Until recently the discipline of economic history was concerned mostly with the Industrial Revolution and the period since. A large majority of the research and writing focused on Great Britain, western Europe, and the United States. There has been a striking change in the last three decades. Economic historians today are much more interested in the earlier periods: the early modern and medieval eras and even the ancient economies of the Old World. They have been gathering empirical materials and employing various theories to make sense of the evolution of these economies. Equally important, there has been a resurgence in the studies of developing regions of the world. Global economic history, focusing on all regions of the world and their interconnectedness since ancient times, is on its way to becoming a major field of study. Even the Industrial Revolution, the most central event of economic history, is being studied and reinterpreted today not as a British or even western European event but as a breakthrough resulting from many centuries of interaction between Europe and the rest of the world.Footnote ¹

Second, there has been growing interest in economics, economic history, political science, and related disciplines in the study of institutions and institutional change and a greater appreciation of the important role played by institutions in long-term economic change. In fact, institutions and institutional change have been identified as key variables that help explain the widely disparate economic performances of different societies. New institutional economics has argued that economic development and growth depend on the extent to which the institutional framework reinforces incentives for organizations to engage in productive activity. The state is also seen as a major player in this context. Institutional economics and economic historians have come to recognize, however, that a society rarely arrives at or creates institutions that are conducive to economic growth. Rather than encouraging productive activity, institutions may act as instruments for transferring resources from one group to another or for promoting their own survival at the expense of others. Focusing on the “rise of the West,” institutional economics and economic historians initially paid little attention to the developing regions. This is also changing, however. The developing regions are emerging as a laboratory for understanding long-term institutional change. For example, growing numbers of comparative studies in recent years have been examining the long-term evolution of fiscal institutions and the emergence of more centralized states in Europe, Asia, and the Americas.Footnote ²

Not only the rise of economic history with global emphases but also the growing interest in the study of institutions and institutional change in non-European contexts has created very attractive conditions for the study of the economic history of developing regions. Unfortunately, the economic history of the Middle East has been lagging behind the study of other developing regions. Still, it is encouraging to see that more doctoral dissertations have been written in recent years on the economic history of the Middle East than in previous years.

Studies on economic history of the region need to make progress on two fronts, it seems to me. First, we need to learn more about agriculture, manufacturing, long-distance trade, monetary history, economic growth and development, standards of living, and other subjects in different areas of the Middle East for each of the three main periods: medieval or early Islamic, early modern or (mostly) Ottoman, and modern since the Industrial Revolution. Second, we need to take advantage of the opportunity to study long-term institutional change in the region not only to better understand the history of the Middle East but also to contribute to the debates on global economic history and the role of instutions and institutional change in long-term economic change. In Middle East studies we have often complained that we find it difficult to contribute to the larger debates in social sciences and humanities, but this is one instance where there is an important debate and a important opportunity for us to be part of it.

Let me elaborate a little more on the second item in this agenda, namely, the study of institutions and institutional change in the Middle East. The study of this region is full of misconceptions and cliches, and one of them is that these societies and economies have endured centuries of stagnation and decay. On the contrary, the Middle East has experienced a good deal of institutional change not only during the last two centuries but also during the millennium from the rise of Islam to the Industrial Revolution. In three key areas—land regime, private finance, and public finance and borrowing—for example, one observes a good deal of institutional change. There was significant regional and temporal variation before the modern era as well.

How economic institutions are determined and why they vary across countries is still not well understood. Institutional economics proposes a number of causes or determinants of institutions, the most of important of which are geography or resource endowments; religion or, more generally, culture; and social conflict or political economy.

There is no doubt that economic institutions in the Middle East have been influenced by geography or resource endowments. From the earliest periods, the land regime and fiscal institutions in Egypt, for example, were shaped to a large degree by the needs of irrigated agriculture. In many areas of the region, low population density tended to support peasant farms as the most dominant unit in the countryside. It has also been argued that the scarcity of coal and wood in the region has put it at a disadvantage. The shift of the international trade routes to the oceans and the relative decline of the Mediterranean can also be considered in this context. It would be highly useful to focus more on the role of geography in future research. With the possible exception of Egypt, however, I do not think that geography and resource endowments were the primary cause of the differences in economic institutions between the Middle East and other regions.

Religion and/or culture have long been offered as a primary cause of the differences in long-term economic development. Weber, for example, singles out Protestanism as the religion most supportive of capitalist development. In his analysis of Islamic societies, he emphasizes the contrasts with western Europe. He argues that Islam and Islamic law created obstacles to political and economic development.Footnote ³ However, it is clear in retrospect that he minimized the considerable differences that existed within Europe and within the Middle East and presented idealized versions of societies and institutions in both regions. One may perhaps find this understandable, to some extent, because much less was known during his time about the history and institutions of both areas, especially of the Middle East.

Those in the recent institutional economics literature adhering to a social conflict or political economy explanation of economic institutions argue that because different groups and individuals typically benefit from different economic institutions, there is generally a conflict over the choice of such institutions. Institutional change, even when socially beneficial, will be resisted by social groups who stand to lose economic rents or political power. As a consequence, the process of institutional change involves significant conflict between different groups, ultimately resolved in favor of groups with greater economic and political power. The distribution of political power is, in turn, determined by political institutions and the distribution of economic power. For this reason, political economy and political institutions are considered key determinants of economic institutions and the direction of institutional change.

In two recent books, Nelly Hanna has studied the large merchants and artisan entrepreneurs in Egypt during the 17th and 18th centuries.Footnote ⁴ Employing a political economy framework and emphasizing the roles played by the power structure and the state, she searches for the origins of capitalist development in Egypt in the early modern era. While she does not explicitly deal with questions of institutional change, her careful use of theory as well as of archival sources offers many insights into these processes. In a series of recent articles and an important book, Timur Kuran deserves credit for placing long-term institutional change at the center of the research agenda.Footnote ⁵ Emphasizing the importance of culture, he has argued that institutions in the Middle East have been rooted in Islamic law, including inheritance law, commercial law, and others, and that rigidities in these institutions have been the main obstacles to economic development. Unfortunately, like Weber, Kuran has also minimized the considerable differences that have existed within the Middle East and within Europe and has presented idealized versions of societies, institutions, and patterns of long-term economic change in these two regions. As a result, he has overlooked the institutional changes in Islamic societies and in Islamic law that emerged in response to many different conditions. He has also tended to minimize if not ignore altogether the large body of evidence that societies in the Middle East have shown a great deal of flexibility and pragmatism as they often circumvented or adapted those religious rules. Of equal importance, Islamic law has not been an autonomous sphere. It has interacted and changed with society and the state. Recent research in the Ottoman archives has shown, for example, not only that courts responded to social and economic change but also that political authority was closely involved in the interpretation of law and day-to-day administration of justice.Footnote ⁶ Once it is allowed that the so-called rigid Islamic rules could and did change, or could be and were circumvented, it becomes necessary to understand why there was change in some areas and not in others.

More generally, it seems to me that cultural explanations often run against a slippery slope. Since Weber argued for the role of Protestanism in economic development more than a century ago, economic successes of different societies around the globe have shown that religion and culture are not the primary factors determining economic development or its absence. Most work in history and the social sciences today tells us that societies adapt and reinterpret culture, rules, and even religion when demands for change become sufficiently strong. Social structure, social conflict, and political power, as well as the state, are either conspicously absent in Kuran's argument or subordinated to the rules of Islam. It seems to me that we ultimately need to use these concepts and try to relate social structure, political power, and political economy to institutions and institutional change in order to understand the economic history of the Middle East.