Rulers, Religion, and Riches: Why the West Got Rich and the Middle East Did Not (Cambridge Studies in Economics, Choice, and Society)
Page 4
Chapter 5 analyzes the spread of the printing press. The framework sheds light on a historical puzzle: while the printing press spread rapidly in Western Europe after its invention by Johannes Gutenberg in 1450, the Ottomans prohibited its use for almost 250 years. The argument for the different reactions to the press is straightforward. The printing press threatened the Ottoman religious establishment’s monopoly on the transmission of knowledge – a key source of their influence in society – and they therefore had incentive to encourage the sultan to prohibit it. The sultan obliged because religious authorities were important legitimizing agents, and permitting the press would have undermined them. Meanwhile, Christian religious leaders were in no position to ask rulers to block the press, and it consequently spread rapidly throughout Europe.
The analyses of interest and printing restrictions suggest there is nothing inherent in Islam that fosters an environment supporting anti-commerce laws. In fact, early Islamic religious and political doctrines were quite flexible and possibly even growth promoting. Reinterpretation of religious law was frequent as demanded by economic and social conditions, and as a result the Middle East was an economic, technological, and cultural leader for centuries after the founding of Islam. Many of the Islamic laws that eventually inhibited economic development were well suited to the needs of the early Islamic economy. Yet, as economic conditions advanced, the legitimizing relationship between political and religious authorities had an increasingly dampening effect on further economic development. Religious doctrines such as those banning interest or reproducing words and images, which were not a problem in the premodern economy, came to the fore as an impediment to overcome.
The printing press was arguably the most important information technology of the last millennium, and Western European economies grew rapidly where it spread. But the indirect consequences of the spread of the press were even more important. Chapter 6 highlights one of these consequences: the press facilitated the spread of the Protestant Reformation. The printing press permitted widespread, rapid dissent, allowing the Reformation to succeed where previous anti-Church movements failed. This chapter reports the results of empirical analyses that show that the Reformation was much more likely to take hold in towns with access to printed works. This is a classic case of a “fork” in a society’s long-run institutional trajectory. Such an anticlerical movement, which was so dependent on the rapid flow of information, was much less likely to happen in the Ottoman Empire, where access to printed works was minimal. The lack of information technology in the Ottoman Empire capable of quickly transmitting ideas allowed established interests to maintain their grip on power, permitting the institutional status quo to hold for centuries. As a result, religious authorities remained powerful political forces in the Middle East for centuries after their influence waned in Western Europe.
The remainder of the book argues why the Reformation was such an important event for the economic trajectory of Western Europe – and why a lack of a similar undermining of religious authority was important for the trajectory of Catholic Europe and the Muslim Middle East. The primary insight is that the Reformation fundamentally transformed the manner in which rule was propagated. The already weak legitimizing capacity of religion eroded further in Protestant states following the Reformation, forcing Protestant rulers to change the agents that propagated their rule. The most common response was to seek propagation by the economic elites who served in parliaments. By economic elite I simply mean those people primarily engaged in commerce: merchants, craftsmen, money changers, commercial farmers, and anyone else engaged in either producing for market or facilitating market transactions. The transition to propagation by the economic elite was an important development, because their preferences tended to align more with those types of policies that also portend economic success, such as secure property rights and public good provision. Consequently, Protestant rulers more frequently enacted laws and policies favoring long-run economic success than did Catholic or Muslim rulers.
This is not to say that the economic elite were more “public spirited” than other types of propagating agents and therefore desired policies in the public interest due to altruistic motives. Quite the opposite, it suggests that the economic elite pursued their own interests, which just so happened to coincide with policies that benefited the broader economy. Nor is it to say that everything the economic elite desired was good for the economy; history is replete with examples of rent seeking by the economic elite. This is also not to say that a political system run solely by the economic elite would be a good thing for an economy. It does imply, however, that a political system where the economic elite have a nontrivial seat at the bargaining table enables better economic outcomes than one where they have no voice at all.
Chapters 7 and 8 dig into the relevant histories to support these assertions. Chapter 7 overviews the post-Reformation economic and political changes made in the two leading Protestant economies: England and the Dutch Republic. Chapter 8 overviews the histories of one Catholic economy that fell behind, Spain, as well as the primary Middle Eastern economy of the time, the Ottoman Empire. These are not trivial comparisons cherry-picked to support the argument. These were the most important economies of the time, save possibly France, adhering to Catholicism, Islam, and some form of Protestantism.
The framework therefore accounts for the “little divergence” that happened between northwestern Europe and the rest of Europe as well as the larger divergence between Western Europe and the Middle East. It is not sufficient to say there was “something about Western Europe” that eventually led to economic success. The emergence of the modern economy was not a pan-Western Europe phenomenon – it was very much an English and Dutch phenomenon. While I do not claim that the framework explains everything – the argument stops before industrialization, which requires its own explanation – I do claim that the places where the modern economy was eventually born had a very different political economy equilibrium by the end of the sixteenth century – one that was more conducive to long-run economic growth.
