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

  Rulers, Religion, and Riches

  For centuries following the spread of Islam, the Middle East was far ahead of Europe. Yet, the modern economy was born in Europe. Why was it not born in the Middle East? In this book Jared Rubin examines the role that Islam played in this reversal of fortunes. It argues that the religion itself is not to blame; the importance of religious legitimacy in Middle Eastern politics was the primary culprit. Muslim religious authorities were given an important seat at the political bargaining table, which they used to block important advancements such as the printing press and lending at interest. In Europe, however, the Church played a weaker role in legitimizing rule, especially where Protestantism spread (indeed, the Reformation was successful due to the spread of printing, which was blocked in the Middle East). It was precisely in those Protestant nations, especially England and the Dutch Republic, where the modern economy was born.

  Jared Rubin is an associate professor of economics at Chapman University in Orange, California. His research on the relationship between political and religious institutions and their role in economic development has appeared in numerous top economics journals.

  Cambridge Studies in Economics, Choice, and Society

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  Rulers, Religion, and Riches

  Why the West Got Rich and the Middle East Did Not

  Jared Rubin

  Chapman University

  One Liberty Plaza, New York, NY 10006, USA

  Cambridge University Press is part of the University of Cambridge.

  It furthers the University’s mission by disseminating knowledge in the pursuit of education, learning, and research at the highest international levels of excellence.

  www.cambridge.org

  Information on this title: www.cambridge.org/9781108400053

  10.1017/9781139568272

  © Jared Rubin 2017

  This publication is in copyright. Subject to statutory exception and to the provisions of relevant collective licensing agreements, no reproduction of any part may take place without the written permission of Cambridge University Press.

  First published 2017

  A catalogue record for this publication is available from the British Library.

  Library of Congress Cataloging-in-Publication Data

  Names: Rubin, Jared, author.

  Title: Rulers, religion, and riches: why the West got rich and the Middle

  East did not / Jared Rubin, Chapman University.

  Description: New York: Cambridge University Press, 2016. |

  Series: Cambridge studies in economics, choice, and society |

  Includes bibliographical references and index.

  Identifiers: LCCN 2016045144 | ISBN 9781107036819 (hard back)

  Subjects: LCSH: Europe, Western – Economic conditions. | Middle East – Economic

  conditions. | Economics – Europe, Western – Religious aspects. | Economics – Middle

  East – Religious aspects. | Rule of law – Europe, Western. | Rule of law – Middle East.

  Classification: LCC HC240.R78 2016 | DDC 330.94–dc23

  LC record available at https://lccn.loc.gov/2016045144

  ISBN 978-1-107-03681-9 Hardback

  ISBN 978-1-108-40005-3 Paperback

  Cambridge University Press has no responsibility for the persistence or accuracy of URLs for external or third-party Internet Web sites referred to in this publication and does not guarantee that any content on such Web sites is, or will remain, accurate or appropriate.

  To the loves of my life: Tina, Nadia, and Sasha

  Contents

  List of Figures

  List of Tables

  Preface

  Acknowledgments

  1Introduction

  Part IPropagation of Rule: A Theory of Economic Success and Stagnation2The Propagation of Rule

  3Historical Origins of Rule Propagation

  Part IIApplying the Theory: Why the West Got Rich and the Middle East Did Not4Bans on Taking Interest

  5Restrictions on the Printing Press

  6Printing and the Reformation

  7Success: England and the Dutch Republic

  8Stagnation: Spain and the Ottoman Empire

  9Conclusion

  Notes

  References

  Index

  Figures

  1.1Twenty Most Populous Cities in Europe and the Middle East, 800 CE

  1.2Twenty Most Populous Cities in Europe and the Middle East, 1300 CE

  1.3Twenty Most Populous Cities in Europe and the Middle East, 1800 CE

  1.4Urban Center of Gravity in Europe and the Middle East, 800–1800

  2.1Rulers’ Desires and How They Are Accomplished

  2.2How Rulers Propagate Rule

  2.3Endogenous Institutional Change

  3.1Diverging Costs and Benefits of Religious Legitimation Over Time

  5.1Print Cities by 1500 in Western and Central Europe

  6.1Welfare Ratios of Skilled Workers in Protestant and Catholic Cities, 1500–1899

  6.2Percentage Protestant vs. Real Per Capita GDP, 2010

  6.3Percentage Catholic vs. Real Per Capita GDP, 2010

  6.4Percentage Muslim vs. Real Per Capita GDP, 2010

  6.5Printing and Protestantism in Western and Central Europe

  6.6Average Parliament Meetings per Century, Protestant and Catholic Territories

  6.7Self-Reinforcing Institutions and the Absence of an “Islamic Reformation”

  8.1Spanish and Ottoman Empires in the Sixteenth Century

  8.2Real Wage Rates in Spain, 1300–1850 (1790s = 100)

