decentralization in the ensuing decades up to the present day.

Chapter 2 describes the launching of the first nationwide local government elections amidst political contention in 1999 in Tehran, Khorasan, Fars, and Kurdistan and the institutionalization of elected local government within the parameters of the velayi regime. The chapter documents the rapid institutionalization of the new city councils throughout the country and in cities of different sizes. It reports on the impressive efforts of newly elected local representatives to carry out their new responsibilities within the limited legal powers afforded the new councils as well as depending on the social capital and trust of the local societies. Tehran City Council, for example, was initially marred by turmoil and dissolved by the central government, but stabilized over time. It has been an important bellwether of political trends elsewhere. The chapter documents the frustration of many councilors with what they perceived to be the narrow range of local powers defined by the local government law, patterns that would remain in place, part of the success of electoral authoritarianism in Iran.

Chapter 1 describes the motivations of the Islamists, who crafted what became the 1996 Local Councils Law. In the face of protests and riots in the nation’s cities, Islamist lawmakers in the fourth Islamic Majles (1992–1996) turned to political decentralization to address poorly managed urbanization and local governance as a way of easing economic stresses among lower economic classes that had spurred unrest. The chapter explores the 1996 Local Councils Law in detail, including the structure and the responsibilities of elected local government comprising three institutions: the elected Islamic city council (shura-ye eslami shahr), the mayor (shahrdar), and the municipal bureaucracy (shahrdari). The chapter goes on to explain the institutional design and structure of elected local government and its place in the intergovernmental system resulting from the decentralization reforms. It highlights the tension between two parallel vertical systems of hierarchical governance, between the top-down appointed system bureaucratic hierarchy and the bottom-up. The contradiction between the two systems results from the tension between two counterpoised systems of upward and downward accountability.

Chapter 8 examines the economic and fiscal dimensions of decentralization in the Islamic Republic of Iran. It presents a comprehensive empirical picture of fiscal decentralization and municipal finances under the IRI, which up till now has been a black box to Iran scholars. This chapter provides a look inside by describing the structure of subnational finance in Iran by analyzing a unique dataset I assembled covering the first phase of decentralization (1998–2006) covering almost 90 cities over an eight-year period – the result of the only comprehensive empirical study of municipal finances in Iran to date. This dataset provides a picture of the revenue and expenditure responsibilities of municipalities. The chapter explores the incentive structure of local government actors and the extent to which the political economy of fiscal decentralization in Iran supports or hinders the three projects for local government laid out throughout the book so far. It shows that local government’s lack of financial autonomy – explicitly constrained by tax, administrative, and local government laws – both distorts broad democratic participation and weakens the capacity of local governments to stimulate local economic development. The chapter highlights that the failure of the original decentralization reforms to put local economic development as a core priority has led to a failure in this regard, a major shortcoming of decentralization Iran to date.

Chapter 10 situates the findings of the book in the main lines of literature on Iran state-building: state centralization and its contradictions; authoritarian persistence; social welfare compact between state and citizens; and the challenges of democratization. The chapter also assesses the implications of the Iran experience for conventional expectations of the democracy-decentralization nexus. The chapter explains why the main lines of literature on modern Iranian state-building fail to explain what motivated the IRI to adopt political decentralization or to explain the timing when it finally did so. Nor does this scholarship distinguish the two dimensions of centralization emphasized in this book. Moreover, scholarship on Iranian state-building has thus far not engaged with the theory of electoral authoritarianism; my findings give strong support to this theory, which explains how the regime effectively deploys local electoral politics to enhance its dominance. Electoral authoritarianism moreover explains how the two forms of state power – the despotic and infrastructural – can be combined in the management of subnational divisions of the nation’s territory. Finally, the findings of the book undermine the claim, associated with writers such as Mahmoud Taleghani or Alexis de Tocqueville, that there is an necessary and causal relationship between decentralization and democratization. The book shows how political and electoral decentralization can be compatible with authoritarian state-building.

Chapter 9 reviews the attempt by Iranian local government to engage with the international municipal cooperation movement as a way to advance the goal of democratic local government inside Iran and highlights the geopolitical factors that pose sharp limits to that goal. For four years before Iranian security services terminated it, I was co-director of a pioneering “city diplomacy” project involving a multi-year collaboration between mayors and civil society groups from the Netherlands and Iran. The project included exchange visits between Iran and the Netherlands by city councilors, mayors, local civil society groups, and central government officials. It also included collaborative funded neighborhood projects inside Iran. The chapter traces the reasons for the failure of the city diplomacy project to geopolitical factors rooted in Iran’s rejectionist foreign policy and anti-Western and anti-liberal ideology. The international geopolitical factors compounded the antidemocratic ideological commitments of the regime that defeated domestic attempts at reform. Despite its abrupt curtailment, the four-year project made some valuable contributions to the discourse/project/ideal of local democracy in Iran, although its impact on the practice of local democracy is not clear. On the other hand, the Iranian state resolutely moved into the space of international municipal cooperation work in a way that negates and neutralizes democratization and imposed its own terms of Islamization on the interchange with the international community around the theme of urbanization and cities. This shows that the Iranian regime is extremely skilled at managing risk rather than eliminating it.

After the war with Iraq (1980–1988), Iran had to reconstruct the economy and the government’s public management systems to address mounting challenges of urban poverty, low economic growth, and poor local management, which had led to significant urban unrest in several cities. The technocratic response of the Rafsanjani administration (1989–1997) included tentative steps to decentralize some central government functions to municipalities and a mandate for them to become financially self-sufficient. The technocrats supported decentralization for instrumental or pragmatic reasons of increasing the efficiency of local administration, not for empowering local democracy. I interpret the tensions between the competing imperatives of the Iranian decision to decentralize by distinguishing two ways a state can be strong, or between what I call good and bad centralization. In so doing, I draw on the distinction of two types of power introduced by Michael Mann, “infrastructural” power – the power of states to achieve collective purposes – and “despotic” power – the capacity of government to exert power over society and individuals. While both authoritarian and democratic states seek to augment the former, authoritarian states depend on strengthening the latter. By their indifference to the goal of checking despotic power, the technocratic endorsement of decentralization worked against democratization and dovetailed with the velayi goal of augmenting both forms of power together toward the goal of Islamizing society and state. At the same time, the failure to promote local economic development through decentralization must be considered a failure of the technocratic agenda.