This framework thus turns simplistic Weberian notions connecting a “Protestant ethic” to economic success on their head.10 Max Weber (1905 [2002]) argued that Calvinist predestination doctrine encouraged believers to show that they were one of the “elect” by working hard and having worldly success. The “spirit of capitalism” thus pervaded the Protestant countries and placed them on a different economic path. The observation that inspired this hypothesis is valid: many of the Protestant nations had a head start on modern economic growth. But, while recognizing that there is a correlation between Protestantism and economic success, this book argues for a very different causal channel than one based on culture or religious tenets. It suggests that the changes in political economy brought on by the Reformation – specifically the replacement of the religious elite with the economic elite at the bargaining table – was the key feature connecting Protestantism to economic success. This of course does not mean that the modern economy had to emerge in Protestant northwestern Europe. It simply entails that if one living in 1600 had to choose which part of the world industrialization and the associated explosion of economic growth would commence 150 years hence, Protestant northwestern Europe would have been a good choice.11
Other Explanations
The explanation proposed in this book for the “rise of the West” is far from the only one out there. The rise of the West is one of the big issues that economic historians tackle, and consequently there have been many words dedicated to furthering our understanding of its causes. Many of the existing hypotheses nicely complement the one proposed in this book. Such explanations focus on other aspects of the rise of the West or relative stagnation elsewhere, providing explanations that reinforce the mechanisms highlighted in this book. There are also explanations that are clearly contradictory to the ones proposed in this book. I also address these below and indicate why I believe my explanation succeeds where those fail.
The explanations for the “rise of the West” most closely related to the one presented in this book are those proposed by Avner Greif, Douglass North, and Timur Kuran. Greif and North both provide useful frameworks for understanding the economic implications of institutions. Greif shows in a series of articles and his book, Institutions and the Path to the Modern Economy, how decentralized institutions worked to facilitate trade in the medieval period in the absence of centralized political and legal institutions. Greif focuses primarily on economic institutions that emerged outside of the state and how these institutions facilitated economic exchange. The focus of the present book is on a different slice of economic life: the incentives faced by the key Middle Eastern and Western European political players. The institutional changes analyzed by Greif were necessary precursors of the historical factors explored in this book. Greif’s work therefore provides a necessary complement to my argument.
One set of institutional differences studied by Greif that deserve explicit attention are those related to family structure. The European family structure resulted from the policies of the medieval Church that discouraged certain practices in order to weaken kinship ties (adoption, polygamy, remarriage, consanguineous marriage). According to Jack Goody (1983), the Church imposed these policies in the hope that people would donate their property to the Church at their death rather than to their kin.12 In contrast, kinship ties were much more important in the Middle East, where consanguineous marriage was commonplace. Greif (1994a, 2006a, 2006b) argues that, as a result, European culture was more “individualistic” than Middle Eastern culture, which was more “collectivist.” Europeans therefore created institutions that created trust outside of the group, as the nuclear family was too small of a unit to engender gains from exchange.13 This advantaged the Middle East when the scope of trade was limited, as trade within the kin group could occur without further institutional development. However, impersonal exchange emerged on a wide scale once late medieval European communities established institutions that facilitated trust beyond the kin group. These arguments are entirely consistent with the ones presented in this book. For one, they employ the same argument for why Islam may have been beneficial to economic growth in the premodern context: it connected Muslims through the concept of umma, which views the entire Islamic community as one. And Greif’s argument for the ultimate success of the European economy nicely complements my explanation. Strong kin ties may have ultimately discouraged impersonal exchange in the Middle East, but this alone does not explain why the economic elite were never able to get a seat at the bargaining table. The argument presented in this book fills in this gap, arguing that the economic elite never had a place at the bargaining table because Middle Eastern rulers were strong enough, due to the legitimizing capacity of Islam, to exclude them.
Another set of works from which the present book draws inspiration and insight are Douglass North’s works on institutions, especially his books Structure and Change in Economic History and Institutions, Institutional Change, and Economic Performance. A primary focus of North’s works is connecting political institutions to the expansion of property rights. The emergence of such institutions in northwestern Europe were undoubtedly important, and they play a key role in the theory laid out in this book. North extended his contributions to this literature in a seminal article with Barry Weingast (1989), which suggests that the imposition of institutionalized constraints on executive authority in England following the Glorious Revolution of 1688 was the key turning point, since it gave an increased political voice to wealth-holders. North, John Wallis, and Weingast extend this argument even further in their book Violence and Social Orders, claiming that opening access to impersonal and impartial legal and economic institutions is the key to economic growth. In their view, open access is important because it encourages a wider swath of the population to use resources efficiently. Daron Acemoglu and James Robinson (2012) make a similar argument in their book Why Nations Fail, arguing that governments that permit extraction are the primary historical hindrances to economic growth. These arguments are all consistent with the one presented in this book. By and large, this book takes the year 1600 as its stopping point. One implication of my argument is that by 1600, there were certain parts of Western Europe that were primed for an economic takeoff in the spirit of what North and others describe. Hence, this book merely pushes their arguments back a few centuries, noting why such events were more likely to happen in England than, say, the Ottoman Empire.
