Islam and Economic Performance: Historical and Contemporary Links

Abstract

This essay critically evaluates the analytic literature concerned with causal connections between Islam and economic performance. It focuses on works since 1997, when this literature was last surveyed comprehensively. Among the findings are the following: Ramadan fasting by pregnant women harms prenatal development; Islamic charities mainly benefit the middle class; Islam affects educational outcomes less through Islamic schooling than through structural factors that handicap learning as a whole; Islamic finance has a negligible effect on Muslim financial behavior; and low generalized trust depresses Muslim trade. The last feature reflects the Muslim world’s delay in transitioning from personal to impersonal exchange. The delay resulted from the persistent simplicity of the private enterprises formed under Islamic law. Weak property rights reinforced the private sector’s stagnation by driving capital from commerce to rigid waqfs. Waqfs limited economic development through their inflexibility and democratization by keeping civil society embryonic. Parts of the Muslim world conquered by Arab armies are especially undemocratic, which suggests that early Islamic institutions were particularly critical to the persistence of authoritarian patterns of governance. States have contributed to the persistence of authoritarianism by treating Islam as an instrument of governance. As the world started to industrialize, non-Muslim subjects of Muslim-governed states pulled ahead of their Muslim neighbors, partly by exercising the choice of law they enjoyed under Islamic law in favor of a Western legal system.( JEL N25, N45, O43, O53, P51, Z12)