It would be fair to say that Islam benefits from incorporating earlier traditions and concepts from the cultures that surrounded the early Muslim community, at its conception. Indeed, the Qur’an includes several stories borrowed from earlier gnostic Christian texts, whilst certain practices and rituals borrowed from the Pagan culture from which Islam sprang. The general explanation is that the Muhammad of Islamic tradition was influenced by a mix of cultures and sects during his years as a trader. Islam most certainly benefited from incorporating surrounding traditions into its framework.
So with that being said, one must also ask, if Islam benefited from trade links with different cultures during its early years, what ideological benefits did those cultures obtain from Islam? I would argue that the development of capitalism owes much to Arab culture at the dawn of Islam.
According to Islamic tradition, from his early 20s to his death, Muhammad was a man of commerce and trade. This wasn’t unique to Muhammad. Mecca under the Quraysh thrived on markets – the spice trade of the 6th century helped hugely, as did the accumulation of interest later outlawed by Islam – mainly unregulated and often chaotic due to lack of strong political or judicial protections. Nonetheless, the location of Mecca and the importance of the Ka’bah for pilgrims, rendered it a great environment for trade. Especially true, because inter-tribal fighting was prohibited in this commercial centre, making it a safe place to do business, whilst worshipping. Mecca’s mix of both faith with the Ka’bah, and commerce with the market, is a mixture that Islam would appropriate and make its own.
Indeed, Islamic tradition holds that Muhammad himself married Khadija; an incredibly successful merchant famed for investing in trade delegations, including one in which Muhammad brought back twice the return she had expected on her investment. Muhammad understood how to make money, how to get along in business, and he understood investment opportunities when he saw them. By the time of his death, he was incredibly wealthy.
His business character aside, Muhammad’s economic pronouncements during his time in Medina provided a framework conducive for business and incentivising further trade in the region, whilst Europe languished in a hopeless feudal dark age. Hadith supposedly collected by Abu Dawud in book 013, Hadith Number 3067, gives us an example of early property rights:
“Narated By Sa’id ibn Zayd : The Prophet (pbuh) said: If anyone brings barren land into cultivation, it belongs to him, and the unjust vein has no right.”
- The trustworthiness of this hadith attributed to Muhammad is irrelevant. What is relevant, is that this Hadith was collected in the 9th century, and so it is clear that the concept of property rights over laboured land existed at that period of time in the Middle East. Property rights would be a concept progressed beautifully by the Leveller movement during the English civil war centuries later. It would also become a concept that Locke elaborated upon, and would later define the nature of capitalism and its criticisms.
As well as property rights, one particular Hadith also collected by Abu Dawud gives us a taste of Adam Smith’s later ‘invisible hand’ metaphor:
“one person came to the Prophet and requested him to fix prices in the market but he refused. Another man came and made the same request; the Prophet said it is Allah who pushes prices up or down, I do not want to face Him with a burden of injustice”
- Here, it is quite obvious that debate around interfering with market forces was being had, in the 9th century. For 9th Century Muslim Arabs, price rises and falls were a natural process, and that human interference was a ‘burden of injustice’. It isn’t a relatively new discussion. Later, in the 13th Century, the Hanbali scholar and author, Imam Shamsuddeen Ibn Qudamah al-Maqdisi wrote:
“Two facts can be derived from the hadith. First, the Prophet did not control prices despite people’s pressure on him which should suggest that it is disallowed. If it were lawful the Prophet would have yielded to their demand. The second point is that the Prophet equated price control with injustice (zulm) and injustice is forbidden. The goods whose price was sought to be controlled were property of a man (trader). And that man cannot be prevented from selling his goods at an agreed upon price by the two parties, i.e. the buyer and the seller”
“In a way the control of price may give rise to price rise. The traders from outside will not bring their goods in a place where they would be forced to sell them at a price against their wish. The local traders would hide the goods instead of selling. People would get less than their need, so they would offer a higher price to obtain the goods.
