There was a time when the economic landscapes of the Middle East and Europe were remarkably similar. But in the course of the second millennium, economic growth in the Middle East progressively declined. Only in the nineteenth century, and largely as the result of foreign influence and the establishment of Western institutions, did Middle Eastern business practices begin to evolve in the direction of modernity in certain cities. Discovering what were the root causes of these trends is the central question guiding Timur Kuran's latest book, a comparative economic and institutional history of the Muslim world that also sheds light on factors accounting for the rise of modern economies in the West.

The long divergence is composed of fourteen chapters containing informative maps, tables, graphs, pie charts, and illustrations. The two central sections – one concerned with explaining the institutional factors accounting for the Middle East's economic stagnation and the other focused on markets in the age of imperialism – form the core of the book. Kuran's overarching thesis, encapsulated in the book's title, is that the rigidity of Islamic legal institutions is the root cause of the Middle East's stunted economic growth. For the most part, Muslims did not innovate by adapting the principles of Islamic law to evolving market conditions or adopting institutions of the modern economy. Many readers will recognize this line of argument, which harks back to Max Weber's critique of Islam as a hindrance to modernity owing to what was perceived as the ‘irrationality’ of Islamic law. But Kuran goes beyond Weber by giving careful consideration to specific areas of the law and its practice that seemingly impeded the economic performance of Muslim entrepreneurs. The first two chapters present the puzzle of the Middle East's ‘economic underdevelopment’ and discuss the role of Islam in structuring economic institutions. According to Kuran, the religion of Islam shaped the economy in three fundamental ways. First, the holy law of Muslims (shari‘a) regulated many areas of social and economic life. Second, Islam provided a sense of identity and cohesion among Muslims. Third, most Muslim polities were governed by Islamic legal and institutional principles. He takes issue with proponents of so-called Islamic economics, who tend to blame external factors, namely European colonial rule, for the failings of Muslim market economies.

Part II of the book, comprising Chapters 3 to 8, examines distinct features of Islamic law. Chapters 3 and 4 focus on Islamic partnership agreements (in particular the mudāraba or limited liability partnership, akin to the commenda). While such contractual forms facilitated the operation of commerce, their ‘simplicity’ rendered enterprise ‘atomistic’ in the long run because they restricted both the number of partners and the longevity of collective enterprise. Based on court records from Istanbul and Galata dating to the seventeenth century, Kuran finds that close to 80% of partnerships mentioned therein involved just two contracting parties, which he takes to be a sign of institutional stagnation. Over time, partnership agreements increased in complexity in the West, by accommodating more partners, conjoining primary and subsidiary partnerships, coordinating through double-entry bookkeeping, and so forth – innovations that foreshadowed the development of the joint-stock company.

The factors explaining why Islamic legal instruments remained impervious to change are examined in the following chapters. Chapter 5 discusses the drawbacks of the Islamic inheritance system, which, because of marriage patterns (polygyny) and egalitarian settlements (male and female entitlements), fragmented estates and thereby inhibited the process of large-scale and long-term capital accumulation. This situation is contrasted to property right structures, including the practice of primogeniture, in the West, which favoured the concentration of productive wealth across the generations. In Chapter 6, Kuran discusses the absence of the concept of legal personhood in Islamic law, which explains why the Middle East adopted corporate structures only in relatively recent times. The chapter begins with the intriguing case of a maritime transportation company in Istanbul (Şirket-I Hayriye) founded in the 1850s along the lines of a joint-stock company – the first of its kind in the Muslim world – demonstrating the attempts at legal reform under Ottoman rule. Kuran considers some of the reasons for the resistance of the Islamic institutional framework to accommodating modern corporate forms in the following chapter, including the existence of the waqf system, used only to manage unproductive assets. The lack of formal banks in the financial markets of the Middle East are the subject of Chapter 8, where Kuran provides a fascinating discussion of casuistry and the legal stratagems that Muslims employed to evade the Islamic interest ban.

In the five chapters forming Part III of the book, entitled ‘The makings of underdevelopment’, Kuran turns his attention to interfaith relations in the eighteenth and nineteenth centuries. Chapters 9 and 10 consider the role that the Middle East's religious minorities, namely Christians and Jews, played from the eighteenth century onward in gaining access to international markets. Kuran discusses the legal pluralism that prevailed, and the puzzling popularity of Muslim courts for the settlement of interfaith trade disputes. In time, these religious minorities came to ‘Westernize’ their practices, to become ‘protégés’ of foreign powers, and to carve out a dominant share of local and international trade. The next chapters discuss the increasing encroachment of European powers on Middle Eastern soil, the negotiation of capitulations, and the establishment of Western institutions that facilitated transactions and impersonal exchange. The final subject that Kuran addresses is the role of consuls as precursors to colonial rule, and he questions why the Middle East did not develop similar institutions abroad or establish diasporas of Muslims traders in the European markets.

The long divergence is a bold and stimulating book, based on a prodigious amount of research in world economic history. It is the first work of its kind to wrestle with the big question about the Middle East's economic path, as Kenneth Pomeranz did some years ago for the case of China and Europe. Scholars who have followed Kuran's work will find segments and revised versions of several arguments previously published in article form. Though it may stir up controversy among those who may not take well to his critique of Islam, this landmark study will find a broad readership to debate its provocative conclusions.