June, 2003

Comments on Timur Kuran's 'Why the Middle East is Economically Underdeveloped: Historical Mechanisms of Institutional Stagnation'

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Professor Kuran argues that poor economic performance in Middle Eastern economies is rooted in institutions and legal conditions that hindered the accumulation and efficient investment of private capital. He further argues that these institutions and legal conditions were specific historical developments in the Middle East, and not inherent features of Islamic societies. Thus Thus Islamic societies have the potential for better performance, provided those historical obstacles can be diminished. This much is clear from the examples of Malaysia and Indonesia, and earlier of Lebanon, all of which showed fairly rapid modernization and economic growth for substantial periods.

However, Kuran’s view is incomplete. He overlooks problems specific to the Middle East that are not part of Islam, but part of the Ottoman legacy or accidents of geography. These include (1) the system of absolute central authority in politics; (2) tribalism and guilds; (3) disincentives to investment in human capital; and (4) disinclination to seek innovations. It may take revolutions – not of the Islamic variety, nor the military or one-party variety, but truly democratic revolutions – to unleash the economic potential of Middle Eastern societies.