Islamic law and economic development

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Islamic nations in the Middle East on the whole have underperformed their counterparts in the West. Asian nations that were poorer than the Arab world at the beginning of the Cold War have overtaken the Middle East. And promising experiments with democracy have been few and far between... 

The question of why is a contentious one. Has the Islamic world been held back by its treatment at the hands of history? Or could the roots of the problem lie in its shared religion—in the Koran, and Islamic belief itself? 

A provocative new answer is emerging from the work of Timur Kuran, a Turkish-American economist at Duke University and one of the most influential thinkers about how, exactly, Islam shapes societies. In a growing body of work, Kuran argues that the blame for the Islamic world’s economic stagnation and democracy deficit lies with a distinct set of institutions that Islamic law created over centuries. The way traditional Islamic law handled finance, inheritance, and incorporation, he argues, held back both economic and political development. These practices aren’t inherent in the religion—they emerged long after the establishment of Islam, and have partly receded from use in the modern era. But they left a profound legacy in many societies where Islam held sway. 

Islamic partnerships and inheritance law limited the ability of merchants to pool capital and build competitive enterprises with long life spans. Islam’s emphasis on fairness and a division of assets among children had the unfortunate effect of preventing large-scale businesses from taking root. Meanwhile, the primary vehicle for organizing institutions—the Islamic trust—placed severe limits on the development of civic institutions such as universities, guilds, and charities. Over time, the result was a stagnant economy and an enfeebled civil society with no way to challenge the established political order.