The comparative approach employed in this book is similar to the important works of Timur Kuran. Kuran, in a series of papers and his book, The Long Divergence, argues that there were numerous aspects of Islamic law that helped stimulate commerce in the premodern economic environment but stifled economic progress as the environment changed. He employs a similar tactic to the one used in this book, searching for an explanation that can explain both why early Middle Eastern economies succeeded and why Western Europe eventually pulled ahead. Kuran primarily focuses on the demand – or lack thereof – for legal change in Middle Eastern history, while my argument primarily focuses on its supply.14 Our works are thus necessary complements to each other; it is impossible to fully understand the demand side without a complete comprehension of the supply side, and vice versa. As with Greif’s and North’s works, Kuran and I ask the same big questions but tackle different parts of them.
Jan Luiten van Zanden employs the insights of Greif, Kuran, North, and many others in his book, The Long Road to the Industrial Revolution. van Zanden argues that one specific phenomenon – the “European Marriage Pattern” – contributed to the institutional formation that took place in early modern Western Europe and helped set it off from the rest of the world. Specifically, van Zanden suggests that the propensity of northwestern European men and women to get married later in life encouraged them to acquire more human capital, which was an important determinant of how institutions evolved.15 Like Greif, van Zanden argues for the importance of decentralized institutional developments in the economic rise of Europe in the late medieval period (950–1350). Without such developments, many of the processes discussed in this book could not have occurred. Like the present book, van Zanden also stresses the importance of the printing press and the Reformation, although he is more concerned with their human capital consequences and I am more concerned with their effects on politics.
Another set of hypotheses focusing on political and legal institutions argues that fiscal and legal capacity – the power to tax and provide law – played an important role in the rise of the West. This argument in its recent form can be traced to Charles Tilly (1975, 1990), who argues that the need for mutual defense and war created incentives for governments to invest in revenue generation; Tilly’s (1975, p. 42) oft-cited statement is “War made the state, and the state made war.”16 It is undoubtedly true that the growth of fiscal, legal, and state capacity in Europe played a large role in the growth of states and economic fortunes.17 Yet, one shortcoming of this literature is that it assumes the existence of a ruler who can choose to expand tax collection efforts or legal jurisdiction without delving too deeply into why the ruler has the capacity to do so in the first place. This shortcoming is justified; any analysis must start somewhere, and assuming the existence of ruler is a reasonable place to start in most historical settings. But the argument laid out in this book suggests that the manner in which rulers are propagated matters for the types of policies they pursue – and, ultimately, their ability to reap the benefits of fiscal and legal capacity. Although I only indirectly discuss investments in fiscal capacity in relation to rule propagation (in Chapters 7 and 8), it clearly follows that the two are intimately linked.18
A related set of explanations based on the unique political history of Europe focuses on the fact that Europe was relatively fractured into small states that were frequently at war, whereas much of the rest of the world was dominated by large empires that faced
less political competition. The main idea in this literature, formulated by Paul M. Kennedy (1987) in The Rise and Fall of the Great Powers, is that the constant demand for warfare in Europe created incentives to improve military technology at a different rate than the rest of the world, which in turn gave Europe the upper hand in colonizing starting in the sixteenth century. A more nuanced version of this hypothesis, put forward by Philip Hoffman (2015) in his book Why Did Europe Conquer the World?, argues that competition between European rulers only led to massive improvements in military technology when combined with gunpowder, which came to Europe in the late medieval period.19 Yet, one of the key insights in the present book is that the Middle East ultimately suffered precisely because their rulers were strong: the strength of their rule, due in part to religious legitimation, permitted them to grow empires without having to negotiate with the economic elite. The opposite was the case in Europe, where rulers were relatively weak due in part to low levels of religious legitimation. This argument complements the fractionalization literature because it provides an explanation for Europe’s fractionalization.20 Indeed, it goes beyond this literature by providing an account for intra-European differences in long-run economic outcomes. The modern economy was born in northwestern Europe, not just Europe. This fact is difficult to account for in an argument based solely on European fractionalization.
A different set of hypotheses focus on the economic effects of rhetoric, intellectualism, and the Enlightenment. A compelling example from this literature is Deirdre McCloskey’s Bourgeois Dignity, which suggests that the way people talked mattered. In particular, a shift in language, particularly in England and the Netherlands, more favorable to commerce and trade was instrumental in changing mindsets and encouraging talented and wealthy individuals to pursue commercial activities previously considered base. Joel Mokyr (2002, 2009) presents a complementary argument, suggesting that new ways of thinking and acquiring knowledge, particularly in association with the seventeenth–eighteenth century Enlightenment, augmented the economic behavior of producers and entrepreneurs in favor of experimenting toward more efficient techniques. Both McCloskey and Mokyr clearly point out important aspects of the growth of the modern economy; it is difficult to imagine a modern economy in which an inquisitive and experimental impulse was lacking in business or those engaging in commerce were pariahs. Yet, it is unclear what the prime mover is in these arguments. Could it possibly be true that a change in attitudes toward merchants occurred without a concurrent rise in the power or wealth of these classes? Is it not possible that the Enlightenment and other intellectual movements were responses to economic or political conditions? The arguments made in the present book help shed light on these problems by providing insight into the conditions that made such movements possible in the first place.