Rulers, Religion, and Riches: Why the West Got Rich and the Middle East Did Not (Cambridge Studies in Economics, Choice, and Society)

by Jared Rubin

  14 This idea is consistent with Greif’s (2006b) insight that institutions can only persist when they are self-enforcing. Greif considers an institution to be self-enforcing if everyone who is affected by the institution has incentive to act in the manner the institution supports.

  15 The intuition laid out in this section largely comes from Rubin (2011). It also incorporates insights from Coşgel, Miceli, and Rubin (2012a, 2012b).

  16 For more, see Gill (1998, ch. 3; 2008). Also see Coşgel and Miceli (2009), who argue that the trade-off between legitimacy concerns and the amount of religious goods provided by the religious establishment affects the relationship between church and state.

  17 For more on this point, see Stark and Bainbridge (1985, ch. 22).

  18 Another straightforward example of how institutionalized rules establish costs for propagating rule is how rulers recruited military elite in medieval Europe and the Middle East. Blaydes and Chaney (2013) argue that feudal institutions were the basis for military recruitment in medieval Europe, meaning that rulers had to concede numerous rights to feudal lords in return for military service. In the Middle East, Muslim sultans relied on slave armies for military service, meaning that local elites had relatively little bargaining power with the sultan, and thus their support was less expensive than their European counterparts.

  19 Greif (2006b) calls such an institution self-reinforcing. His important insights provide the subtext for the ones elaborated in this chapter, but I attempt to confine as much jargon as possible to the footnotes.

  20 For much more on this argument, see Kuran (1995).

  21 Gill (1998, 53) makes a similar point: “[P]riests who consistently make poor political endorsements will discover that their followers will question not only their political judgment, but the spiritual guidance they offer as well.” For more on this point, see Rodinson (1973), Noonan (1993, 2005), Ekelund et al. (1996), and Hallaq (2001).

  22 Paul David (1985, p. 332) eloquently defined a path-dependent sequence of events as those in which “important influences upon the eventual outcome [are] exerted by temporally remote events, including happenings dominated by chance elements rather than systematic forces.” His example of the QWERTY keyboard layout as a path dependent process is a classic example, even if it is with its detractors.

  3 Historical Origins of Rule Propagation

  1 See Hallaq (2005, ch. 1).

  2 This insight has a long tradition nicely overviewed in Ensminger (1997). Also see Udovitch (1970), Rodinson (1973), and Lewis (1993). Jha (2013) carries this argument one step further, noting how trade fostered interethnic and interreligious cooperation in South Asia, which fostered the creation of institutions that bolstered interethnic trust in the twentieth century.

  3 See Lopez (1971).

  4 See Michalopoulos, Naghavi, and Prarolo (2015).

  5 For an in-depth account on this point, see Watson (1983). For a brief overview of trade in Islamic history, see Rubin (2012).

  6 Quoted in Lewis (1995, p. 149). For more on the intersection of the religious and the legal in early Islam, see Lewis (1974, 1995, 2002), Hassan (1981), and Hallaq (2005). Razi (1990) argues that this intersection is in part responsible for the outsized importance of Islam in legitimating political rule in the present day. Platteau (2011) argues that Islamic political authorities were easily able to bring the religious establishment under their aegis from an early time, and only used Islam to legitimize their rule when there was a vacuum of centralized power. This argument is consistent with the one proposed in this book, although this book places a greater emphasis on the constraints that religious authorities were able to place on the actions of political authorities.

  7 These insights, along with the associated Qur’anic verses, are from the website www.free-minds.org. All Qur’an quotes are from www.quran.com.

  8 These passages are from www.sahih-bukhari.com.

  9 For more on these points, see Goodenough (1931, pp. 37, 54), Jones (1964, p. 96), Gager (1975, pp. 94, 96) and Goody (1983, pp. 92–93). Stark (1996) argues that the poor were underrepresented, in proportion to the Roman population, in early Christianity. Even if this is true, most Christians were from the poorer to middling classes.

  10 For an extensive overview of the early separation of church and state in Christianity, see Mann (1986, ch. 10), Tierney (1988), and Feldman (1997).

  11 Quoted in Johnson (1976, p. 70).

  12 For more on this point, see Hyma (1938, p. 14) and Feldman (1997, pp. 25–27). Gelasius I is quoted in Tierney (1988, p. 13).

