False Economy - Alan Beattie [69]
In fact, so ephemeral are intellectual fashions in this particular field that there was a vogue in the 1980s for arguing the exact opposite. Dozens of business books argued that capitalism actually worked better when imbued with "Asian values"—generally defined as an attachment to social and economic solidarity (as opposed to destructive individualism), as manifested in long-term relationships between governments, investors, and producers (as opposed to the promiscuous free-for-all of Western capitalism). Such rationalizations died off somewhat in the aftermath of the 1997-1998 Asian financial and economic crisis, in which it turned out that some of those "long-term relationships" had also been distinctly dysfunctional.
Having lost rather a large number of bouts, the "Religions determine growth" thesis has nonetheless been hauled out of semiretirement for another shot at the title, this time taking a swing at Muslim (rather than Catholic) beliefs. On the face of it, there is much more promising material to work with in Islam than Papism. Does the Koran not ban usury—the lending of money at interest, an essential element of any modern market economy? Are Muslim countries in the Middle East not a byword for economic stagnation, living off oil earnings rather than producing goods and services? Is the Islamic addiction to accepting fate rather than trying to make something of oneself not so entrenched that the resigned shrug of "Inshallah" ("God willing") routinely accompanies the making of plans and promises in the Middle East?
In truth, while there are some ways in which the theology of Islam seems unsupportive for growth, it has little to do with an intrinsic an-ticommercial bias, and even less to do with the alleged prohibition of usury. More likely, it happens that some societies that adopted Islam proved to be resistant to change and reform, largely for other reasons. And one or two aspects of Islamic religious dogma that were in fact initially advantageous to economic growth failed to adapt and became a hindrance.
First, let's address the recent past. There has been simply no tendency for Islamic societies to grow less quickly than others over the past half-century. This result was established by Marcus Noland of the Peterson Institute for International Economics, one of Washington's most respected think tanks, in a study published in 2003. His paper provoked a cacophony of yelps of surprise among fellow economists but no convincing refutation. Indonesia and Malaysia, for example, have been relatively successful. And when Noland looked at countries with both Islamic and other religious communities, such as Ghana—a good way of isolating the specific influence of religion on growth—he found no evidence that Muslims were doing badly. If anything, Islam appears to be good for growth.
So why did they not do better before the twentieth century? Historically, the underperformance of Islam begins in the twelfth and thirteenth centuries. The religion was founded in the seventh century, in some ways an attempt to purify and unite the "religions of the book"—Christianity and Judaism. It spread and rose very rapidly, filling the space left by the implosion of the Roman empire.
In some respects Islam was a more commerce-friendly religion, at least in its theology, than its main rival, Christianity. There is a widespread belief that the Koran imposes a blanket prohibition on usury—the lending of money at interest. But both in theory and in practice there is little to suggest that this was a major impediment to growth. The specific references in the Koran and other writings are to riba, which means "increase" and appears to refer not to the charging of interest per se but to the practice