Political Power and Institutional Change: Lessons from the Middle East

Abstract

This paper focuses on the internal organisation of the societies of the Middle East and how that may have influenced the economic institutions to explain the economic trajectory of the region since the medieval era. Societies of the Middle East experienced a good deal of institutional change since the rise of Islam. While many of these changes were in response to the changing circumstances, they also reflected the social structure and prevailing power balances. Beginning in the medieval era and continuing with the Ottomans in the early modern period, political power was concentrated in the hands of the sovereign and the state elites around him. In contrast, the influence of various social groups, not only of landowners but also of merchants, manufacturers and moneychangers, over economic matters, and more generally over the policies of the central government remained limited. As a result, societies in the Middle East did not develop institutions more independent of the state and the state elites and more in favour of the private sector.

Keywords:

• Middle East
• economic development
• institutions
• institutional change
• political power

JEL classification:

• N15
• N25
• N35

Notes

²The term Middle East was coined only recently, during the last century or two. Nonetheless, I prefer to use this term rather than the earlier Near East because of its convenience.

³In essence, the mudaraba was identical to the commenda of Europe; for discussions of the Islamic origins of commenda, see Udovitch 1962; Ashtor 1972, and Pryor 1977.

⁴Acemoglu and Robinson (2006) have developed a model to examine the circumstances under which political elites, fearing political replacement, are likely to block technological and institutional change.