It may come as no surprise that what international audiences refer to as "Iranian cinema" covers only a small, selective portion of the films produced in Iran. For all the innovative, artistic films that garner attention at festivals, there are many more that never cross the borders. Some of these are accomplished art films in their own right, but the rest, a majority, do not have any artistic pretensions.

They are made to survive only a few weeks at the local theatres and DVD stands. It's no shame if they are forgotten, but they can't be ignored completely. The film industry in Iran, currently one of the most active in the world, produces nearly 100 features every year – and that's not counting documentaries, underground films, and a deluge of made-for-TV features. To put this in perspective: France, the most successful film industry in Europe, produces around 200 films a year, Britain no more than 100.

In countries with large film industries, arthouse loses the numbers game either to commercial movies or, in the case of dictatorships, to propaganda. Iran is an interesting case, however, because the bulk of its output is neither commercial nor ideological schlock. Rather, it is a certain type of urban-set narrative that film-makers and critics refer to as a "main-body" drama (badaneye asli) – a phrase distinct from "mainstream", because pictures of this type are by no means the most widely seen. Nonetheless, they keep being made. In a sample of 70 films from 2010, 29 fall into this category. In comparison, only four out of 70 are primarily religious in theme. No more than three can be classified as political propaganda.

In Iran, the state is by far the largest investor in and distributor of movies. The Islamic republic's imposition of censorship is notorious. Less known is the support it lends to film-makers. Without state support, the current volume of production would be impossible. In other words, when it comes to main-body films, the state is investing millions of dollars in pictures that neither yield strong financial returns nor promote the official agenda. Why?

A description of main-body cinema begins to provide the answer. For the most part, the drama of these films is fuelled by sex: betrayals, one-night stands, abuse, a man or woman chased by or chasing a bevy of partners. A young businessman lures women to his office and makes off with their virginities (One of Us Two, by Tahmine Milani). A wife tries to make sense of her husband's betrayal (I Am His Wife, by Mostafa Shayesteh). Everyone betrays everyone else (I Am a Mother, by Fereydoun Jeyrani). Things stop just short of becoming visually and verbally explicit, but there is enough sexual content to embarrass the puritan side of any viewer. This inner puritan must wait for a degree of satisfaction until the last few scenes, when repentance, repugnance, or retribution return moral balance to the universe.

The tension between racy content and pietistic conclusion may very well be reflective of tensions in Iranian society – between traditional, moral ideals and modern, metropolitan realities (the stories take place almost exclusively in Tehran). Or we can think of it as the consequence of the tension between what film-makers imagine will titillate the audience and what they must depict to satisfy the censors.

Such explanations are not entirely wrong, but they do not say enough about either the films or the society that produces them. They don't, for example, explain why such films receive the required permits and subsidies in the first place while so many other screenplays never get past the censors. They also fail to address the questions that arise upon closer examination of the finished products. For example, why should main-body films all look so similar? What dictates their uniformity?

The camera in these films is steady, horizontal, and direct. Virtually every frame contains a character (compare this with Abbas Kiarostami's long takes of unpopulated hills, streets and seasides, or Mohsen Makhmalbaf's shots of anonymous crowds). Medium shots predominate, so that we can see two or three characters at the same time, without much of the background. Clothing, makeup, and décor are new, pastel-hued, and smooth. The acting style is a faux naturalism that is borderline theatrical, with slightly exaggerated gestures and poses.

There is a strange correspondence between this set of stylistic traits and that of Hollywood films of the classic era, between 1921 and 1969. The correspondence is strange because Hollywood itself underwent a transformation at the end of that period. The studios, under the influence of television and the pressure of declining audiences and profits, incorporated elements of the independent European cinema.

Their films became a tad more gritty, a tad less linear. The stories began to deal with political issues of the day, allowing in a touch of reality. The global audience is now so used to this transformed Hollywood style that the so-called classic films, with a few important exceptions, seem awfully dated.

Why should main-body Iranian films, which also seem dated and trite, take classic Hollywood as their point of departure, instead of the newer Hollywood style? I believe the correspondence is not just a matter of imitating the "wrong", anachronistic style. It is also a matter of resonance and convergence, a similarity in purpose and worldview that has encouraged similar choices.

In classic Hollywood films, as in main-body Iranian films, all visual surfaces are reduced. They are bland, and this blandness is deliberately achieved. Every wall is freshly painted, every piece of furniture is new. Faces are obviously made up. Lighting separates bodies from the background and the camera brings the bodies into focus.

In real life, surfaces bear the mark of time – that is, their history. Before an individual ever speaks a line or makes a gesture, the lines of her face communicate her life experience. On walls, cracks and grime tell us about the lives that a room has embraced. A culture builds its environment, and then everything that it builds becomes subject to history. Everything becomes gritty.

The history that surfaces carry expresses the conflicts they have seen. Without conflict they would remain pristine. In real life, it's only in the homes of the rich, or those who pretend to wealth, that surfaces are regularly renewed so that signs of time and conflict are entirely erased. Interior design and city maintenance are not just about comfort and health. They are also attempts at theatre and make-believe. We lead ourselves to believe that we are surrounded by peace and harmony, no matter what actually enfolds us.

