The roots of Islamic backwardness

J. Bradford DeLong Professor of Economics University of California Berkeley Project Syndicate

The war in Iraq is over. But the battle to transform the economies of the Middle East -- the only hope of preventing fanaticism from claiming a generation of young unemployed Arabs and Iranians -- is only beginning.

That struggle goes beyond development strategies and touches the roots of Islam. "The people of Iran," the late Ayatollah Khomeini is reported to have liked to say, "did not make the Islamic Revolution to lower the price of watermelons." By that logic, capitalism and Islam are incompatible. Are they?

History may provide some guidance here. The Industrial Revolution started in the English midlands and Belgian forests -- regions endowed with coal, canals (along which barges could carry the coal), and skilled metalworkers (who could build coal-burning steam engines). Coal, canals, and metalworkers were the foundation for building, installing, and using the automatic spinning machines, power looms, and railway locomotives that were the first modern machine industries.

Steam power, factories, markets, and industry quickly spread throughout northwest Europe and its settler colonies. By the end of the 19th century, Turin, Vienna, Prague, Wroclaw, Essen, Paris, Lille, Liege, Lyons, and Barcelona in continental Europe, much of Britain and the United States, parts of Canada and Ireland, and Melbourne, Buenos Aires, and Johannesburg (plus, of course, Tokyo) were centers of modern industry.

Beyond these limits, however, the fires of the Industrial Revolution barely smoldered, if they burned at all. For two centuries, far-sighted Ottoman viziers had argued for the need to spur Turkey's economic and technological development: Back in 1453, Sultan Mehmet II's armies had conquered Constantinople, because Mehmet had built the most technologically advanced and powerful artillery in the world.

In the early 19th century, Egypt's Mehemet Ali looked at the global balance of economic and military power, and decreed that Egypt must industrialize, fast. He feared that unless Egyptians could learn modern industrial technologies and develop an economy prosperous enough to support modern industrial armies, his descendants would be mere puppets of British and French viceroys. His decree went nowhere: Egypt did not industrialize, and Mehemet Ali's great grandchildren did indeed become puppets of the British and French.

Today's 70 million Egyptians live much better than their heavily taxed cotton- and grain-growing predecessors of Mehemet Ali's time. But the gap between the economies of the Arab Middle East and Western Europe -- in (non-oil sector) productivity, technological capability, and standards of living -- is wider than it was a century ago, and vastly greater than at the start of the Industrial Age.

In many respects, the slow pace of the Islamic world's economic development has been a matter of choice. The Prophet Muhammad was a merchant, and the Quraysh (Mecca's ruling tribe at the time of the Prophet) lived by guiding caravans from Arabia to the Fertile Crescent. But the affinity between Islamic attitudes, rulers, merchants, and craftsmen that made Cairo, Damascus, Baghdad, and Samarkand jewels of High Medieval urban civilization vanished long ago.

Industrialization means novelty and change. If those who hold power fear that change may bring unpleasant consequences, they will systematically obstruct it, which rulers in the Middle East proceeded to do for centuries.

But slow and distorted development in the Islamic world is the result of blocked opportunities as well. Wouldn't Pakistan be much better off if it exported more of its textiles to the rich industrial world? Wouldn't waiving Pakistan's quota under the Multi-Fiber Agreement have been a very good and important step for the U.S. government to take in reciprocation of the Pakistani government's help as U.S.-led forces attacked al-Qaeda bases in Afghanistan?

No doubt it would have been. Wouldn't prospects for economic development in Morocco, Algeria, and Tunisia be much more promising if European governments would let EU citizens buy more North African oranges? Of course.

But other key reasons for the slow pace of economic development in the Islamic world reflect the standard dilemmas of poor governance. "Protect property rights and enforce contracts," say Western economists. But property rights and contracts are threatened at many levels. They are threatened by roving bandits, by local notables, and, most of all, by government functionaries who use their offices to extort extra income. Simply put, a weak state cannot enforce contracts and property rights, while a state that is strong enough to enforce them must control its own bureaucrats.

However, the most important reasons that the Islamic world has done worse than Latin America or Southeast Asia seem to be focused around education. There can be little hope for sustained economic development where the educational system is at least one generation -- and possibly three generations -- behind other regions in terms of its commitment to universal literacy, and where higher education largely ignores the skills and subjects needed to enable people to master technology.

After all, blocked export opportunities, weak government institutions, and high levels of corruption are worldwide problems. Even political and religious leaders hostile to change and industrialization are not uncommon. But as we compare patterns of development throughout the world, more and more evidence is piling up that universal literacy and a large class of people with industrial-technical skills are key resources that determine whether countries are able to break free from the grip of backwardness and poverty.