Thoughts about Iran: How institutional autocracies decay but try to reinvent themselves

Ideological autocracies often survive through mutation - leveraging nationalist rhetoric and highly selective economic liberalisation. This week we write about how this could play out in Iran.

One prominent variant of authoritarianism is the institutional type. Such regimes put in place institutions and procedures that formalise their authority and purpose. Behind this behaviour lies a deep well of motivation: a belief in their virtue and their suitability for ‘eternal life’. That suitability is conferred by ideology, whether communist or theocratic.

Revolutionary origins

Most ideological-institutional autocracies in recent times have been born out of revolutions – for example, the Bolsheviks seizing power in 1917; the Chinese Communists taking control in 1949; the Castro brothers and their band of supporters ousting Batista in 1959 and the Iranian clerics overthrowing the Shah in 1979. Once in power, new institutions and instruments of control were created accompanied by the intensive application of terror to cower opponents, usually a majority of the population. After all, such regimes conform to Arendt’s view of totalitarianism: the desire to control most aspects of their citizens’ lives. But what happens to such regimes once the phase of revolutionary enthusiasm has passed? The answer is that some simply fail or get displaced by external aggressors, but others mutate and in so doing may secure their continuation - at least for some time.

Failure

The Soviet Union is the clearest example of failure. The reasons for its demise were many but included the persistent inability to improve the performance of the economy after the 1980s, along with the pressure of rising fiscal costs stimulated by geo-political and military rivalry with the US. There were also strategic blunders, notably the invasion of Afghanistan. While its ideological vitality and purpose waned, survival involved severe repression. When the imperial will to control collapsed, the loss of its satellite states set off an internal chain reaction.

Mutation

Yet it has been mutation, rather than outright failure, that has been more common. Historically, political theorists thought any mutation would err in the direction of democratisation. But this has not been the dominant path. Instead, institutional autocracies have commonly shifted economic focus to become more permissive of private interests, particularly for those in and around the leadership and politically connected organisations. Dilution of earlier reliance on the public sector has mainly been motivated by chronic under-performance. But such shifts have mostly not been accompanied by political liberalisation.

The shift towards greater private activity – including de facto alliances between state owned and private companies - has invariably provided significant financial opportunities for elements in the bureaucracy and persons/entities able to leverage political access. Such shifts also reset the political equilibrium over time and in so doing bring into the open latent tensions arising from differences in the fortunes of the beneficiaries versus the rest of the population. There are also increasing frictions within the group of beneficiaries themselves as they vie for access to favours, resources and revenues. Those unavoidable tensions in turn ensure that repression retains a prominent place in the policy armoury. Finally, the atrophy of the dominant ideology – whether communist or religion-based - prompts a shift toward more emphasis on nationalistic goals and use of nationalist rhetoric. Such processes are apparent in China and Iran today.

But can such mutations succeed? To help answer that question, in this post we consider present day Iran and its conundra.

Repurposing the Iranian regime?

As with other institutional autocracies, in the aftermath of the 1979 revolution, the emphasis was on building the state sector and nationalisation. But in subsequent decades that approach was downplayed and other entities gained a growing presence in the economy, notably the IRGC, the regime’s military-security wing. As we have shown in an earlier post (here), the IRGC has built very major economic interests across a wide range of sectors, and although subordinate to the clerical leadership – the source of the regime’s ideology – it has progressively acquired more autonomy, including space for the enrichment of the institution, as well as leading individuals. In contrast, the independent private sector has remained small scale and mostly informal. The more lucrative parts of the economy have thus been cordoned off for institutions and individuals integral to the regime. The combined impact of these arrangements and the imposition of sanctions have ensured that the economy has performed extremely poorly, even as the accrual of private rents by connected parties has grown.

Under threat from external aggressors and following the assassination of the Supreme Leader – Ayatollah Khamanei - as well as many others in the leadership, the regime’s repositioning has taken on an additional dimension: a strongly nationalist tone and rhetoric. That is hardly surprising when under attack from foreign forces, but it does suggest some attempt to broaden appeal. But will these combined mutations give a second wind to the regime? In a recent article in Foreign Affairs, Narges Bajoghli and Vali Nasr[1] have argued that the war has created conditions for the regime to change course sufficiently and indeed to persist. They make the case that the new leadership is no longer recruited from among the founders; is defined less by ideology and clericalism than nationalism fused with a technocratic ethos, notably with respect to the economy, but also greater pragmatism and narrow self interest in external affairs.

But even if much of this argument is accepted, it is hard to see how a technocratic, nationalist focus will successfully address the cumulation of decades of economic under-performance, aggravated by the massive destruction of infrastructure in the 2026 war. Yet being able to do so will be critical to a successful mutation as it is generally recognised that a very significant part of the Iranian population’s discontent with the regime can be traced to economic factors.

Solutions to these deeply entrenched problems would inevitably require measures that would directly affect the regimes’ main beneficiaries and in ways that would have an adverse impact on them. That is because the IRGC, the Foundations or bonyads and others have built large and closely connected stakes in the domestic economy. They have shut out competition and harvested considerable rents. These arrangements and behaviours have imposed huge costs on the economy, but the key supporters of the regime have little interest in reversing them. Hence, rather than a successful mutation, a far more probable outcome on the cessation of war (which the regime recognises is unlikely to be linked to a suspension of sanctions) would be to expose and aggravate these tensions further, leading the new leadership once again to resort to repression as the means for staying in power.

Conclusion

In sum, political and economic mutation and the structures and interests that it generates in institutional autocracies will struggle to provide a new pathway to ‘eternal life’ if the main changes are largely about the rearrangement (and preservation) of rents. That fundamental tension may currently be highly relevant for Iran, but many of the same issues have been present in China and Vietnam in recent times. Both these countries, however, started their mutations earlier with rather different underlying preferences and policy instruments to Iran, and in a less exposed economic situation. Their experiences suggest that mutation and repurposing can be possible, even if the durability of those changes is unclear. In subsequent posts, we will examine why that proved possible – as well as the limits.

This analysis draws on research from our forthcoming book, Modern Autocracy: The Rise of Authoritarian Economies – but why only some can succeed, publishing in early 2027.

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[1] Narges Bajoghli and Vali Nasr, 2026. “Iran’s New Grand Strategy: How a Remade Islamic Republic will reshape the Middle East”, Foreign Affairs, July/August issue

Source of cover image: Office of the Iranian Supreme Leader via AP