Institutional Causes of Economic Underdevelopment in the Middle East: a Historical Perspective

To anyone who knows the Middle East, broadly defined to include North Africa and the Balkans, it is a puzzle that the region became and remains economically underdeveloped. Visit any major city in the region — Cairo, Aleppo, Istanbul — and you will encounter big covered bazaars, centuries old. Istanbul’s stunning Grand Bazaar, whose core was built in the 1460s, boasts more than 4000 shops. Wandering in its vaulted streets, you appreciate the major commercial centres that the region has had. Travellers and resident foreigners of the sixteenth century marvelled at the size of the markets and at the variety of commodities traded. They were also impressed by the prevailing living standards. None considered the region economically backward. Admittedly, some foreigners were critical of Islam, or of ‘the Turk’ who by then ruled much of the region, or of handicaps endured by visiting merchants. However, informed foreigners did not consider Islam inimical to wealth creation or the region’s institutions harmful to economic activity.