The relative economic decline of the Middle Eastern Moslem world after 1500 requires some explanation. Comparing Istanbul, or Cairo, and London or Paris at the turn of the 16th century would not show up any great differences in living standards, cultural sophistication, or comfort.

BY JONATHAN WARNER | JUNE 12, 2012

LongDiverg

How could it be that a civilization that was able to conquer much of Europe, toppling even the once-mighty Eastern Roman Empire, could become so atrophied that it lost almost all its territory by 1920? How could a civilization that preserved the wisdom of the ancient Greeks, and gave the world the system of numerals that it uses today, find itself marginalized and forced to accept many innovations from outside its borders even to survive? Why did the industrial revolution not take place in the Middle East?   Why the long divergence between the West and the East?

The divergence is easy to document, as Timur Kuran carefully and engagingly does, but is less easy to explain. His thesis is easily stated (p. 5) – the Middle East fell behind because it was slow to adopt certain institutions that allowed for the pooling of (financial) resources for an extended period of time. The lack of appropriate banking arrangements; the absence of a partnership structure that allowed the easy transfer of a business to the original partners’ heirs; the failure to develop joint-stock companies; are the key ingredients that are missing.

Rather in the tradition of Max Weber (although critical of Weber’s actual thesis), Kuran searches for an explanation in the realm of ideas and religion. There are some prima faciae attractions in this approach, perhaps, most tellingly, that by the mid-19th century the Jewish and Armenian Christian minorities of Istanbul were becoming wealthier than the majority Muslim population, despite the impediments and taxation that the minorities faced (and the fact that they made frequent use of the Islamic legal structures). He agrees with Weber that the absence of an Islamic version of incorporation was a hindrance to the development of city administration – but argues that this begs the question, as Middle Eastern cities seemed to do just as well as Western ones up to 1600 or so.

islamic-finance-and-law-theory-and-practice-in-a-globalized-worldInstead, Kuran fingers Islamic inheritance patterns as a possible cause. While corporations in the west could be structured so as to survive the deaths of the original partners, Islamic practice was that enterprises were dissolved on the death of one of the partners, unless all the deceased partners’ heirs could agree to keep it going (a likely impossible task). As a result, the preconditions for joint stock companies were not there, and, further, Moslem enterprises would lose out to western ones. The greater risk of doing business with a Moslem enterprise that might unexpectedly have to be wound up gave an advantage to western companies in third countries where the two were in competition. This, magnified and extended, could account for the divergence in success of western and Islamic countries. The seeming lack of interest in developing commercial ties (exemplified by the very small numbers of Middle Eastern Consulates in other countries) set up the conditions for the failure of the Moslem world to take advantage of the commercial opportunities that were being developed by Western merchants and businessmen.

 


*Published in Journal of Global Analaysis (JGA) Vol. 3 | No. 1
© Copyright 2012 by CESRAN