by Jared Rubin
Contradictory Hypotheses
The most important set of contradictory hypotheses to the one proposed in this book centers around differences in culture. I already stated the primary problems with explanations based on culture – they often confuse correlation with causation, suggesting that a “conservative” culture is the cause of the problem when it is actually a result of deeper forces also affecting economic and political differences. Of course, culture matters to economic outcomes. Yet, hypotheses of this ilk tend to treat culture as unchanging. An important example of such an argument yet again comes from Max Weber (1922), who famously ascribed the relative economic retardation of the Middle East to the “conservative nature” of Islam. Such a claim was seconded in more recent expansive histories by David Landes (1998, ch. 24), Eric Jones (1981, pp. 179–84), and even Joel Mokyr (1990, pp. 205–6), who in a fantastic book on technology and economic development suggests that a shift to a more conservative outlook contributed to the long-run technological backwardness of the Middle East.21 The present book suggests an alternative explanation: conservatism is not an inherent feature of a society, but an outcome based on a lack of incentive to change.22
Gregory Clark’s meticulously researched A Farewell to Alms presents a different strand of cultural argument. Clark offers the theory that noble and middle-class values slowly spread throughout English society during the late medieval and early modern periods because the rich had higher reproduction rates than did the poor, and this did not occur elsewhere in the world. As people with a more bourgeois background spread throughout all layers of the economy, virtues generally associated with capitalism spread with them, allowing England to escape the Malthusian trap of persistent subsistence income. In Clark’s view, institutions play no role in the rise of modern wealth. It is a fascinating hypothesis that has sparked an important debate about the “big question” of why some are wealthy and others are poor.23 Yet, it does not adequately address one important aspect of the argument: the onset of modern economic growth was a northwestern European phenomenon. Clark’s argument applies to England but not to the rest of Western Europe, and it cannot explain the clear differences that arose by 1750 between the Ottoman Empire and northwestern Europe, not just England.24
Another explanation, more prevalent in the popular press than in academia, is that Western colonialism is the cause of Middle Eastern economic stagnation and political violence. In this view, the nineteenth- and twentieth-century plundering of North Africa and the Middle East by European powers inhibited the region’s economic development. The most popular variant of this argument is that the carving up of the Middle East under the Sykes-Picot Agreement of 1916 without regard to tribal, ethnic, or religious identities set the stage for internal conflicts from which the region has yet to escape.25 This is an attractive idea to those who want to absolve Middle Eastern political, religious, and economic leaders from contributing to economic stagnation. While it is certainly true that the European powers did not have the best interests of Middle Easterners at heart – and that many aspects of twentieth-century Middle Eastern political economy have colonial roots – it is hard to see how colonialism is the root source of Middle Eastern problems. Such explanations raise a more important question than they answer (also noted by Timur Kuran): Why were Western European powers able to colonize the Middle East in the first place? Colonization cannot be the root cause of economic differences, but instead must be an outcome of other, more historically distant economic or political causes.
Another hypothesis that cannot explain many of the phenomena discussed in this book is Jared Diamond’s “geography hypothesis” put forward in Guns, Germs, and Steel. Diamond claims that the shape of land masses, the ability to domesticate certain animals, and crop endowment had numerous consequences for how societies formed over time. Likewise, Jeffrey Sachs (2001) argues that disease environment, ability to produce food, and energy endowments help explain why tropical climates have performed worse than temperate ones. A related set of hypotheses are those of Stanley Engerman and Kenneth Sokoloff (1997, 2000), who argue that resource endowments helped shape the economic paths of different regions in the New World. If geography is the ultimate determinant of long-run economic success, it is difficult to see why some regions of the world could be so far ahead at one point in time and then fall so far behind later. After all, geography is practically constant. The geography thesis therefore has difficulty answering the primary question posed in this book: Why was the Middle East so far ahead of Western Europe for so long only to ultimately fall so far behind?26
A final argument meriting discussion is the one proposed by Bernard Lewis late in his career in What Went Wrong? Lewis argues that the lack of separation of church and state in the Islamic world had a long-run detrimental effect on Islamic economies. This fact is also at the heart of the argument in the present book, although the conclusions drawn from it are very different than in Lewis. Lewis argues that there was never a separation of church and state in Islam due to the fact that Muhammad conquered his holy land in his lifetime and became the head of the first Muslim state. Consequently, the concept of “secularism” remained foreign and unthinkable in the Islamic lands. Lewis goes on to argue that this meant that societal features associated with secularism in the West – civil society and representative government – never evolved in the Islamic world. Lewis’s argument is a bit too simplistic. Why should a concept be unthinkable for more than one thousand years merely because it was not a part of early Islamic doctrine? Both the religion of Islam and the political structure of Middle Eastern states changed on numerous fronts in the last 1,400 years, especially in the first four Islamic centuries. There is apparently nothing inherent to Islam that would forbid change in the manner that Lewis implies. The present book provides an answer where Lewis is lacking one. Instead of simply assuming that differences in how rulers used Christianity and Islam were “built into” the system, it provides an explanation for why the legitimizing relationship between rulers and religious authorities diverged over time. Unlike Lewis, my explanation does not rely on a Eurocentric assumption of the “Orient” merely being stuck in its ways. Instead, I argue that where we do not see change it is not because of some inherent conservatism or alternatives being “unthinkable,” but because it was in the interests of enough of the relevant players to maintain the status quo.