  13 It is possible that Constantine’s acceptance of Christianity was a political expedient aimed at gaining Christian support in the midst of civil wars fought with Maximinus II and Licinius over who would rule the empire. But Constantine’s embrace of Christianity cannot have been solely to legitimize his regime. Although the Christian population was growing rapidly in the late third and early fourth centuries, Christians still only made up around 10% of the Roman population around the time of the Edict of Milan. For more on Constantine’s conversion to Christianity, see Jones (1949, ch. 6; 1964), Downey (1969, p. 21), and Stark (1996, ch. 1).

  14 These numbers are from Stark (1996, p. 7). For more on this momentous period in Christian history, see Goodenough (1931, p. 53), Jones (1964, p. 96), Coleman-Norton (1966, pp. 85–86), Downey (1969, p. 34), Johnson (1976, p. 79), Goody (1983, p. 93), and Cameron (1993, pp. 71–72).

  15 See Coşgel, Miceli, and Ahmed (2009).

  16 See Crone and Hinds (1986, p. 1).

  17 See Crone and Hinds (1986).

  18 For more on this point, see Crone and Hinds (1986, chs. 4, 5).

  19 For much more on the evolution of proto-kadis, see Hallaq (2005, ch. 2).

  20 Hallaq (2005) notes that the Sunna was not complete in this period and there were actually multiple Sunna, including those of the first caliphs. Recognition of the Sunna of the Prophet as a source of law came later.

  21 For much more on the early history of Sunna and hadith, see Hallaq (2005, ch. 5).

  22 For more on the growth of the legal class in the first few Islamic centuries, see Masud et al. (1996), Berkey (2003), Hallaq (2005), and Coşgel, Miceli, and Ahmed (2009).

  23 Quoted in Hallaq (2005, p. 184).

  24 See Hallaq (2005, ch. 8).

  25 See Hallaq (2005, ch. 8).

  26 See Hallaq (2005, ch. 8).

  27 See Hallaq (2005, p. 191).

  28 For more on fatwas legitimizing actions by rulers or keeping their actions consistent with Islam, see Masud et al. (1996) and Fierro (1996).

  29 For more, see Watt (1988, p. 28).

  30 For more on the formation of the schools, see Hallaq (2005, ch. 7).

  31 For more, see Schacht (1964, ch. 10), Coulson (1969), Weiss (1978), and Hallaq (2001, ch. 4).

  32 Haim Gerber (1999, chs. 4–7) studied rulings by the important seventeenth-century Palestinian mufti Khayr al-Din al-Ramli in which numerous disagreements that remained unresolved in the classical and postclassical periods arose, necessitating an act of ijtihad. Wael Hallaq (1984, 2001) also notes numerous historical examples of ijtihad, suggesting that the “gate” never closed in theory or in practice. However, even if the “gate of ijtihad” were open, Hallaq’s studies suggest that jurists indeed practiced ijtihad less frequently after the tenth century.

  33 Chaney (2016) provides a complementary theory to the one proposed here. He argues that the rise and decline of Muslim science resulted from the incentives faced by the religious establishment. When the majority of the populations conquered by Islamic polities had converted to Islam, Chaney argues that studies in logic, philosophy, and science threatened to undermine the position of the religious elite.

  34 See Tierney and Painter (1992, ch. 4).

  35 Quoted in Tierney and Painter (1992, p. 73).

  36 For more, see Tierney and Painter (1992, ch. 4).

  37 See Berman (1983, ch. 1) and Tierney and Painter (1992, ch. 5).

  38 For more on the
economic consequences of these conditions, see Lopez (1971, chs. 1–2). For more of the effect of these conditions on the contractual forms found on manors, see North and Thomas (1971).

  39 For more, see Goodenough (1931, p. 69) and Feldman (1997, p. 30).

  40 See Tierney and Painter (1992, chs. 6, 7).

  41 See Lopez (1971, chs. 2–3).

  42 For more, see Greif, Milgrom, and Weingast (1994) and Greif (1994b). Putnam (1993), Guiso, Sapienza, and Zingales (2016), and Jacob (2010) contend that a key feature of medieval political institutions – the independence of certain cities in Northern Italy and the Holy Roman Empire – led to greater social capital and hence better subsequent economic outcomes.