Both parties (sellers and buyers) would lose; the sellers because they were prevented from selling their goods, and the buyers because they were prevented from fulfilling their needs. So this act will be termed as forbidden”
- By the 13th century, Islamic scholars were debating the economic problems associated with price fixing, rather than just in relation to faith and Godly demands. For this, they were relying on hadith as their base. Again, whether Muhammad actually said what is claimed in hadith is irrelevant. What is relevant is that economic theory was being debated – in relation to faith, and justice – by at least the 13th century, with its origin in at least 9th century Arabia.
Relating to market pricing, and also in the 13th century, the Islamic scholar Ibn Taymiyyah wrote:
“If desire for goods increases while its availability decreases, its price rises. On the other hand, if availability of the good increases and the desire for it decreases, the price comes down.”
- We begin to see that concepts inherent to capitalism were being debated and practiced centuries prior to early capitalist structures on the Mediterranean coast in Europe.
Alongside the concept of property rights, and the nature of prices, we are also presented with the rules Muhammad supposedly laid down for the creation of the market in Medina. Al-Samhùdfs ‘History of Medina’, gives us a glimpse of that market:
‘Umar b. Shabba transmitted on the authority of ‘Atâ’ b. Yasár: When the Messenger of God wanted to establish for Medina a market, he came to the market of the Qaynuqa’, then he went to the market of Medina, stamped on it with his foot and declared: “This is your market, let its space not be diminished and let no tax be taken in it.”
- Long before the advent of Capitalism in Europe, the middle east – whether from Muhammad’s mouth or not – had a concept of individual property rights, free market prices, and incentives for business growth with the story of the tax-less market in Medinah. These were all concepts being discussed and tested in early Islamic Arabia. It is no surprise that Europe’s early capitalist centres – Venice especially – had strong trade links with the middle east, and were thus exposed to the Protestant work ethic and growing sense of individual freedom largely based in northern Protestant Europe, but also the frameworks developed for trade in Islamic societies centuries earlier.
Further, Abd al-Malik’s reign as Caliph – an indescribably important Caliph, responsible for much of what we know of Islam today, I wrote on here – saw the establishment of the dinar in previously independent currency areas, and thus began an era of monetary policy. Later came deficit financing, and early forms of savings and checking accounts. Modern principles of market economies, were developed within the markets of Islam.
This naturally leads to the question; how is it that the Middle East is now struggling economically, if the religion that it is based on seems just as suited, if not more so to capitalism than its Christian counterpart? Economic historian Angus Maddison points out that in 1000AD the Middle East’s global share of GDP was 10% to Europe’s 9%. But by 1800AD the Middle East’s share of GDP fell to 2%, with Europe’s rising to 22%. Life expectancy in the middle east is 8.5 years shorter than Europe, North America and East Asia. Indeed, in the 19th century global trade increased 64 fold, compared to the Ottomans, for whom it increased just 10 to 16 fold. What happened?
It is true that western economic development relied heavily on slavery at its foundation. But, so did the Ottoman Empire, and most Arab societies. At Istanbul in the early 1600s, one fifth of the population were slaves. According to Robert Davis, professor of history at Ohio State University, around 1.25 million Europeans were captured and enslaved as a result of the Barbary raids by largely Arab and Berber peoples. According to Britannica.com:
“Slaves were owned in all Islamic societies, both sedentary and nomadic, ranging from Arabia in the centre to North Africa in the west and to what is now Pakistan and Indonesia in the east. Some Islamic states, such as the Ottoman Empire, the Crimean Khanate, and the Sokoto caliphate, must be termed slave societies because slaves there were very important numerically as well as a focus of the polities’ energies.”
“Approximately 18 million Africans were delivered into the Islamic trans-Saharan and Indian Ocean slave trades between 650 and 1905.”
- Muslims were imperialist too. Arab towns and ports involved in the slave trade included Zabīd in Yemen, Muscat in Oman, and Aden in Yemen. Indeed, as late as 1963 the population of Saudi Arabia included around 300,000 slaves. Slavery also helped to build the power of the Chinese economy. Korea enslaved people. Slaves existed in India. And so, we must look to other sources for information why the Arab world started to decline economically.
