The spread of the Islamic state out of Arabia in the seventh century C.E. led within just a few decades to a large empire that covered the Fertile Crescent, North Africa, Spain, Persia, and parts of India and Central Asia. The new state afforded its newly acquired domains a centralized administration, a unified territory, and secure conditions, all of which were highly conducive to the development of agriculture, industry, and trade. Some of the institutions that structured this economic expansion were continued from earlier times and adapted to the injunctions of Islamic law, while others were developed by Muslim jurists to accommodate the needs of business and production.
The discussion below first considers the major institutions that structured the economy of the Middle East— land tenure, guilds and markets, financial and production structures, and taxation—and then briefly surveys the historical development of Middle Eastern economies.
LAND TENURE
Land tenure and land taxation in the Middle East varied according to time and place as their form depended on both Islamic and state law, but a few overarching principles can be identified. Islamic law considers that land belongs to the Creator and is gifted by Him to His creatures. Thus land ultimately belongs to the community, a principle that in turn allows a community’s members to hold land privately, and also grants the rights of usufruct, sale, and inheritance. The state, then, as the representative of the community, has the right to tax land (as it is rented from the community at large), as well as to confiscate it if left unproductive. Productive land then may be acquired through purchase or inheritance or by reclaiming wasteland, after which the normal rules of private property and taxation apply to it; agricultural land may be held and worked individually (or through hired labor) or collectively by villages that then divide the produce into individual shares. Two categories of land fall outside this general scheme: mulk, that is, inalienable and nontaxable property that is used for private dwellings (mainly houses and small orchards) and to which all the principles of private ownership apply; and waqf, that is, any property (mulk or otherwise) deeded by its owner to serve as a foundation or endowment for a segment of the community—such as students or jurists—or an institution with a public purpose, such as a mosque, school, or hospital. A waqf is inalienable; it cannot be sold or purchased, nor can its original purpose be changed. Whatever income it generates can be spent only on the specified purpose and any related administrative costs.
In practice, though the broad lines of Islamic law were followed, the state could and did implement its own rules regardless of the jurists’ views. From the second half of the eighth century, during the early Abbassid period, the state arrogated to itself the right to grant large estates from its vast holdings to powerful figures whom the caliph wanted to reward or reconcile with, though Islamic rules of inheritance provided for their eventual subdivision. Under the Ottomans (1450-1921), land that was neither mulk nor waqf was categorized as state land (miri); new regulations were introduced, establishing the principle that cultivators owned only the usufruct, so that the land could not be sold or parceled out among heirs (who would have to own it collectively). Though village agricultural land was often held in this way, traditional patterns of landholding remained generally in force throughout the Middle East.
GUILDS AND MARKETS
By the nineteenth century, craftsmen and artisans throughout the Middle East were organized in guilds, which were patterned after the waqf structure found in Islamic law schools. A master craftsman headed the guild, flanked by associate artisans who supervised the apprentices. The guilds regulated the prices of finished products as well as the wages and employment of artisans; the system was strictly controlled in order to maintain income protection and product quality. Traders were similarly organized, though it was often the case that merchants also owned factories and controlled part of the production process. Crafts and industry developed mainly in the cities, which were the primary markets for the adjoining countryside. A muhtasib was in charge of ensuring that the city was properly supplied; he also supervised the market, ensuring honesty in the calculation of weights and measurements and watching for hoarding or abusive monopoly practices that would cause price instability.
FINANCIAL AND PRODUCTION STRUCTURES
Throughout the Middle East, taxes on land often consisted of a percentage of the harvest, but most transactions, and especially trade, used currency, which was minted and controlled by the state from the very beginning of the Umayyad dynasty (661-750). Indeed, for several centuries gold and silver coins minted in the Middle East were international instruments of payment (except in China, which for a while required the use of its paper currency). To facilitate international trade, money was deposited with banks that issued local orders of payment (hawala), as well as bills of exchange (suftaja), throughout the trade routes. The letters of credit on which trade agents drew could be issued by their employers or the employer’s bank.