The Audience of this Book … and a Caveat
This book provides insight into the statement made in its subtitle: Why the West got rich and the Middle East did not. It tackles the question of where modern wealth came from, and why its origins were found in the West and not elsewhere. This is one of the most important inquiries economists and economic historians make, which is why so many have addressed it in the past and many more will continue to address it in the future. A satisfactory answer has implications that clearly go well beyond historical curiosity. First and foremost, gaining a better understanding of the origins of modern wealth is a topic of central interest to economists, especially development economists and economic historians. Political scientists are interested in the role that rulers and political institutions played in the process that yielded the modern economy. I also attempt to repudiate simple but false claims about the direct connections between religious doctrine and economic outcomes. To the extent that they are willing to listen to such an economic argument, this is a topic of interest to scholars of religion. Finally, and most importantly, this book has implications for what promises to be one of the most enduring stories of the twenty-first century: the role of Islam in politics and economics. This topic should interest anyone concerned with the future of Middle Eastern political economy or the important role the Middle East will play in twenty-first-century Western political economy. Interest in this topic obviously extends well beyond the academy, and I have written this book in a manner that reflects this. To the extent possible, I avoid using economics jargon, and I have replaced all equations with words.
Whenever
an economist writes for a general audience, it is difficult to avoid writing in a manner that prevents misinterpretation. This is even truer when writing on religion, a topic in which many people have preconceived notions on what they want the answer to be. I attempt to preempt any such misinterpretation throughout the book, wherever it is appropriate, and I re-address the major misconceptions of the argument in the concluding chapter. But there is one misconception worthy of addressing at the end of this introductory chapter. This is, namely, that this book is very much not a diatribe against religion. Nor is it a diatribe against Islam. It is true that this book seeks an explanation for why the Middle East fell behind Western Europe, and that it finds “getting religion out of politics” to have played a major role in this process. But there is almost nothing about Islam or Christianity per se that is at the root of these differences, save their capacity to legitimize rule. Nor is there anything specific to religion that is “bad” for economic outcomes: propagation by any entity with interests not aligned with broader economic success will likely lead to laws and policies detrimental to long-run economic fortunes. More importantly, while this book tackles a controversial topic, it does so with no underlying agenda besides being a quality work of economics. It is not pro- or anti-Islam or pro- or anti-religion. It is simply an argument that uses economic logic to improve our understanding of the origins of the modern economy and why it emerged – and did not emerge – when and where it did.
Part I
Propagation of Rule: A Theory of Economic Success and Stagnation
2
The Propagation of Rule
The introductory chapter posed an important puzzle: Why did the economies of the Middle East fall behind those of Western Europe after leading them for centuries following the spread of Islam? This chapter provides a framework for answering this question. The starting point follows from the most basic of economic dictums: people respond to incentives. Digging one step deeper, the questions arise: What type of incentives lead to economic success when present and to stagnation when absent? Why are incentives different in different societies? What determines the incentives that people face?
There are a variety of societal features shaping the incentives individuals face. For instance, religion can incentivize people to do certain things and not do other things. Islam disincentivizes Muslims to eat pork and consume alcohol, and it does so by imposing a cost on these actions. The costs are both intrinsic (fear of displeasing Allah) and social (what will other Muslims think?). The point is not that Muslims never eat pork or drink alcohol; it is simply that it is more costly for them to do so than it is for non-Muslims. And people perform actions less the more costly they are.