  8.3Real Per Capita Agricultural Consumption in Spain, 1300–1850 (1850s = 100)

  9.1Middle East and North Africa on the Eve of World War I

  Tables

  1.1Economic and Political Health, the “West” and Middle East/North Africa, 2012–2014

  3.1Largest Empires in World History, through 1750

  3.2Ten Most Populous Cities in Western Europe around the Commercial Revolution

  4.1Interest Laws in Late Medieval Western Europe

  5.1Number of Cities with Presses and Works Produced by 1500, by Country

  5.2Biggest Print Cities before 1500

  6.1Cities in the Holy Roman Empire (Population ≥ 20,000)

  6.2Cities in the Holy Roman Empire with Universities by 1450

  6.32SLS Regression Coefficients – Effect of City Characteristics on the Reformat
ion

  7.1Population-Weighted Welfare Ratios for Skilled Labor, by Current Country

  7.2Total Population (in 1,000s) of Ten Largest Cities, by Current Country

  7.3Urban Population Growth during the Dutch Revolt in Holland and Zeeland, 1570–1647

  8.1World’s Largest Empires in the Early Modern Period

  8.2Per Capita GDP in Five Western European Countries, 1500–1750 (Netherlands 1750 = 100)

  8.3Religious Composition of Principal Ottoman Urban Populations, 1520–1535

  8.4Religious Composition of Certain Arab Provinces circa 1570–1590

  8.5Muslim Population Share in the Sixteenth–Seventeenth Centuries, Select Southeastern European Cities

  8.6State Revenues 1550–1559, Annual Averages in Tons of Silver (Total) and Grams of Silver (Per Capita)

  8.7State Revenues in the Seventeenth Century, Annual Averages in Tons of Silver (Total) and Grams of Silver (Per Capita)

  Preface

  I began research for this book in 2004, my third year of graduate school at Stanford University. Conflict between the “West” and the “Islamic world” was one of the enduring stories of the time: 9/11 was still fresh on everyone’s minds, and wars in Iraq and Afghanistan dominated headlines. Not much has changed on this front in the intervening twelve years. If anything, the conflict has heightened. Terrorist attacks around the globe, the spread of al-Qaeda and ISIS, and the devastating Syrian refugee crisis all suggest that many of the West’s political and economic struggles of the foreseeable future will take place in the Middle East.

  Understanding the roots of conflict between the Middle East and the West is therefore of first-order importance, and it is the primary reason I wrote this book. It is my opinion that the most important driver of the conflict is the vast disparity in economic fortunes of the two regions. The economic disparity is real; while it is true that a few of the Gulf States gained significant oil wealth in the latter half of the twentieth century, only a small fraction of the population has seen any of its benefits. In any case, this wealth is fleeting; there is little evidence to my knowledge that any of the wealthy oil nations have built anything close to an economy that will stay strong as the world shifts away from petroleum as a primary energy source.

  The economic disparity between the “West and the Rest” permitted Western occupation and colonization of the Middle East in the nineteenth and twentieth centuries. This disparity also permitted authoritarian rulers, generally supported by the West, to dominate Middle Eastern politics throughout most of the twentieth century. These outcomes have deep historical roots, and it is the goal of this book to discover and analyze these roots. The arguments laid out are inherently comparative; the causes of what went wrong, if anything did indeed go wrong, in the Middle East are easier to ascertain by analyzing what went right in parts of Western Europe. The goal of the book is therefore twofold. On the one hand, it provides insight into some of the necessary determinants for long-run economic success. On the other hand, it spells out how and why an economy might stagnate if those determinants are absent.

  Upon deeper reflection, the reasons for the vast disparity of economic fortunes between the Middle East and the West are not so obvious. Any account of this disparity must also account for the fact that it has not always been this way. For centuries after the founding of Islam, the Middle East was ahead of Western Europe by practically any metric: economics, politics, culture, and science. The Fertile Crescent was the Western Eurasian economic and cultural hub for most of the high medieval period. At some point, this obviously changed. Almost no scholar I know of would argue that the Middle East was close to the leading European economies on the eve of industrialization in the mid-eighteenth century. After industrialization, what were already readily apparent economic differences were exacerbated many times over. The real questions, then, are: Why did a region that was so far ahead for so long ultimately fall behind? Why did the Industrial Revolution begin in Great Britain instead of, say, the Ottoman Empire?

  This book attempts to shed light on the answers to these questions. In doing so it addresses head on the elephant in the room that is all too frequently invoked by Western media outlets and “intellectuals” as an explanation for Middle Eastern problems: Islam. I believe that such claims are ridiculous, but they cannot be simply dismissed offhand without providing a compelling alternative explanation. I provide such an explanation, although it is up to the reader to decide whether it is compelling. My explanation is deeply grounded in economic theory, and it considers the incentives of all the players who may have played some role in the divergence. It is my hope that the reader will come away from this book with a more nuanced view of the role that Islam played in Middle Eastern economic stagnation and, ultimately, conflict with the West.