  43 For more on this point, see Lopez (1971), Jones (1997), and Greif (2006b).

  44 For more, see North and Thomas (1971), Milgrom, North, and Weingast (1990), Greif, Milgrom, and Weingast (1994), Hunt and Murray (1999), and Greif (2004, 2006b).

  45 See Berman (1983, p. 91).

  46 Tierney (1988, pp. 33–95) gives an excellent overview of the Investiture Controversy, replete with translations of many of the important documents of the period.

  47 For more on this period, see Berman (1983, ch. 2) and Tierney (1988, ch. 3).

  48 On these last points, see Hyma (1938, pp. 30–32) and Feldman (1997, pp. 30–35).

  49 See Berman (1983, ch. 7).

  50 See Berman (1983) for an in-depth overview of the emergence of various types of law in this period.

  51 See Berman (1983).

  52 For an English translation and interpretation of this document, see Tierney (1988, ch. 3).

  53 Quote from Berman (1983, p. 97).

  54 See Tierney (1988, pp. 116–126).

  55 See Tierney (1988, pp. 127–138).

  56 See Tierney (1988, pp. 139–149).

  57 Quoted in Tierney (1988, p. 171).

  58 See van Zanden, Buringh, and Bosker (2012).

  4 Bans on Taking Interest

  1 Cash waqfs were also an important source of capital in the late Ottoman period. However, they had important differences from banks described later in this chapter.

  2 Kuran (2005a) argues that “Islamic economics” as a whole is largely a guise for a modern economic system cloaked in Islamic doctrine.

  3 Quoted in Kindleberger (1980). For more on this flavor of argument, see Labib (1969), Rodinson (1973), Udovitch (1975), Le Goff (1979), Jones (1988), and Pamuk (2004b). For arguments in favor of an impact of interest restrictions on economic and political outcomes, see de Roover (1948), Noonan (1957), Kuran (1986), Ekelund et al. (1996), Reed and Bekar (2003), Munro (2003, 2008), Rubin (2010, 2011), and Koyama (2010).

  4 For more on interest restrictions in a premodern context, see Brenner (1983), Glaeser and Scheinkman (1998), and Rubin (2009).

  5 See Rahman (1964) and Schacht (1995).

  6 For more on hiyal, see Khan (1929), Schacht (1964, 2006), Coulson (1969), Grice-Hutchinson (1978), and Ray (1997).

  7 Jahiz, an Arab writer living in Basra in the ninth century CE, documented a specific account of a double sale. He cited two Persian Gulf merchants who bought back for cash the same articles they had just sold on fixed term. Jahiz’s account reveals that such transactions were commonplace for Muslims in this period. For more on this account, see Çağatay (1970, p. 57) and Rodinson (1973, pp. 38–40).

  8 See Rodinson (1973, p. 39).

  9 The scholars Abu Yusuf (d. 798) and Shaybani (d. 805) wrote two famous treatises.

  10 In a detailed study of the early twelfth-century Cairo Geniza, Shelomo D. Goitein (1967, p. 170) observes that although credit and commerce flourished in Egypt, “even a cursory examination of the Geniza material reveals that lending money for interest was not only shunned religiously, but was also of limited significance economically … therefore, the economic role of financial investment today was then fulfilled by various forms of partnerships.” Also see Udovitch (1979), Goitein (1967), and Gerber (1999, pp. 129, 141).

  11 See Imber (1997, p. 146).

  12 For more on istiğlal, see Gerber (1988, ch. 7).

  13 On waqfs, see Imber (1997). On cash waqfs, see Çizakça (1995).

  14 For more on the lack of banking, see Udovitch (1979) and Kuran (2004b, p. 73; 2011). Partnerships most frequently took the form of mudaraba (sleeping partnership) or ‘inan, in which both partners invested some capital. For an extended analysis of partnerships in the medieval Islamic world, see Udovitch (1970). For more, also see Goitein (1967) and Labib (1969).