Islamic law provided for a number of instruments intended to promote production and trade. Land partnerships (muzaraca and musaqat) allowed for the maximization of production by bringing together land, capital, and labor. Business partnership could be of two kinds: proprietary (sharikat al mulk) or commercial (i.e., contractual) (sharikat al laqd). The first implied joint ownership of capital, whereas the second covered labor, capital (mudaraba), and credit (wujUh) partnerships. Although some jurists allowed some forms of unlimited partnerships (under stringent rules), most partnerships were of the limited kind (cinan). The latter category included labor partnerships that were used in agriculture and crafts; capital partnership (which would eventually be introduced into Europe through Italian traders as the commenda) could also be used in those fields, though it was mostly used in trade. The terms of partnerships and the distribution of profits and losses according to specified shares were strictly governed by the law to ensure that contracts would not become usurious. Contracts required witnesses to be valid but were not always recorded in writing.
TAXATION
Taxes were levied on the basis of Islamic law, but the state could and did add as many new taxes as it wished (despite occasional objections from the jurists). Besides the zakat (levied upon Muslims) and the jizya (levied upon non-Muslims), state land was subject to either the kharaj (which could consist of up to 50 percent of the produce) or the cushr (10 percent of the produce). Crafts and industries were generally taxed around 10 percent of their production and various taxes and customs regulated trade profit. Taxes and methods of collection varied widely according to time and locale. Whereas early on the central government received taxes directly through its governors, the eventual weakening of the state forced it to delegate the right to collect taxes to the semi-independent emirates that divided the empire and gave only formal allegiance to the Abbassid caliph in Baghdad.
THE EARLY DEVELOPMENT OF THE ECONOMIES OF THE MIDDLE EAST
Agriculture, the basis of the economy in the pre-Islamic Middle East, flourished with the Islamic expansion. A large variety of cereals, vegetables, and fruits became available as traders brought back new species to their native land. Revolutionary changes in irrigation techniques and soil management, helped by new advances in physics and chemistry and the blossoming of sciences in general, brought much more land under cultivation and made land more productive than previously possible. This, in turn, led to a sizable population increase and the development of two primary industries, textiles and sugar refining, which in turn led to expanded agricultural production of cotton, flax, and sugarcane. This expansion and experimentation with new plants also led to the development of various new medicines, cosmetics, perfumes, and so on. A variety of other new products and techniques were developed or introduced as well, including types of pottery, glass, bookbinding, leather goods, paper (brought back from China), ships, armaments, tools, and so on. Three main trade routes (the Silk Road through Persia and Central Asia, the Persian Gulf route, and the Red Sea route) linked the Middle East to the Far East, which remained its most important trade partner for several centuries. Textiles, sugar, glass, medicine, and agricultural products were exported and silk, spices, precious stones, and paper (at first) were imported.
Political developments were to somewhat hamper these achievements, however. The flourishing economy of the early centuries, though maintained at first despite the fragmentation of the empire into small emirates, could not sustain the blows dealt by successive foreign invasions that were facilitated by the emirates’ intense political and sectarian infighting. The disruptive effect of the Crusades, which started in 1095 and lasted for almost two centuries, was compounded by the Mongol attacks that culminated in the sack of Baghdad in 1258. Indeed, these attacks would have devastated the Muslim world had the Crusaders and a faction of Isma’llls (a small sect whose members governed Fatimid Egypt and parts of Syria) been successful in their attempts to establish an alliance with the Mongols. It was not until the region was united again under the control of the SunnI rulers Nur al Din (d. 1174) and Saladin (d. 1193) that both Crusaders and Mongols were repulsed and the economy could grow again.
