The Long Divergence

The Long Divergence: How Islamic Law Held Back the Middle East

Timur Kuran
Copyright Date: 2011
Pages: 424
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  • Book Info
    The Long Divergence
    Book Description:

    In the year 1000, the economy of the Middle East was at least as advanced as that of Europe. But by 1800, the region had fallen dramatically behind--in living standards, technology, and economic institutions. In short, the Middle East had failed to modernize economically as the West surged ahead. What caused this long divergence? And why does the Middle East remain drastically underdeveloped compared to the West? InThe Long Divergence, one of the world's leading experts on Islamic economic institutions and the economy of the Middle East provides a new answer to these long-debated questions.

    Timur Kuran argues that what slowed the economic development of the Middle East was not colonialism or geography, still less Muslim attitudes or some incompatibility between Islam and capitalism. Rather, starting around the tenth century, Islamic legal institutions, which had benefitted the Middle Eastern economy in the early centuries of Islam, began to act as a drag on development by slowing or blocking the emergence of central features of modern economic life--including private capital accumulation, corporations, large-scale production, and impersonal exchange. By the nineteenth century, modern economic institutions began to be transplanted to the Middle East, but its economy has not caught up. And there is no quick fix today. Low trust, rampant corruption, and weak civil societies--all characteristic of the region's economies today and all legacies of its economic history--will take generations to overcome.

    The Long Divergenceopens up a frank and honest debate on a crucial issue that even some of the most ardent secularists in the Muslim world have hesitated to discuss.

    eISBN: 978-1-4008-3601-7
    Subjects: Economics, Sociology, Political Science

Table of Contents

  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
  3. Preface
    (pp. ix-xvi)
    Timur Kuran
  4. PART I Introduction
    • 1 The Puzzle of the Middle East’s Economic Underdevelopment
      (pp. 3-24)

      At the start of the second millennium, around the year 1000, a visitor from Italy or China would not have viewed the Middle East as an impoverished, commercially deficient, or organizationally primitive region.¹ Although the region might have seemed enigmatic, its oddities would not have painted a picture of general economic inferiority. Now, at the start of the third millennium, it is widely considered an economic laggard, and a plethora of statistics support this consensus. More than half of its firms consider their limited access to electricity, telecommunications, or transport a major obstacle to their business, as against less than...

    • 2 Analyzing the Economic Role of Islam
      (pp. 25-42)

      For Middle Eastern intellectuals the mid-nineteenth century was a time of humiliation and anxiety. Once considered backward, Europeans were now living more prosperously and subjugating Muslims. Although none developed a coherent explanation for this shift in fortunes, many sensed that it had something to do with religion.¹ There are several reasons to think that their intuition had a basis in fact.

      One has already been given: certain key economic institutions of the Islamic Middle East were intertwined with Islam’s holy law. These institutions emerged in the early centuries of Islam, when temporal and spiritual matters were not sharply divided. The...

  5. PART II Organizational Stagnation
    • 3 Commercial Life under Islamic Rule
      (pp. 45-62)

      Although little is known about Muhammad’s early years, historians generally believe that he worked as a commercial agent for a powerful clan in Mecca. Among the people he served was a wealthy widow named Khadija, whom he later married.¹ Muhammad’s trading career is sometimes invoked as evidence of Islam’s compatibility with free enterprise and with commercial cooperation across groups defined by descent.² The underlying logic is strained. It is akin to stating that because Jesus was a carpenter, Christians must have a special knack for making furniture. Nevertheless, it is significant that the founder of Islam was a successful merchant....

    • 4 The Persistent Simplicity of Islamic Partnerships
      (pp. 63-77)

      In the tenth century exchange was essentially personal everywhere, in Italy and India no less than in Iraq. An investor would finance a merchant known to him as trustworthy, or known as dependable to trustworthy friends. He would not place trust in strangers, as we now do when investing in the stock market or buying merchandise through the Internet. Courts existed to adjudicate commercial disputes. Because judges treated economic relations as resting on personal ties, these disputes amounted to contractual conflicts among individuals. If Islamic partnership law spread to places far from Islam’s heartland, this is because prior to the...

    • 5 Drawbacks of the Islamic Inheritance System
      (pp. 78-96)

      Of all the economic rules in the Quran, the most detailed are those on inheritance. Restricting the individual’s testamentary privileges to one-third of his or her estate, the Quran reserves the unbequeathed portion to children, spouses, parents, and siblings of both sexes, according to rules dependent on the exact composition of the legally recognized heirs.¹ The rules were understood to provide shares also to more distant relatives under certain circumstances. For certain special cases, the applicable rule differs across the two major denominations and principal schools of law. Only under the Shii interpretation may the testator make bequests to a...

    • 6 The Absence of the Corporation in Islamic Law
      (pp. 97-116)

      The year 1851 saw the founding of the first predominantly Muslim-owned joint-stock company of the Ottoman Empire: the Şirket-i Hayriye marine transportation company, literally the “Auspicious Company.” Headquartered in Istanbul, its ownership was divided into 2,000 tradable shares. At the time, the empire was just beginning to install the requisite legal infrastructure. Commercial courts established to enforce the newly adopted French commercial code were in their infancy, and the opening of an organized stock exchange was not even on the drawing board. Nevertheless, Şirket-i Hayriye began operation under the patronage of sultan Abdülmecit, its largest shareholder. The remaining shares were...

