Middle East economies are unable to shift into top gear

By Jonathan Power

Dateline: Doha, Qatar.

It has always been one of the mysteries of history why it is that the Muslim world of the Middle East was once so far ahead of Europe in science, medicine, astronomy and mathematics yet by the 16th century started to fall behind.

Not only did most of it never industrialize, if it hadn’t been for nearly all its countries having oil in abundance they would still be living in the poverty and torpor that was their lot at the beginning of the twentieth century. Even today as modernism takes over and cities are built like this one and its neighbours, reaching for the sky, the foundations are industries of the newer kind – tourism and banking. According to the UN’s annual Human Development Report most of them, Abu Dhabi apart, compared with countries of equal income per head, are low down in the world rankings on education, health, scientific prowess and the status of women.

But why did the Muslim world lose its momentum? If it had kept going at the pace it did in the first millennium after Mohammed it would now be one of the world’s leaders.

The problem has been Islamic law. It has imposed a straight-jacket on economic development, even though Mohammed argued in favour of private property, commerce and personal enrichment. Europe and Asia were less bound.

We can single out a number of laws – the law of contracts, the inheritance system, marriage and regulations on hereditary.

Traditionally, Moslem business men usually formed partnerships but the death of a partner terminated the partnership automatically. Active partners carried full liability; there were no bankruptcy laws. The firm’s assets were exposed to demands from third partners. Inheritance laws spread ownership into small parcels among many heirs. Polygamy multiplied the problem. The Koran has detailed rules on inheritance. While giving women more rights than they were given in Europe the sum effect was to make economic progress circumscribed. Moreover, apostasy laws whose breaking could be punishable by death, made it impossible to do business under a non-Muslim system, making international commerce difficult.

Banks could not be established to provide the large-scale financing necessary for mass transport, mass communications and for the factories of mass manufacturing.

In Europe where church and state were separate there was much more freedom for new ideas and new ventures. In Islam theology ruled almost everything.

If this were still the picture today the Muslim countries would be stuck in the worst of ruts.

Pioneered by the Ottoman Empire, Ataturk’s Turkey and the sizeable secular component of Egyptian society, change was introduced from the mid 19th century onwards and slowly spread to other parts of the Muslim world. Things have definitely changed but not as much as they need to. Old attitudes and practises still exist. The apostasy laws still are invoked, if not always and consistently.

In the 1850s Egypt and Turkey, attempting to fast forward, brought in French legal practices. But it took time for judges to be trained and new norms of law to be inculcated. Nepotism and corruption remained rampant, the inheritance of a personal way of dealing with matters that should be decided by disinterested judges. Pre-modern institutions created bloated bureaucracies which are alive and well today. Government policies and conservative social instincts hamper creativity and competition. Thus their manufacturing exports – Turkey excepted – are largely unable to make it in the world at large. Even if the dead hand of top down decision making were swept aside it would take decades for development to take off, apart from the oil, banking and tourism sectors.

Losing the race against Europe led to the rise of protectionism. Turkish statism, Arab socialism and Islamism all at different times have inhibited the capitalist urge to create, invest and grow.

Today the influence of Islamic law has diminished, not least because of Western pressure. The pace was set by Muslim Turkey that in the 1920s abrogated its old, Islamic laws in their entirety. Even in the conservative Arab peninsula they have been modified beyond recognition. Today the corporation is a popular organizational form. Banks are alive and well in every country, working at home and abroad under different systems of jurisprudence. Coming late to the party the Middle East has been able to borrow modern institutions in their most advanced forms.

Yet the populace, even secular intellectuals who are not attached to Islamic practices, have a tendency to blame the West for its development failures rather than their own regimes. The role of classical Islamic law in historically blocking economic development is understood by relatively few, argues Professor Timur Kuran in his new book, “The Long Divergence”.

Unless the Muslim world can change gears and up its annual GNP growth to a consistent 8% or more (which only Qatar is doing) the West will continue to widen the gap. It’s a bad scenario.

© 2013 Jonathan Power

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