Several theories persist – western imperialism being the most often suggested – though I am inclined to accept Timur Kuran’s argument in his wonderful book: “The Long Divergence: How Islamic Law Held Back the Middle East“. In it, Kuran argues that whilst this early form of Islamic proto-capitalism benefited early Muslims immensely for centuries following Muhammad’s death – the system was far more advanced than at the same point in time in Europe – it later became anchored to very dogmatic faith-based restrictions from Islamic jurisprudence of the middle ages that simply went unchallenged. And so as gradual liberation and evolution of market forces from state power in Europe – ironically, utilising methods cultivated by Arabs – gave the west a steady advantage, Islamic societies in the middle east – despite having clear advantages through past innovations – began to stagnate and fall behind due to a failure to modernise and utilise productive resources.
Kuran points to Islamic law governing business partnerships and inheritance for two examples of the more dogmatic ideological approach Islamic societies enforced through institutions. Kuran does not suggest that Islam itself is incompatible with modern liberal economies, simply that institutions developed – some much later – that severely restricted growth, and that those structures remained unchallenged. Whilst those laws and institutions had their benefits originally – they were particularly egalitarian whilst at the same time promoting innovative commerce and sophisticated partnerships for the time – they later began to hold back innovation with their failure to modernise, whilst Europe was experimenting with far more complex business frameworks.
Kuran notes that during the middle ages, Islamic jurisprudence decreed that business partnerships automatically disbanded the moment a partner died, regardless of how well that venture was doing. Kuran says:
“Active partners carried full liability. Also, an Islamic partnership lacked entity shielding: any partner could force its dissolution unilaterally, and its assets were exposed to demands from third parties. The death of a partner terminated the partnership automatically, giving heirs an immediate claim on a share of the assets; all surviving members incurred costs in the process of settlements. Moreover, the number of heirs could be large, because Islam’s inheritance law assigns mandatory shares to designated relatives of the decedent.”
- This meant that partnerships lasted very little time, were painfully insufficient and institutionally restricted from long term growth. There was just no framework for the development of modern, long lasting businesses and corporations that emerged in the west. This structure in the Middle East remained largely untouched right up until the 19th Century.
It must be said that this is a very quick summary of Kuran’s book. He elaborates and articulates the point far better than I ever could. I would strongly recommend getting a copy for a deeper explanation of the connection between Islamic jurisprudence in the middle ages, and the economic structures built around it.
The west’s enlightenment era philosophers on both social and economic theory – like Locke and Smith – seemingly took ideas already long in circulation – like property rights – developed them further, and structured a wonderful concept of individual civil and economic rights from that base. It took two revolutions in France and the US to begin that huge social and economic transformation. This was the key to the explosion of economic growth in Europe and the west. The separation of church and state, liberation of market forces, secular democratic protections, gender, race, and sexuality equality, and the limited power of the state over the rights and freedoms of the individual combined to give western economies far more room to innovate and grow. Secular democratic institutions have the remarkable quality of constantly reviewing social issues and updating accordingly; a quality lacking when a state and economy are under the control of one prevailing ideology.
As some largely Islamic countries now begin to embrace those modern concepts, invest in infrastructure, and liberalise socially and economically – Tunisia is a good example – I have no doubt that it will unleash innovation and creativity on a grand scale again, benefiting the entire planet.
It is easy in the west for us to overlook the contribution of Arab Muslim theorists throughout the ages on the development of structures we now take for granted. Many Arab economic theorists were centuries ahead of their European counterparts. Equally, it seems just as easy for Arab Muslims – particularly Islamists – to dismiss the developments – both socially and economically – since the days of the Caliphates, as a product of the big evil imperial west existing only to conquer ‘Muslim lands’. I would argue that there needs to be a systematic change to the prevailing narrative in so much as it currently seems to place notions of equal rights, secularism, and market liberalisation as ‘western values’ rather than universal. This naturally then leads to both Muslims and non-Muslims extolling the equally as misguided presumption that Islam itself is incapable of modernising and liberalising. It is a defensive reaction from both sides. This needs to be addressed, because it seems to me that equal protections and individual liberties manifested as free expression, the right to worship according to one’s own personal conscience, to associate, to trade, to love, and to pursue happiness regardless of gender, race, belief, or sexuality without oppression from any exclusive ideological principles, are universal principles that benefit all.