    • 7 Barriers to the Emergence of a Middle Eastern Business Corporation
      (pp. 117-142)

      It was in the late sixteenth century that European commercial enterprises started being organized as corporations. The voyages of global discovery and the consequent invigoration of overseas trade formed the impetus for this development. The commercial expansion relied on capital outlays for unusually long periods and from growing numbers of investors. However, various practices essential to the workings of the business corporation had already emerged over preceding centuries. The early variants of the business corporation combined known organizational features, though in novel ways.

      Some of those features did not emerge at all in the Middle East. Others did, but their...

    • 8 Credit Markets without Banks
      (pp. 143-166)

      The first two successful banks of the Middle East, the Bank of Egypt and the Ottoman Bank, were founded in the 1850s. In each case, the capital and organizational template came from abroad, and the administration was foreign-dominated. Around the same time, both Egypt, which was nominally under Ottoman suzerainty, and the Ottoman Empire itself established specialized commercial courts that adjudicated essentially according to the French commercial code. These legal reforms restricted the jurisdiction of the Islamic courts on economic matters. Among their novelties was the explicit legalization of interest.¹ If it took foreigners to introduce modern banking to the...

  6. PART III The Makings of Underdevelopment
    • 9 The Islamization of Non-Muslim Economic Life
      (pp. 169-188)

      Until the late eighteenth century, no major religious community of the Middle East outclassed others in either commerce or finance. However, in the course of global economic modernization, local Christians and Jews registered advances that Muslims failed to match. By the nineteenth century Greeks and Armenians, and to a lesser extent Jews, were playing strikingly disproportionate roles in the region’s commercial and financial life, especially in cities. They had leapt ahead of Muslims also in living standards. That is why over the past two centuries Middle Eastern reforms to restore national economic competitiveness have included policies to improve the relative...

    • 10 The Ascent of the Middle East’s Religious Minorities
      (pp. 189-208)

      The renowned Turkish journalist Falih Rıfkı Atay witnessed World War I and its aftermath, including the Greek occupation of western Turkey and Armenian collaboration with Russian and French invaders. He attributes the severity of the Turkish responses to a “feeling of inferiority” rooted in the undisputed economic dominance achieved by Anatolia’s Christian minorities.¹ The economic successes of the Greeks and Armenians had fueled separatist movements, which then galvanized defensive military campaigns, as well as far-reaching social and economic reforms, to reverse the positional losses of Turks.

      Positional losses produced defensive reactions also on the part of nineteenth- and early twentieth-...

    • 11 Origins and Fiscal Impact of the Capitulations
      (pp. 209-227)

      As it entered World War I, the Ottoman Empire abrogated all of its bilateral trade treaties known as capitulations. The occasion sparked joyous celebrations across the shrinking empire, whose subjects had come to consider the capitulations demeaning and a terrible fiscal burden. The date of their abrogation became a holiday.¹ Crafted by Muslim rulers and their counterparts in Christian Europe, the capitulations provided extraterritorial privileges to foreign merchants conducting business in lands under Islamic law. That they imposed costs on the local population is undeniable. By the twentieth century the capitulations were exempting foreigners, and to a degree even their...

    • 12 Foreign Privileges as Facilitators of Impersonal Exchange
      (pp. 228-253)

      On May 9, 1665, Mehmet bin Mahmut, a Baghdad merchant, sued Heneage Finch, the English ambassador to the Ottoman Empire, in an Istanbul court. A group of English merchants, complained Mehmet, would not repay a debt. The record is silent on why the ambassador was sued, rather than the merchants accused of default.¹ When the trial began, the ambassador showed the kadi the text of an Ottoman-English treaty, which stipulates that in cases involving even one trader operating under the English flag, neither claims nor witnesses may be heard in the absence of documentary support (hüccet). Reminded of this agreement,...

    • 13 The Absence of Middle Eastern Consuls
      (pp. 254-276)

      Imagine a Turkish merchant based in Iskenderun around 1680. He has established a partnership with a wealthy person who is funding a commercial venture to Marseille. According to the plan, our traveling merchant will carry silk fabrics on the outbound trip, sell them in Marseille, and use the proceeds to buy woolens. When the woolens are finally sold in Iskenderun, the investing partner will recover his principal, and the profit will be shared. If this scenario appears fanciful, it is because in the seventeenth century few Muslim merchants ventured to the commercial centers of western Europe. Christian pirates and brigands...

  7. PART IV Conclusions
    • 14 Did Islam Inhibit Economic Development?
      (pp. 279-302)

      In seeking to explain why the Middle East—defined to include the Arab countries, Iran, Turkey, and the Balkans—entered the nineteenth century as an underdeveloped region, this book has focused on institutions that contributed to critical deficiencies. Until the eighteenth century, and in some respects even later, neither the people who lived under those institutions nor outside observers saw the unfolding problems. In the seventeenth century, not even foreigners whose organizational innovations were turning western Europe into an economic superpower understood that the Middle East’s economic infrastructure would become dysfunctional. They did not foresee that the region would need...

  8. Notes
    (pp. 303-348)
  9. References
    (pp. 349-392)
  10. Index
    (pp. 393-405)