Islamic and issues of development

1. Islam and Development- Part 1
Historical and Institutional
Perspectives
Gairuzazmi M Ghani

2. Islam and Development?
• A millennium ago, around roughly the tenth
century, the Middle East was an economically
advanced region of the world. Either measured
by:
(i) standard of living,
(ii) technology,
(iii) agricultural productivity,
(iv) literacy, or
(v) institutional creativity.

3. Islam and Development?
• Only China might have been even more
developed (Needham Puzzle).
• Subsequently, however, the Middle East failed
to match the institutional transformation
through which western Europe vastly
increased its capacity to pool resources,
coordinate productive activities, and conduct
exchanges.

4. Islam and Development?
• The institutional endowment of the Middle East
did evolved.
• However, the change was minimal, at least in
relation to the structural transformation of the
West, and the Middle East’s own evolution during
the EARLY Islamic centuries.
• In eighteenth-century Cairo credit practices
hardly differed from those of the tenth century.
• Investors and traders were using enterprise forms
essentially identical to those prevalent eight
centuries earlier.

5. Islam and Development?
• By the nineteenth century the entire region
was clearly “underdeveloped” relative to
western Europe and its offshoots in the new
world; and by the twenty-first century, the
Middle East had fallen markedly behind parts
of the Far East as well.
• WHY??? (“Western perspective”)

6. Islam and Development?
• The historical economic underdevelopment of
Islamic (Muslim) countries relative to the
west has been explained by:
(i) the absence of rationalism (Weber 1963),
(ii) the negative impact of Western imperialism
(Rodinson 1974),
(iii) the development of Muslim law, particularly
with regard to property rights, (Facchini,
2007),

7. Islam and Development?
(iv) Islamic law of inheritance which had a negative
impact on capital accumulation, absence of the
concept of corporation which blocked the
development organizations and of civil society,
locking up of vast resources into waqfs, Islamic
form of trusts, which were to become
dysfunctional over time (Kuran 2004),
(v) the disposition of institutions of freedom to the
West by Christianity and not to the Middle east
by Islam (Facchini, 2009),

8. Islam and Development?
(vi) the discounting of documents in Islamic legal
practice constrained the organization of early
modern Muslim trade (Lydon, 2009), and
(vii) the absence of monasticism in Islam, which
stems from the lack of emphasis on hard
work, abstinence and celibacy as paths to
salvation (Ergener, nd).

9. Islam and Development?
(viii) "conservative" or "mystical" nature of Islam
discouraged curiosity (to learn non-Muslim languages
or European cartography, take foreign expeditions,
adopt foreign methods and techniques, and so forth)
and prevented risk-taking, innovation, and
mechanization (Cromer 1908; von Grunebaum 1966;
Weber 1978; Lewis 1982, 2002).
• In this view, Islam is seen as inherently hostile to
commerce and finance. In particular, both religions
advocated several laws which inhibited economic
development – such as regulations on taking interest
and printing, suppression of women, and laws
discouraging mass education.

10. Islam and Development?
(ix) political illegitimacy was the root cause of
underdevelopment, citing a general
overindulgence in military campaigns, unjust
taxation, and other detrimental economic
policies (Chapra, 2008). Based on ibn
Khaldun’s model.

11. Islam and Development?
HOWEVER:
• Other authors have argued that there was
nothing irrational about Islamic mentality
(Rodinson, 1974),
• the sophistication of medieval Moslem financial
and commercial practices. (Udovitch, 1962),
• We need to look at problems specific to the
Middle East that are not part of Islam, but part of
the Ottoman legacy or accidents of geography.

12. Islam and Development?
• These include
• (1) the system of absolute central authority in
politics;
• (2) tribalism and guilds;
• (3) disincentives to investment in human
capital; and
• (4) disinclination to seek innovations.