Islam, institutions and economic development

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<p style="padding: 0px 0px 0.5em; margin: 0px;"><em>Romesh Vaitilingam interviews Eric Chaney for Vox</em></p>
<p style="padding: 0px 0px 0.5em; margin: 0px;"><em>August 2010</em></p>
<p style="padding: 0px 0px 0.5em; margin: 0px;"><em>Transcription of an VoxEU audio interview [http://www.voxeu.org/index.php?q=node/5459]</em></p>
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<p><strong>Romesh Vaitilingam:</strong> Welcome to Vox Talks, a series of audio interviews with leading economists from around the world. My name is Romesh Vaitilingam and today's interview is with Eric Chaney from Harvard University. Eric and I met at a rather noisy street caf&eacute; in Glasgow at the 25th annual congress of the European Economic Association in August 2010. We spoke about his research on the economics of the Islamic world.</p>
<p><strong>Eric Chaney:</strong> In general, I studied the economic history of the Islamic world. I'm interested in the institutional evolution of the Islamic world in comparisons of institutional Islamic world with those that arose in Western Europe and using the Islamic world, if you will, as kind of a comparison for Western Europe. I think ultimately, what I want to be able to do is shed some light on the key differences between the Islamic world and Western Europe that were key for Western Europe's economic development. I have a few papers that I've completed and in one of the papers, I examine intellectual production of the Islamic world from pretty much the beginning until around 1400. In this new paper that I represented here today, I look over a span of about 800 years.</p>
<p>Another work I have is currently in progress. I also examined the evolution of the Islamic world in different ways over a similar period.</p>
<p><strong>Romesh:</strong> Can you give me, Eric, an overview of the relationship between Islamic societies and economic development? I guess a popular view would be Christianity--Protestantism perhaps&mdash;was a good basis for economic development, industrialization and Islam never has been.</p>
<p><strong>Eric:</strong> I think that in general, religions are not constant over time. They change and to a certain extent, I think, in the long run religion is endogenous. I do think economists have ignored the political influence of religious organizations throughout history. I think especially given growing evidence of the importance for institutions, I think we do that at our own risk. Because if you look historically at religious organizations, whether they be in Western Europe or in the Islamic world, they&rsquo;re some of the most politically powerful institutions and they shape institutional changes.</p>
<p>That's my view currently, that understanding how these religious institutions fit into society and the political power they wielded may shed light on institutional development in both Western Europe and the Islamic world, which is the two areas I'm most familiar with.</p>
<p><strong>Romesh:</strong> We know that the Islamic world was responsible for a fair proportion of major scientific developments over time, but these it seems were never really converted into industrial progress, development progress, economic growth as we think of it nowadays. What do think the issue there was then, something around the institutional structures?</p>
<p><strong>Eric:</strong> Yes, if you look at science in the Islamic world, historically it was light years ahead of Western Europe and of China for a long period. In fact, the basis of modern science today was laid in part by Muslim thinkers in the early Middle Ages. A lot of the words in English today, for example, <em>algorithm</em>, come from Arabic. I have a paper that looks at this and looks at the decline of Islamic scientific production and actually what you see is that Muslim thinkers were not writing less, per se, as time went on. They were just writing about different things. You see a shift from writing on, what were called in that period the rational sciences, which is what we would consider science today to a greater shift on, focus, if you will, on religious texts.</p>
<p>You see a shifting out from what we would call science and a greater emphasis on religion. I think that, as I argue in the paper, that is due to endogenous factors that gave individual scientists incentives to transfer their research from secular science, if you will, to religious endeavors.</p>
<p>So, yeah, I think that Islamic institutions are the way the Muslim society has organized themselves historically, definitely, laid, if you will, the roots for the decline of Muslim science. As I argue in the paper, once the majority of the population became Muslim, the incentives for individual scientists to engage in secular research declined, and in fact, became highly negative. If you researched these subjects, you were ostracized.</p>
<p><strong>Romesh:</strong> Would it be fair to say then that the Islamic societies confused, you're studying were more open in this way than perhaps they've evolved into now?</p>
<p><strong>Eric:</strong> I think, that without a doubt, if you were to try to write &quot;1, 001 Arabian Nights&quot; today and circulate it in Saudi Arabia, it would be banned. Part of the book is pornographic and there's also a fledgling level of enlightenment where people are openly questioning religion that nowadays in some Islamic countries could get you in serious trouble. I think, it's hard to generalize, but I think at least on some measures the Islamic world today is more closed today than it was in the Middle Ages.</p>
<p><strong>Romesh:</strong> What can your work on Islamic development shed light on in terms of our understanding of the industrial revolution and how the West suddenly took off and moved to this whole new place?</p>