A little-noticed aspect of both classic Hollywood and main-body Iranian films is that the characters are either wealthy to begin with or are soon transported to wealthier settings. It's either rich to riches or rags to riches – little difference. In the 29 films of my sample, only four deviate from this rule. Affluence is taken entirely for granted. Its source is never clearly explained or questioned.

This feature of main-body cinema is much more striking than its overt sexual content. The sexual commotion is at least partly reflective of everyday life. The eradication of all signs of economic lack and disparity from the screen, however, is an impressive feat that requires concentrated effort. Needless to say, these films do not touch on contemporary politics.

When nearly all social conflict is artificially removed from a setting, then it is personal and psychological conflicts that take centre stage. I am not talking about extraneous or fake drama here, but essential human interactions: love, sex, betrayal. But they are pushed by the force of the narrative into the glare of an isolating spotlight, replacing every other problem.

Romantic dramas have dominated the silver screen since the late 1920s and the Great Depression. Alfred Hitchcock's main contribution in the realm of subject matter was to offer crime as yet another narrative force that can disrupt the blandness of commercial cinema without questioning its underlying assumptions. Both crime and romance films in their Hollywood incarnations send a similar signal to the viewer: life is a fine thing as it is. Romantic dramas confirm the viewer in his personal life. Crime films emphasise that conflicts are monstrous exceptions.

In the 1960s, a financially troubled Hollywood adopted elements of alternative cinema in order to seem truer to the lives of its audiences, who could no longer stomach the theatricality of the classic dramas. In Iran, main-body films are also in a state of crisis. They do not sell. They make their money before they even open, from state funds. The films that do sell are for the most part cheap slapstick comedies, which comprise almost 20% of the industry's output. The only exceptions are a few well-made social dramas – Asghar Farhadi's A Separation and Reza Mir-Karimi's As Simple As That, for instance. These pictures, particularly Farhadi's Oscar-winning drama, are in fact quite in line with the film-making sensibilities of new Hollywood.

Despite the commercial incentive, main-body films have not gone the way of new Hollywood. Not yet. This is not because Iranian cinema lacks the technical know-how, but because the state cannot tolerate even a shallow attempt at the portrayal of social conflicts. Only the classic Hollywood/main-body style can so effectively block the political will that constantly threatens to seep from reality into films.

The key phrase the censors have been using in the last few years to condemn cinematic projects is siah-namaayi. It's a made-up phrase which translates roughly as "negative portraiture": representing social conditions as darker than they are. In practice, it means portraying the situation as it is. Javad Shamaghdari, deputy minister of culture in charge of cinema, declared it morally worse than spying and criminally punishable. (We come across such restrictions in many other places: Egypt's 1976 censorship law decreed that "it is forbidden to represent social problems as hopeless, to upset the mind, or to divide religions, classes, and national unity".)

The official stance on main-body films is that they are neutral. Asked why such movies receive production permits while more thought-provoking films are regularly red-lighted, the former culture minister Mohammad Hossein Saffar Harandi replied that the projects that receive authorisation are mobah – religiously unobjectionable, though without merit. They are neither good nor bad.

This explanation was taken seriously even by the embattled Iranian director Jafar Panahi, who extended it to reason that what the government expects of cinema is "something that could cause no transgression or benefit, no advantage or disadvantage. And it mustn't have a critical outlook towards anything, and the audience should be left with nothing to think about when leaving the movie theatre. They want a cinema that is consistently neutral, that has the static effect of nothingness. This is a template that's suggested by Mr Harandi, and any film that deviates from this, however slightly, will offend them."

But what should we make of the government's willingness to accept the sexual content of main-body films and to routinely fund their screenplays? Something more than a desire for neutrality is at play.

Here we have the shape and content of a new propaganda. The message is no longer that of religious films: the idea that we live in a world that takes its meaning and direction from the immutable decrees of the Divine. The message is that Iranians live in a society whose markets can provide the material needs of its citizens, a society in which we can occupy a place as individual centres of our own drama, a drama that nonetheless has a distinct and recognisable shape (belonging, that is, to a genre), a drama as predictable as, well, a Hollywood film.

If this sounds a lot like the American way, it's because, in a sense, it is. It's the way of the market economy, which daily gains power over all aspects of Iranian life. The upper-class, apolitical milieu of main-body films is something the government would like to actively promote as a national self-image. If it means the film-makers have to use a few saucy plot-twists to jazz up an otherwise dead scene, then so be it.

But as usual the censors are a step behind. The government is not yet ready to deal with the consequences of the lifestyle main-body films portray, a lifestyle characterised by the dissolution of all traditional values. The rich men in these films quickly find out that they can buy anything – people, honour, family, and especially love. The beautiful women learn the same, and also that they can trade their beauty for money. That is why the hand of the director, like the hand of God, must at the end intervene to inflict pain and punishment. The stories, left to their own devices, would deny morality. But the intervention never feels convincing.