Reza Shah built up a modern Iranian army centered on the Cossack Brigade, the only modern force in Iran prior to his coup. He forced the tribal levies to enlist into his rural police forces and their responsibility was now internal security. This extension of government control into every region of the country and in such a short period was disturbing to a population that had enjoyed their independence. While he thought of himself as an Iranian Ataturk, the real Turkish one had built up a centralized (modern) state slowly to minimize culture shock.

Economically he found the payments from the Anglo-Iranian Oil Company unreliable - Iran was paid only from what profits the company declared and the country had no ability to audit the books. In 1931 he unilaterally cancelled the agreement and a new one was drawn up in 1933 that provided a more stable revenue stream based on a royalty per barrel of oil. The price of this was to extend the contract to 1993 which wasn't popular with Iranians (and would continue to be a sore spot). He founded the first national bank in 1927 which allowed the state to sponsor economic development in the 30's, prior to that all banks in Iran had been foreign. Reza Shah was conscious of the state's backwardness (especially in contrast to Turkey) and invested in light industry and built-up the transportation networks - but this focus on urban regions tended to leave the countryside behind. At this time agriculture was still the key source of funds (with oil coming in second).

He targeted the independent ulama by barring their graduates from their koranic schools from serving in the government bureaucracy (making it an educational ghetto) and removed them from the state's legal system. Now bureaucrats and judges would come fromt he secular school system setup by Reza Shah that covered primary to post-secondary schooling.

The downside was with a stable economy and a (relatively) strong military he became more autocratic and began removing/arresting his coterie and replacing them with 'yes' men. He also began to emphasize pre-Islamic Persian society, 'good' ideas were found in ancient pre-Islamic antecedents. The Arab conquest of the 7th C and the following Islamic rule was seen as the cause for Iran's backwardness and situation. So outdoor religious ceremonies were banned as were veils.

Previous attempts at modernization under the Safavids had been small, they lacked the power of a centralized government and the great powers (Britain and Russia) preferred a weak king. Their reforms were small (founding of a western technical school, forming the Cossack brigade) due to their lack of funds and weakness. In contrast, Turkey had started modernizing much earlier and had built up a much stronger central government. Despite being on the losing side in WWI, they benefited from an excellent leader (Mustafa Kemal) who managed to hold the central Turkish state together and inflict a strong defeat on Greek forces that the war-weary allies acceded to his wishes rather than fight another war.