The issue of underdevelopment in Iran has long been marked by a paradoxical situation. On the one hand, there is broad consensus on the necessity of development to achieve social welfare; on the other hand, there is no clear theoretical or political agreement on how to realize it. Contemporary theories of underdevelopment identify inequality as the primary factor underlying development failures, emphasizing that power imbalances between the state and society play a central role in exacerbating inequality. In this respect, the present study examined the role of power relations between elites and non-elites in reproducing, mitigating, or constraining unjustified inequalities in Iran. The analysis relied on an institutional approach and employed a combined theoretical framework derived from main scholarship in the field. According to the findings, inequality in the distribution of power, wealth, and social status largely results from the absence—or weakness—of a stable and institutionalized balance of power between the state and society. Periods characterized by political consolidation and weakened accountability mechanisms are associated with rising inequality, whereas deviations from political homogenization tend to coincide with, albeit limited, reductions in inequality. The study argued that moving beyond the status quo and advancing toward sustainable development would require profound institutional restructuring and the establishment of the shackled Leviathan—a state that is capable of effective policy implementation, committed to the rule of law, and subject to democratic accountability. Such a configuration, conceptualized as a strong state–strong society equilibrium, constitutes a necessary condition for reducing inequality and achieving inclusive growth in Iran.

Introduction

The issue of development in Iran, despite broad public consensus on its necessity, remains mired in ambiguity and failure. A key driver of this failure is the persistence of unjustified inequalities. In this regard, the present research aimed to address the following questions: what constitutes the primary determinant of inequality in Iran? And how can it be resolved to enable meaningful development? The analysis adopted an institutional approach to examine how the structure of political power distribution (i.e., the mode of interaction between the state and society) influences the state’s capacity to implement policies aimed at reducing inequality, and ultimately shapes wealth distribution. The study covered the period of 2005–2021, as it encompassed various phases of political consolidation and changes in governance structures, thus providing an ideal context for the current inquiry. Leading theoretical contributions in development studies identify the imbalance of power and wealth between elites and non-elites as the core of the crisis. Accordingly, the current analysis merits attention as it aimed to identify the fundamental factor generating inequality in Iran and outline the mechanisms for addressing it.

Materials and Methods

The present study adopted a descriptive–analytical method to address the research problem. The data was primarily drawn from macroeconomic indicators for the period 2005–2021. Indicators such as budget compliance, the democracy index, and the rule of law index were used to measure the state’s executive capacity. In addition, the misery index, corruption index, and the dollar value of the monthly wage were analyzed in order to assess the state of power balance. Finally, the Gini coefficient and net job opportunities were examined to evaluate the impact of different types of Leviathan on inequality.
Given the complexity of the topic, a single theoretical model could not fully account for the analysis required. Therefore, a combined theoretical model was used to derive explanation, prediction, and prescription. It was first necessary to examine the political order prevailing in the country during the period under investigation. To this end, the theoretical framework of Douglas North was employed, which explains the transition from a limited-access order to an open-access order—a transition that requires the rule of law. Moreover, Fukuyama’s tripartite model (effective state, the rule of law, and democratic accountability) was incorporated to assess the state’s executive capacity. Acemoglu and Robinson, while recognizing the importance of state executive capacity, argue that the core of power balance formation lies in the creation of a shackled Leviathan. In a shackled Leviathan, power is balanced both among elite interest groups and between elites and non-elites. Finally, by examining changes in power between the state and society, this study analyzed the persistence of unjustified inequalities in Iran.

Results and Discussion

According to the findings, Iran’s political economy during the period under review was strongly shaped by fluctuations in the balance of power between the state and society. During periods characterized by power consolidation and the weakening of oversight institutions, the government tended to expand its share of power and control over wealth. The results indicated that any erosion of the balance of power is directly linked to the reproduction of economic inequality and increased pressure on the middle and lower strata of society. Conversely, during periods of reduced power consolidation, improvements in the balance of power were evident, which led to a limited reduction in inequality. The findings suggest that the persistence of unjustified inequalities in Iran’s political economy stems not solely from the structural characteristics of the economy, but primarily from the failure to establish a stable and institutionalized balance of power between the state and society. When power shifts toward strengthening accountable institutions and upholding the rule of law, the scope for the unjust distribution of resources diminishes.

Conclusion

Development in Iran requires profound institutional reform and a transition toward the strong state–strong society model. This model, equivalent to the shackled Leviathan in institutional literature, envisions a state capable of effectively implementing policies (a strong state) while being tightly constrained by democratic accountability mechanisms and the rule of law (shackled). Such a balance is essential for reducing inequality and achieving inclusive growth.