This book focuses on the types of incentives that shape a society’s economic outcomes. The central focus is on the incentives that shape the laws and policies that a society enacts. The contents of laws and policies, as well as how they are enforced, are among the most important determinants of whether a society is economically successful or not. When laws and policies favoring commerce are impartially enforced – for example, those favoring property rights, innovation, investment in public goods, reasonable taxation, freedoms of speech, press, and information – people are more likely to invest in highly productive enterprises.1
Laws and policies favoring commerce sow the seeds of economic growth. Production rises when investors direct capital toward its most highly productive use, allowing for more consumption in the future. This process compounds itself over time as investment in increasingly productive activities occurs. Conversely, when lawmakers enact and enforce laws and policies dissuading commerce – handouts to privileged citizens, burdensome taxation, abuse of property rights, harsh restrictions on free markets, or overinvestment in war – people are likely to either invest in low-productivity ventures or not invest at all. For instance, as property rights became weaker in the Islamic core around the tenth century, water mills and building cranes practically disappeared.2 These are precisely the type of capital investments that pay off handsomely only if rights to their rents are secure over long periods. Their absence prevented the realization of potential productivity gains. The resulting economic losses grew even greater in the long run, as these economies never realized the benefits of compounding.
Why do laws and policies favoring commerce emerge in some regions but not others? As subsequent chapters show, pro-commerce laws and policies became much more commonplace in certain parts of Western Europe prior to the Industrial Revolution, but Middle Eastern rulers rarely enacted similar laws and policies. To understand why this was the case, it is first necessary to understand where laws and policies come from and why they might be different in different regions. This is not an easy task. There are many groups with the ability to create and influence the content of laws and policies, and understanding how these groups interact is essential to understanding what types of laws and policies emerge. This chapter focuses on these interactions, exploring how and why groups get their voice heard, and why this results in the creation of certain types of laws and policies.
Any inquiry into the forces underlying the content of laws and policies must focus on the incentives of political actors and the constraints they face. Even dictators cannot enact any law or policy that they please; they have constituents to whom they must account, and citizens may revolt against certain laws.3 The simplest way of analyzing the decisions made by political actors is in terms of costs and benefits. What are the benefits to political authorities from promoting a certain law or policy? What are the costs? Only when the benefits outweigh the costs will the political actor fight to enact a law or policy.
But who are the relevant players? How and why can they constrain rulers? Historically, European monarchs had to negotiate laws and policies with religious authorities, military and landed elites in parliaments, and, occasionally, commercial leaders from urban areas. Meanwhile, Middle Eastern rulers negotiated with a mixture of religious authorities, military figures, and tribal power brokers. Why were the players different in the two regions? Why and how did rulers’ interactions with these players differ? More importantly, what did this mean for the economic fortunes of these regions? These questions are necessary to answer in order to address the puzzling “reversal of fortunes” between the Middle East and Western Europe.
Who Makes Laws and Policies and Why Are They Followed?
A number of questions require addressing in order to understand where laws and policies come from and why they differ in different regions. Which parties create laws and policies? What are their interests? What is the bargaining power of each of the parties in the fight over laws and policies? Why do people follow laws and policies?
This chapter answers these questions by focusing on the role that elites play in creating laws and policies and encouraging others to follow them. I define elites as anyone who can influence how people whom they do not know act.4 In much of European and Middle Eastern history, religious authorities were among the most important elites. Their dictates encouraged people to do minor things such as fast during Ramadan or give alms to the poor, as well as major things like go on a Crusade or fight a holy war. Other types of elites abound in the historical and contemporary record. Tribal elders use wisdom and moral authority to resolve disputes and give advice, military elites use force to influence others to do things they would rather not do, and economic elites wield their purse strings to garner influence. Because elites influence others, they can help shape laws and policies that people follow. It is therefore the interactions between different types of elites that dictate laws and policies.
People will not follow any law or policy enacted by an elite. For example, when King Charles I of England (r. 1625–1649) attempted to collect ship money – a tax levied without the consent of Parliament that was widely viewed as illegitimate – the tax largely went evaded, with nobles openly refusing to pay it. Why? Why did Charles I’s subjects follow laws and policies in some instances but not others? What
constrains rulers? How do they convince people to follow their laws and policies?
The answers to these questions are central to the framework proposed in this chapter. Research that I conducted with Avner Greif (Greif and Rubin 2015) provides some insight into these answers. We argue that there are two reasons why people follow laws and policies (which I henceforth call rules): because they believe that the person who enacts the rules has the right to do so, and because they believe that punishment will result if they do not follow the rules. In other words, people follow a rule either because the ruler is legitimate or because he has access to some form of coercion, or both. Two features of rules therefore explain why people follow them: who establishes them and who enforces them.