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Book Review: Islamic Law and Free Enterprise

April 25, 2011

The Long Divergence: How Islamic Law Held Back the Middle East. Princeton: Princeton University Press, 2011.

Islam and Free Enterprise—Timur Kuran Explains How Shariah Law Held Back the Middle East from Creating Wealth

Professor Timur Kuran of Duke University has written a controversial book on the topic of capitalism and the creation of wealth, which, Kuran says, exist in the Free World but not in Islam. Nicholas Kristof’s review[1]  Timur Kuran’s 2011 book, The Long Divergence, caused some readers to cry “Islamophobia!” when they read Kuran’s critique of Islamic law and heard him lament that Islamic law (shariah law) has kept Muslims stuck in the 7th century world of caravans and bazaars. “Nowadays,” Kuran writes, “reluctance to critique institutions is commonly driven by a desire to avoid offending people. [But] anxieties about causing offense rest on the faulty presupposition that Muslims are inherently hostile to intellectual debate and uninterested in self-improvement.”[2]) I want to let Timur Kuran speak for himself in order to understand what he is saying.

Timur Kuran says that the Free World is creating ever larger amounts of wealth because Free World corporations (which are forbidden in shariah law) began “pooling their resources within units [corporations and banks] far larger and far more complex than was possible in the Middle East.”[3] Professor Kuran adds, “This is not to deny the vast accomplishments of Islamic civilization; nor does it presuppose that economic productivity is the sole measure of a society’s worth.”[4]

Of course, there are corporations in many Muslim countries, but the reader should understand that strict Muslims oppose such compromises with shariah law. Take banking, for example. “In traditional Middle Eastern credit markets, suppliers typically were individuals capable of making small loans. Westerners had access to commercial banks that could channel capital into large-scale productive ventures.”[5] In the mid-nineteenth century European money men came to Istanbul and Cairo and made contracts with the Ottomans to open banks. Suddenly, Turks and Arabs had access to loans and could make investments and could create wealth. That was a sweet arrangement for everyone. But before the middle of the twentieth century, these arrangements came to be viewed as “imperialistic.” The European laws that protected these banks were said by Muslims to be humiliating.

Enter the curious concept known as the “Islamic bank” in the mid-twentieth century. Referring to this concept as “a contradiction in terms,” Professor Kuran observes that an Islamic bank is “a corporation” and therefore “alien to Islamic law.” Islamic banking thus constitutes an “invented tradition. Its architects have used western institutional models not to make Muslim economic life more “western” but, rather, to encourage saving, investing, borrowing and lending in ways at least cosmetically ‘Islamic.’”[6] Today, Arab “Islamic banks” do a brisk business with European and American financial institutions, thanks to the timely invention of an Islamic banking tradition.

While Christian Europe gave rise to free enterprise (as argued persuasively by Rodney Starks in his fine book, The Victory of Reason), there is no reason that adherents of other countries cannot legalize corporations and banks as one of the marks of globalization. Thus, China has legalized private companies, called kongsi (Chinese: 公司; pinyin: gōngsī). So has India. But Islamic law is not free to adapt, because Mohammad’s earliest followers set down the rules for how Muslims in every age ought to live. Professor Kuran advocates for reform, because made-up terms like “Islamic banking,” he says, “implicitly recognize the unsuitability of classical Islamic law to modern needs.”[7] He goes on to say:

The idea that outsiders are somehow responsible for the Middle East’s underdevelopment resonates with much of the population, including secularists who consider Islamic law backward and obsolete. This situation sustains sterile debates about the virtues of embracing Islam for solutions to poverty, mismanagement, and powerlessness.[8]

It takes a great amount of courage for Professor Kuran to tell his critics that Muslims have not appreciated “the limitations of Islamic law as a basis for social, economic, and political order in the twenty-first century.”[9] We will hear more from Timur Kuran in future posts.

Kuran, Timur. The Long Divergence: How Islamic Law Held Back the Middle East. Princeton: Princeton University Press, 2011.

[2] Timur Kuran, The Long Divergence: How Islamic Law Held Back the Middle East (Princeton: Princeton University Press, 2011). xiii

[3] Ibid. x

[4] Ibid. xii

[5] Ibid. 11

[6] Ibid.12

[7] Ibid. 302

[8] Ibid. 302

[9] Ibid. 302

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