Money Market: How the West Was Won-In the Middle Ages

By Keating, Joshua E. | Foreign Policy, November 2011 | Go to article overview
Save to active project

Money Market: How the West Was Won-In the Middle Ages


Keating, Joshua E., Foreign Policy


[ILLUSTRATION OMITTED]

It's one of the best-known but least understood of historical trends: Until the 13th century, the Middle East and North Africa were far more scientifically and economically advanced than medieval Europe. But while the European Renaissance was followed by the rise of capitalism and the Industrial Revolution, the Arab world stagnated for centuries. What happened?

The traditional view, held by early 20th-century theorists like Max Weber and modern historians like Bernard Lewis, is that cultural factors--Islam's conservative nature, the "Protestant work ethic"--were the reason. But in a recent paper published in The Economic Journal, economist Jared Rubin pinpoints a more specific and potentially far more decisive factor: the Western ability to loan money at interest.

Both Islam and early forms of Christianity ban usury, defined as the charging of interest on a loan. In both cultures, businesses developed methods to get around the prohibition. A popular stratagem in early Islamic finance was the mukhatara, or "double-sell." For example, a debtor might sell a creditor something for $100 and then immediately buy it back for $110 to be paid at a later date, the $10 becoming in effect a form of interest on the $100 loan.

Today, schemes like mukhatara remain the only legal way to charge interest in much of the Muslim world. But secularizing governments in the West gradually did away with the ban on usury during the 14th and 15th centuries, allowing them to develop the sophisticated banking services needed to generate capital for, say, building factories or funding massive construction projects, Rubin says. The split might have come, Rubin points out, because Islam evolved as a binding social code, intimately entwined with the political systems it dominated and absorbed throughout the Ottoman Empire, whereas Christianity developed as a dissident movement separate from the political institutions of the Roman Empire.

So how, then, to account for today's booming Islamic economies in the Persian Gulf and Southeast Asia and billions of dollars invested in so-called "sharia-compliant" financial services? Rubin considers these new methods just variants on the age-old workarounds, but not enough to propel Islamic economies past Western odes.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
Loading One moment ...
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited article

Money Market: How the West Was Won-In the Middle Ages
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

While we understand printed pages are helpful to our users, this limitation is necessary to help protect our publishers' copyrighted material and prevent its unlawful distribution. We are sorry for any inconvenience.
Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.

Are you sure you want to delete this highlight?