  15 This excludes cases involving waqfs.

  16 For more, see Mandaville (1979), Çizakça (2000, ch. 3), and Kuran (2005c, pp. 606–8).

  17 See Çizakça (2004, p. 10).

  18 For more on the resolution to this controversy, see Mandaville (1979, pp. 297–8) and Imber (1997, pp. 144–5).

  19 See Mandaville (1979, p. 292). Çizakça (2000, pp. 51–2) shows that the amount of capital injected into the economy by the cash waqfs was nearly ten times the amount withdrawn by the state through the tax farm of the silk press. On the other hand, Gerber (1988, pp. 132–40) provides data showing that the waqf’s role in providing credit in Bursa was relatively minor, and only 11% of all entries concerning credit were provided by waqfs in Jennings’s (1973, p. 176) study of Kayseri sicils.

  20 The approval of cash waqfs varied between schools of Sunni Islam. The Hanafi position (which was taken by the Ottomans) was relatively lenient, allowing them subject to custom. The Shafi’i, Maliki, and Hanbali schools also allowed the cash waqf, but only under certain conditions, with the Maliki school being the least rigid. For more, see Mandaville (1979, p. 293) and Çizakça (2000, pp. 27–40).

  21 A few of the early Church fathers spoke out against interest, but modern scholars generally agree that these scattered early references to the evils of interest do not imply that taking interest was forbidden in the first three Christian centuries (Dow 1922; Divine 1959; Frierson 1969). The lack of anti-interest doctrine in this period is not attributable simply to the absence of a centralized Church. Numerous local synods met before the fourth century and would have been the primary forums to espouse anti-interest sentiments, as they were in the fourth century, but interest was not a topic that was widely discussed, if it was discussed at all (Hefele [1894] 1973).

  22 See Hefele ([1894] 1973) and Maloney (1973). Elvira and Carthage explicitly extended the prohibition to laymen. Canons ten and thirteen of the Synod of Carthage of 345–348 stated, “As the taking of any kind of usury is condemned in laymen, much more is it condemned in clergymen” (Hefele [1894] 1973, vol. 2, pp. 186, 468).

  23 Rubin (2009) provides a theory of interest restrictions that is consistent with this early history of the Church, arguing that once the Church gained wealth under Constantine in the early fourth century, it suddenly faced a problem whereby its commitment to provide aid to everyone in need encouraged risky behavior associated with taking loans at high interest. One way to mitigate this problem while remaining consistent with Old Testament doctrine was to ban interest. For other views on the emergence of interest restrictions in premodern economies, see Posner (1980), Brenner (1983), Glaeser and Scheinkman (1998), and Reed and Bekar (2003).

  24 See Lopez (1971, p. 72).

  25 See Le Goff (1979) and Munro (2003, 2008).

  26 For more on these papal decrees, see Noonan (1957, pp. 19–22, 80–1; 1966, p. 63) and Munro (2003, 2008).

  27 See Munro (2003), Lane (1966, ch. 6), and Mueller (1997, ch. 10–14).

  28 See Pirenne (1937, pp. 133–4) and de Roover (1948, p. 104).

  29 See Pirenne (1937, pp. 133–4), de Roover (1942, pp. 57–8; 1948, pp. 104–6, 161), Gilchrist (1969, p. 114), and Grice-Hutchinson (1978, ch. 1).

  30 See Noonan (1957, ch. 7), Gelpi and Julien-Labruyère (2000, p. 32), and Munro (2003, 2008).

  31 See Homer and Sylla (1991, ch. 5–6, p. 138).

  32 Quote from Noonan (1957, p. 161, ch. 7). Also see Munro (2008).

  33 See Noonan (1957, ch.
5, 12), Divine (1959), and Gilchrist (1969).

  34 See Gilchrist (1969, p. 115) and Gelpi and Julien-Labruyère (2000, pp. 42–3).

  35 By the sixteenth century, the interest ban was more or less a dead letter, although it was still the official position of the Church. The Protestant Reformation sped up the Church’s relaxation of interest doctrine, but it is clear that the forces underlying the relaxation of the ban were in motion well before the Reformation. For more on the early Protestant views on interest, see Noonan (1957, ch. 18), Gelpi and Julien-Labruyère (2000, ch. 4–5), and Kerridge (2002). The ban was officially lifted in a series of decisions between 1822 and 1836 in which the Holy Office publicly declared moderate interest legal to everyone. In 1917, the Church offered the Codex iuris canonici, which replaced all earlier collections of canon law and allowed a legal title to interest.