<p><strong>Eric:</strong> Yeah, so this is something that I'm currently working on. I don't know where this research agenda will end, but I'll give you my thoughts right now. Historically, Islamic civilizations, to generalize broadly, were ruled by military elites and religious authorities. Religious authorities controlled local coordination networks. They controlled local communities. Then you had these military elites who were often imported slaves who were manumitted. It was a very peculiar Islamic institution, but that was almost ubiquitous across the Islamic world.</p>
<p>If you compare that to Western Europe, you see something very, very different. So in Western Europe, you'll have the king, the nobles, which sometimes got along with the king, and sometimes didn't, and you have the Church, and you have cities. All of these guys are duking it out. I think that that space that was created in Western Europe, where these people were fighting each other, created a space where institutions could evolve in a more positive direction than perhaps they did in the Middle East, well, than they did in the Middle East.</p>
<p>I think that was because in Europe, nobody had a monopoly over these local coordination networks. The Church was vying for them, nobles were vying for them, sometimes cities were fighting. So you could play one guy off against the other. In the Islamic world, this space never opened.</p>
<p>So my current research agenda is trying to understand when did this happen in Europe. If you look at Charlemagne, for example. Charlemagne's era doesn't look much different than the Islamic world. But something changes in the period after that where by the 14th, 15th century Western Europe looks very different than the Islamic world.</p>
<p><strong>Romesh:</strong> Can we turn to the paper you were presenting today? This was about Egypt and the experience of natural disasters happening there. Can you talk us through what's going on there?</p>
<p><strong>Eric:</strong> Yeah. So I use about 800 years of Nile flood data that I gathered from an archive in Paris and from a secondary source to look at how large economic shocks affected the balance of power between church and state in the Islamic world. Again, church and state is kind of a misnomer, because of the way Islamic societies were organized. But in essence what the paper finds is that when the Nile was deviant, i.e. the floods were too high or too low, religious authorities had a greater ability to extract concessions from the political elites.</p>
<p>Again, this gets to the point I was making earlier, the fact that--I mean, this is empirically consistent, at least, with this idea that in the Islamic world, religious elites controlled these popular coordination networks. When people got mad, the way that they protested they go out on the streets demanding grain. The leaders of these protests were religious authorities.</p>
<p>So these were the guys who stood to gain when economic catastrophes happened, and they got higher payoffs. They also ensured tax cuts for their constituents, if you will, the local population. So that's what the paper shows.</p>
<p><strong>Romesh:</strong> Sounds like it has eerie connections with the Pakistan floods, and talk of the threats to the political structure in that country right now.</p>
<p><strong>Eric:</strong> Yeah. So I think in general what they showed... The Islamic world has changed a lot in the past 1, 000 years, the past 500 years. I don't want to emphasize this too much. But I do think that if you look at what's happened to the Islamic world since colonialism, for a variety of reasons when Europeans came on the scene civil society wasn't very developed, because these religious elites had no incentive to allow alternative forms of coordination to develop. Then you had these dictators that arose.</p>
<p>So what you're left with, I think, today in a lot of Islamic countries is a similar, if you will, medieval framework where you have a military elite, and then you have religious elites, and there's nothing in between.</p>
<p>So that if you want to protest, religious coordination networks are what there is. Some people have told me this is similar to what happened in Poland under communism, and that might be true. But there was a history in these countries of municipalities, of organizing in ways that were not religious. In much of the Islamic world, those traditions just aren't there.</p>
<p><strong>Romesh:</strong> So on that very issue, and final question for you, Eric. One of the missions of certain political authorities in the West has been to introduce democracy to countries like Afghanistan and Pakistan. Could you see any prospect of this based on the data of the history of Islamic societies?</p>
<p><strong>Eric:</strong> It depends on how you want to go about doing this. I think there are two models. There's the invade and impose, which the U.S. has tried to do in Iraq, that's yet to be seen if it's going to produce anything that we would consider optimal. Then there's the try to encourage from outside. I think, if you look historically at trying to encourage from outside, the current anti government forces in most Islamic countries are Islamist for the most part. Given that a lot of these secular forms of coordination have been discredited in many Islamic societies, it's not clear to me how you're going to move from current dictatorship, who are mostly run by these secular guys--which is why a lot of these groups are discredited, because they saw what happened when they got in power--so it's not clear to me how you're going to move from this situation to democracy without spending some time with Islamists in control. There are a lot of Islamic groups, some of them, I think, better than others. But in the West, at least, people seem to be very reticent to allow these groups to come into power.</p>
<p><strong>Romesh:</strong> Eric Chaney, thanks very much.</p>
<p><strong>Eric:</strong> Thanks.</p>