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April 29, 2011
Professor Timur Kuran

Kuran's assessments of Islamic law's effect upon on Middle East economics are given life by actual governments in the region that operate under Islamic principles in areas of investment and ownership.

Islamic Governments and Free Enterprise: A Muslim Explains Why the Twain Never Meet

We previously reviewed Timur Kuran’s book, The Long Divergence: How Islamic Law Held Back the Middle East. In that book Professor Kuran explains how the West (and the Asian East and the Latin and African South) have begun creating wealth for their citizens; why not in the Middle East? That region’s economic misfortunes, Professor Kuran explains, derive from the total control of Arab rulers and their families over most of the movement of money in their countries. For example, in Tunisia, the ruling family, which fled following the uprisings in January, has a majority interest in the major banks, hotels, oil rights, and telecommunication system in the country. The border customs income was a family piggy bank. But it’s the same in all 21 Arab countries.

Private business as we know it in the Free World does not exist in most of the Middle East. Too bad for the Middle East. In America, the government protects the right of any person to incorporate a business. Free world governments everywhere have legalized the right of their citizens to form corporations. The private trading company was, Peter Drucker said, “the first autonomous institution in hundreds of years, the first to create a power center that was within society yet independent of the central government of the national state.”[1] Private initiative and private control resulted in all manner of enterprise and achievement. “By contrast,” write Micklethwait and Wooldridge, “civilizations that once outstripped the West failed to develop private-sector companies”—the authors mention the Islamic world—“fell farther and farther behind.”[2] The advantages of the private company are “conquering such obstinate refuseniks as the Chinese Communist Party and the partners of Goldman Sachs.”[3]

The US had 5 ½ million corporations in 2001; North Korea apparently has none; neither does Syria. “Today the number of private-sector companies that a country boasts is a better guide to its status than the number of battleships it can muster. It is also not a bad guide to its political freedom.”[4] In their description of a totalitarian regime Carl Friedrich and Zbigniew Brzezinski include as one of six distinguishing traits the prohibition of private, non-government organizations.[5] In a democratic system “a multitude of independent, voluntary, non-government associations” transfers some power from the state to the individual.[6] The enduring relevance of economist F. A. Hayek’s warning against centralized control, sounded in his 1944 classic Road to Serfdom, demonstrates the need for citizens to guard their freedom to form special-purpose associations. Hayek’s main point is “that coordination of activities through central direction and through voluntary cooperation are roads going in very different directions: the first to serfdom, the second to freedom.”[7]

Hayek, Friedrich A. von. The Road to Serfdom. 50th anniversary ed.: University of Chicago Press, 1994.

Hutton, J. E. A History of Moravian Missions. London: Moravian publication office, 1923.

Micklethwait, John, and Adrian Wooldridge. The Company: A Short History of a Revolutionary Idea. New York: Modern Library, 2003.

Smith, Constance E., and Anne E. Freedman. Voluntary Associations: Perspectives on the Literature. Cambridge, MA: Harvard University Press, 1972.

[1] Quoted in John Micklethwait and Adrian Wooldridge, The Company: A Short History of a Revolutionary Idea (New York: Modern Library, 2003). 54

[2] Ibid. xxi

[3] Ibid. xvi

[4] J. E. Hutton, A History of Moravian Missions (London: Moravian publication office, 1923).J. E. Hutton, A History of Moravian Missions (London,: Moravian publication office, 1923), Micklethwait and Wooldridge. xx

[5] Constance E. Smith and Anne E. Freedman, Voluntary Associations: Perspectives on the Literature (Cambridge, MA: Harvard University Press, 1972). 33

[6] Ibid. 34

[7] Friedrich A. von Hayek, The Road to Serfdom, 50th anniversary ed. (University of Chicago Press, 1994). xiii-xiv

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