  The argument is hopefully clear about one key point: Islam itself is not the problem. However, economic success is less likely to occur where religion plays an important role in politics. But this is not to lay blame on religion in general, either; any interest group that has a powerful seat at the political bargaining table but does not have interests consistent with economic growth will play a retarding role in a society’s economy. Historically – for reasons emphasized in this book – religious authorities had an outsized seat at the political bargaining table in both the Middle East and Western Europe. Understanding the process through which this was undermined in the latter but not in the former is therefore of utmost importance for understanding the long-run economic divergence between the two regions.

  This book does not offer a solution for closing the economic disparity between the Middle East and the West. It merely diagnoses the problem and its causes. But just like a doctor must make a correct diagnosis before prescribing treatment, a proper diagnosis of the divergence is essential if we are to understand what political and economic actions could be taken to help close the gap. The diagnosis provided by this book is not based on some simplistic notion of Islam, and this book does not blame Islam more than any other religion for substandard economic performance. It does suggest that getting religion out of politics will be a crucial and necessary step for the Middle East, but even this is not a complete solution.

  There is no reason to expect a quick fix in the Middle East; the process of getting religion (mostly) out of politics took centuries in the West. It is also true that context matters, and the economic and political contexts of the two regions are very different. An important difference noted in this book is that Islam is more conducive to legitimizing political rule than Christianity is, a fact that certainly influences the set of changes that are possible in the Middle East. But even if religion is removed from politics, this is only a first step. It matters dearly who replaces the religious elite at the bargaining table. For instance, replacing religious elites with autocrats is almost certainly worse for economic and personal well-being.

  The rise and spread of Islamic fundamentalism is likely to be one of the enduring stories of the twenty-first century. The best way to contain it – indeed, the best way to contain radicalism of any kind – is through economic development. Radical ideas, be they religious or secular, are much more appealing when there is little hope for a better future. Such ideas, and the violent extremist tactics employed to carry them out, are a by-product of a world that has been left behind economically. It is my sincere hope that this book takes us one step closer to understanding the sources of such economic stagnation while shedding some light on what a path toward long-run, sustained economic growth might look like in the Middle East.

  Acknowledgments

  This is my first book, and as such it brings together most of the research I have conducted over the past decade. So many people have influenced my thoughts, publications, and career. There is a temptation to thank them all, beginning with graduate school. I will gladly succumb to this temptation; I see no reason to leave out anyone who has influenced me. A caveat, of course, is that so many people had a hand in shaping my thinking that I am
sure to miss a few. If this is you, I apologize.

  Some of this book comes from work I started in my dissertation, completed in the economics department at Stanford University. A number of my classmates at Stanford – in economics, political science, and the Graduate School of Business – contributed to my thought process at seminars, in class, and late at night over cheap beer. They include Will Tadros, Josh Lustig, Max Gulker, Jon Meer, Ed Van Wesep, Andres Santos, Steve Nuñez, Sri Nagavarapu, Bryan Keating, Gopi Shah Goda, Saumitra Jha, Luz Marina Arias, David Patel, Peter Lorentzen, Ben Ho, Kıvanç Karaman, Ta-Chen Wang, Erik Snowberg, and Lars Boerner. Equally important were the many faculty who helped at some stage in the process with insight and encouragement, including Petra Moser, Gavin Wright, Paul David, and Brent Sockness.

  I feel blessed to have had fantastic collaborators, some of whom have worked with me on projects highlighted in this book. I have collaborated with Latika Chaudhary on multiple projects on the role religion plays in Indian political economy. She is one of the nicest people I know and is always full of insight. Mike Makowsky is a good friend and a heck of an agent-based modeler. He is always willing to give spot-on comments. Erik Kimbrough, Roman Sheremeta, and Tim Shields have been a blast to work with and have given me great insight into how experimental methods can further our understanding of economic phenomena. Murat Iyigun has been a huge advocate of mine since we first met in 2008. It is an honor to have someone as accomplished as him in my corner. The same can be said for Sascha Becker, Steve Pfaff, and Debin Ma. I have enjoyed every minute of working with all of you and I cannot wait to see what the final product of our efforts will look like. One collaborator who deserves special mention is Metin Coşgel. Along with Tom Miceli, Metin and I wrote two papers that form much of the argument for Chapter 5. He and Tom graciously allowed me to use the material we worked on together in this book. This is one of the key chapters in the book, as it links the theory in the first part to the consequences laid out in the final part. Metin has been a great friend over the years; I am in his debt as a scholar.