Is Islam Bad for Business?

In this beautifully crafted book, Timur Kuran provides a remarkably rich analysis of how Islamic law impeded economic progress in the Middle East and North Africa. Kuran’s views are fresh and powerful, and they are subtle. He does not claim that Islamic law was generally bad for economic activity. He does not claim that prohibitions on interest denied credit to merchants or entrepreneurs. Nor does he claim that predation by absolutist states blocked capitalist accumulation or inhibited commerce. Instead, Kuran shows how Islamic law originally provided Middle Eastern states up until the Ottoman Empire with one of the most effective legal regimes to encourage commerce and industry that existed anywhere in the world. Yet built into those laws was a set of self-reinforcing characteristics that led away from the more complex, impersonal, and flexible organizational forms that came to characterize European commerce. Over the period from the sixteenth to the eighteenth century (hence the “long” divergence), these characteristics inhibited change in Middle Eastern commercial operations, while European merchants evolved novel legal and organizational forms that taken together gave Europeans systemic advantages in commerce. By the nineteenth century the Middle East lagged so far behind that the region’s only way forward was to accept these legal and organizational forms, and seek ways to insert them into Islamic society. In what follows I will outline and critically engage Kuran’s key arguments. While I believe that The Long Divergence is an exemplary work of historical social science from an institutionalist perspective, I also think that Kuran places too much emphasis on the historical role of Islamic law, and too little emphasis on the role of the state. Further, I suggest that there is a bit too much “path dependence” in his account. As a consequence, he is more pessimistic than I think necessary about the possibilities for change in the wake of the Arab Spring. Key Features of Islamic Law for Commerce Kuran’s method in his book is admirable. He does not seek out institutions that might be harmful to commerce. He starts from the indisputable fact that from the tenth through the sixteenth century, Muslim merchants dominated trade networks from Africa through the Middle East to India and southeast Asia, in both caravan trade and shipping. Thus he begins with the assumption that Islamic legal institutions, as they developed during this period, were quite favorable to commerce. It was only after the sixteenth century that Europeans began to rival, and eventually surpass, Muslim merchants; and from the midnineteenth century onward even Christian and Jewish minorities in Muslim lands pulled away from their Islamic countrymen in their success in trade. To explain these trends, Kuran examines the key features of Islamic law that were highly supportive of commerce for centuries and asks what made these laws problematic compared to European rivals from the sixteenth century onward. Why was it difficult or impossible for Islamic laws to adapt or change as needed to enable Muslims to meet this competition? Throughout, Kuran is always questioning, testing his own conclusions, and sifting the evidence; he never assumes anything inimical or negative about Islamic law. Every negative effect has to be proven, and shown to be not a foolish or deliberately harmful choice, but an unforeseen outcome of rational decisions made by Islamic merchants and states seeking to advance their interests. Kuran focuses on several features of Islamic law that were present from the early decades of Islam’s development, and other features that developed mostly or entirely after the initial half-century of Islam’s rise. These features are analytically separated, but Kuran shows how they were in fact closely interrelated and formed a self-reinforcing pattern that made it nearly impossible to change just one or two if desired. The first feature is Islam’s inheritance system. The Prophet was concerned to raise the status of women and protect the claims of junior heirs, considering it immoral Jack A. Goldstone is Virginia E. and John T. Hazel, Jr. Professor and Director, Center for Global Policy, School of Public Policy, George Mason University ([email protected]). | |