The descendants of Saladin did not rule for long, however, as Syria and Egypt were soon overtaken by the powerful Mamluk military dynasty (1250-1517). But the return of security, the unification of Central Asia under the Golden Horde, and the subsequent Mongol conversion to Islam (starting with the Il-Khans who controlled Iraq and Persia) paved the way for another great expansion in industry and trade, which lasted throughout the thirteenth century. The state, whose tax revenues increased when trade flourished, provided protection to merchants by taxing their competitors, ensuring the security of their ships, and jealously guarding access to the trade routes. The great expansion in trade gave rise to an oligarchy of powerful merchants in Egypt, known as the Karimi merchants, many of whom were also factory and ship owners. However, while the Mamluks encouraged industry and trade, they also formed a ruling class that to some extent interfered in the production process. They provided their own dynastic members the right to collect taxes from agricultural districts while not paying any on their own factories, and to impose the corvee (forced labor) on their estates. The state became an economic agent with monopolistic tendencies that slowed down competition and production.
DECLINE AND STAGNATION
The main cause of the economy’s decline arose from natural factors, however. The expansion of the thirteenth century came to an abrupt halt with the spread from the East of the Black Death (1347-1350); Syria and Egypt were ravaged and lost almost half of their population. In Egypt, local industries were taken over by the state and became state monopolies. The weakened rulers found themselves bereft of revenue and vulnerable to the incursions of Tamerlane (d. 1405) throughout the fourteenth century. As a result, exploitative taxes that made economic conditions even worse were imposed on the peasants. Bad administration and lack of competition lowered the level and quality of the state-owned monopolized industries. In addition, the circumnavigation of Africa allowed European traders to bypass the Middle East and break its monopoly over trade routes.
The resulting political and economic weakness of the region allowed the rising Ottoman state, which had already spread throughout Anatolia, to expand southward in the fifteenth century and to incorporate Syria and Egypt under its rule. The return of security and of a centralized government that provided protection along trade routes, repaired irrigation systems, organized taxation, and removed trade barriers, allowed for an economic renewal in Syria and Egypt during the sixteenth century (though most of Iraq remained a battleground between the Safavids of Persia and the Ottomans until it finally fell to the latter in 1638). Villages that had been abandoned were occupied again and the population seems to have increased by as much as 40 percent. Despite increased competition from Europe, industry and crafts found local markets and niches in the international market; thus, when the Portuguese monopolized the spice trade, merchants shifted to another highly sought commodity, coffee, which originated from Yemen.
But the sixteenth-century expansion did not generate the steadily accelerating growth that was occurring in Europe. While local production did not decline over the next two centuries (as evidenced by the sustained tax receipts collected by the Ottomans), it did not grow either. A number of factors contributed to this stagnancy. One of the main problems was the renewed onset of the plague, which struck several times in Cairo and Syria in the seventeenth and eighteenth centuries, leading to a stagnant or even declining population (in contrast with European population growth). Competition from cheaper European finished goods, a slow recovery from plague epidemics, the need for immediate income, and the increasing European demand for raw materials drew the peasants into a reliance on cash crops and led to a corresponding stagnation in crafts and industry. The guilds were unprepared to meet this challenge, as their structure did not encourage competition: guilds restricted and controlled entry into given professions, prohibited the merging of different crafts, and supervised finished products and their prices. The situation was made worse by a devaluation of the currency due to the import of cheap silver from America.
However, the main reason for the stagnation of the economy resides in the taxation system, which varied according to political conditions. In Anatolia and Syria, the Ottomans had instituted the timar system, which guaranteed to the state a certain part of the taxes collected by the sipahis (Ottoman cavalrymen), with the rest going to fund local administration as well as a local army that could be enlisted when needed. In Egypt, an Ottoman governor was appointed to collect taxes directly and there was no attempt at creating a local army. However, continued warfare and the need to keep up with European military advances and innovations forced the Ottoman state to create a standing army and to increase its military expenditures. The timar and ziamet systems were discontinued in favor of a system based on the sale of ”tax farms” (iltizam), in which the tax farmer collected taxes over specific agricultural areas or urban crafts and industries. These tax farms were then auctioned off to local elites. Such sales raised immediate funds—and in effect resulted in deficit financing. The assigning of lucrative iltizams led to social reorganization: the Mamluk upper class that had been shunted aside reasserted itself in Egypt and a class of acyan (notables) arose in Syria. It also led to conflict and sometimes bitter feuding; in Syria, local military men, Ottoman Janissaries, merchants, culama’ (Muslim scholars), and owners of large estates all competed with each other to acquire iltizams, while in Egypt the competition was between the great Mamluk houses. The assignment of iltizams was initially temporary, but as this led to abusive taxation of the peasants, the tax farm was eventually given for life and then on a hereditary basis (malikane), with the hope that the tax farmer would seek to protect his source of income by refraining from unduly disrupting peasant farming. But the multazims (holders of iltizam) did often disrupt the production process: by cultivating large estates, by first providing credit to farmers who could not keep up with taxes, and then eventually seizing their property, or by purchasing the entire crop of a region and hoarding it in order to manipulate prices. There was as a result a considerable increase in waqf ahli, private property that could not be bought or sold and was set up solely for the use of the descendants of the owner, who avoided in this way seizure of the land by creditors.
Thus the attempt at creating a new economic system faltered mainly because of the formation of an elite class that could not rule and whose only interest was to maximize its revenues. Whereas in the past, the state used part of its tax revenues for reinvestment in the agricultural system and provided security, public repairs, and legal protection, the new class now used their revenues only for consumption and power consolidation, and extorted and imposed illegal taxes on the peasants. And while it was true that customary law, which protected the individual, did not allow actual enserfment of the peasants, who resisted the extortions by fleeing, revolting, or seeking the protection of nomadic tribes, the political conditions were such that the peasants could be abused. The result was that more than two thirds of their produce was taken away from them, and agricultural production could not develop and be maximized.
REVIVAL
During the nineteenth century, the economy expanded again as the plague disappeared and the population increased at a very high rate. In turn, this growth led to more agricultural production, exports of raw materials, and expansion in the local industries. However, the political conditions did not allow for industrial growth. In Egypt, the extortions of the elite led to social instability, urban revolts, and the flight of peasants from their villages. This chaotic situation allowed Muhammad ‘All, who had been sent by the Ottomans with a garrison in the wake of the French invasion of 1798, to seize power and become governor of Egypt. Suppressing the old Mamluk elite, ‘All embarked on an ambitious program of economic reform, Westernization of the educational system, and cadre formation. Land was expropriated and administered directly by the state, as was trade. Agriculture improved, irrigation was expanded, and new crops (especially a new breed of cotton that proved very successful) led to some trade growth. But the economy had become primarily a state venture and all entrepreneurial possibilities were eliminated. Furthermore, Muhammad ‘All’s relative success in forming a new army led him to challenge the Ottoman state and invade Syria, prompting intervention by France and Great Britain to stop him.
Following this European intervention, Syria reverted to Ottoman rule, but the Ottoman state, overwhelmed with internal problems, was not able to maintain effective control. The old system of iltizam was restored and the struggle between the tax farmers and the peasantry resumed. Further penetration by Western goods, aided by Western governments who obtained low tariffs on their merchandise and imposed high customs on imports, made industrial production sluggish. And though trade (mostly, the importing of finished goods and the exporting of raw materials) improved generally, the Capitulations, agreements the Ottoman state was forced to make with Western powers, provided special privileges for Western traders and their proteges, Christian and Jewish minorities. The latter found themselves prospering and attracting popular anger and resentment.
In Egypt, the downside of Muhammad ‘All’s creation of a state economy came to a head when prices for cotton fell worldwide. Centralized and inefficient administration and lack of an entrepreneurial class prevented industry from adjusting to these circumstances. The state resorted to hoarding, which in turn pushed its trading partners into bankruptcy; the resulting lack of revenues and the high cost of administration forced Muhammad ‘All to redistribute large tracts of land to family members and associates in return for upfront tax payment. His descendants made things worse by taking on public works projects financed with foreign loans, often made at terms unfavorable to the state. This led to further borrowing from European powers, paving the way for ultimate bankruptcy and, as a result of the ensuing popular unrest, colonization by Great Britain. As for the Ottoman state, the same policy of borrowing, pursued in order to finance the military it needed to defend itself, led to its eventual financial and military demise and allowed Western colonial powers to seize Syria and Iraq at the conclusion of World War I.
