410 - 005 - Economic Development

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Economic Development

In the course of the second millennium, the Islamic world failed to match the institutional transformation through which western Europe greatly expanded its capacity to pool resources, coordinate production, and conduct exchanges. By the nineteenth century it had become “underdeveloped” relative to western Europe and its offshoots in the New World. The key indicators of this state of economic backwardness lay primarily in the private economy. In 1800 credit practices in Cairo, Istanbul, and Lahore hardly differed from those of the Middle Ages. Investors, producers, and merchants pooled resources mainly through small and short-lived partnerships based on classical Islamic law. Trade with the outside world, and increasingly also local trade, was under the control of foreigners and foreign protégés. Public goods continued to be delivered mainly through waqfs (Islamic trusts), which lacked the flexibility of corporations. With few exceptions, school curricula remained wedded to medieval teachings, and Muslims were still overwhelmingly illiterate. Partly because the private economy had failed to modernize, states of the Islamic world had to go abroad for resources to modernize their bureaucracies, armed forces, and economies.

Two centuries later, some Muslim countries are on the World Bank’s roster of high-income countries, with many others in the middle-income category. They all feature stock markets and banks that finance both trade and a wide range of investments. Some have rapidly growing and increasingly diverse industries that export heavily to the West. Most boast firms that rank among the world’s largest. All have sophisticated product markets, and operate modern facilities such as dams, power grids, mass transportation and communication networks, hospitals, and universities. Yet, the Islamic world also includes some of the world’s poorest countries, including a few that remain in the earliest stages of economic modernization.

The economic transformations of the past two centuries have been neither continuous nor free of conflict. Along with periods of feverish reform, there have been times of resistance to institutional change, global economic integration, and resource reallocation.

Economic Modernization

In the nineteenth century the Islamic world was rocked by an invasion of mass-produced goods from Europe. The inflow of industrial commodities dealt a blow to the profitability of various craft guilds. Some succumbed quickly to the competition, and the survivors lost both market share and political clout. By and large, they reacted to the competition by seeking to strengthen their customary rules through legal codification. They were generally slow to reorganize and change their production methods. Under the circumstances, it was entrepreneurs operating outside traditional craft guilds who introduced the technologies of mass production into local economies. Initially these entrepreneurs belonged mostly to non-Muslim minorities, who found it easier to operate under European or European-inspired institutions. With very few exceptions, all of the joint-stock companies and corporations formed in the Islamic world before World War I drew their capital overwhelmingly from local non-Muslims, except insofar as they relied on foreigners.

Meanwhile, agriculture became increasingly commercialized, with certain crops cultivated primarily for export to Europe. Largely through the initiative of European trading companies:

Silk became a major export commodity in Syria, Lebanon, Turkey, and Iran;
Olive Oil in Tunisia;
Cotton in Egypt, Syria, Turkey, and Yemen;
Wine in Algeria and Tunisia;
Tobacco in Turkey, Iran, and the Dutch East Indies;
Rubber in Malaysia and the Dutch East Indies;
Palm Oil and Groundnuts in Central and West Africa;
Tea and Jute in India;
Coffee in Yemen and the Dutch East Indies;
Jaffa Orange emerged as an indigenous development of the period and became a lucrative export commodity in Palestine;
Pearls became a leading export commodity outside of agriculture throughout the Persian Gulf.

By the mid-nineteenth century, large regions of the Islamic world, including India, Indonesia, Malaysia, Algeria, and much of sub-Saharan Africa had fallen under European rule. The economies of these regions thus came to be administered by Europeans. Around this time, in the non-colonized parts of the Islamic world, governments became increasingly active in the economic sphere. With Muḥammad ʿAlī’s reforms in Egypt (1805–1849) and the Tanzimat in Turkey (1839–1876), independent and semi-independent Muslim governments started promoting new industries; codifying financial, commercial, and administrative procedures; using municipalities to deliver urban services; relying increasingly on indirect taxes for revenue; and establishing secular schools to train specialists and civil servants. It is in this period that both Turkey and Egypt adopted commercial codes and courts modeled after those of France, mainly to accommodate modern organizational forms and business practices. A related legal development of the period was the introduction of the first Islamic legal code, the Ottoman Mecelle. Drawing creatively and selectively on the sharīʿah, the Mecelle deals with various aspects of economic contracts. In instituting wide-ranging reforms, the governments of the Islamic world became increasingly centralized.

The nineteenth-century reformers understood that sustained development would require much new infrastructure. They had neither the funds nor the know-how, however, to undertake major investments on their own, and the atomistic nature of local credit markets limited opportunities for domestic borrowing. Under the circumstances, they borrowed heavily from Western financiers and relied on foreign enterprise. Some of the great infrastructural projects of the period — including the Suez Canal; the Berlin-Baghdad Railway; the ports at Port Said, Beirut, and Haydar Paşa; the gas, water, and power systems of Istanbul, Cairo, Baghdad, Damascus, and other cities; and some of the early irrigation systems in Egypt — were undertaken through foreign loans and with technical and administrative guidance from abroad.

The first half of the nineteenth century saw the establishment of private banking firms, mostly British, in major cities of the Islamic world. With government debt rising, several foreign-owned incorporated banks came on the scene in the middle of the century, including the Ottoman Bank, the Bank of Egypt, and the London and Baghdad Association. Shortly thereafter the leading European banks opened their own branches in major cities of the Middle East. These banks allowed local government debt to grow enormously, and before long one government after another found itself unable to meet its interest obligations. The standard European response was to put an international commission in charge of the defaulting government’s finances. Some countries, such as Turkey and Iran, continued to retain their political independence even as they lost financial autonomy. Others, notably Algeria, Morocco, Tunisia, and Egypt, endured foreign occupation.

Scant industrial investment took place in the Islamic world until World War I, both because international treaties precluded local governments from imposing tariffs on imports and promoting local industries, and because the organizational forms needed to mobilize the necessary capital and use it efficiently were lacking. During World War I, certain local governments found their supplies of industrial commodities cut off, so they began producing domestic substitutes, generally at high cost. After the war, and the Ottoman Empire’s disintegration, many independent governments and also some colonial administrations continued to promote local industries through subsidies and preferential buying schemes. A highlight of this era of economic nationalism is the opening of the first banks owned and managed by locals: Bank Misr in Egypt and İş Bank in Turkey.

With the onset of the Great Depression, the drive toward self-sufficiency accelerated. Declining world prices for the Islamic world’s traditional export products prompted governments facing trade deficits to give their industries high tariff protection. With trade severely restricted during World War II, and then the adoption of import substituting industrialization strategies throughout much of the Islamic world, protection for infant industries continued. These strategies were generally pursued until the late twentieth century.

Oil

The most significant economic development of the post-World War II era has been the emergence of oil as a source of massive revenue and foreign exchange in Saudi Arabia, Kuwait, Qatar, Oman, the United Arab Emirates, Iraq, Iran, Algeria, Libya, Nigeria, Brunei, and Indonesia. All of these countries have become major exporters of oil.

The oil industry of the Islamic world had its beginnings in the late nineteenth century in exclusive concessions granted to foreign oil companies in Iran and the Dutch East Indies. Its rise to global prominence came much later. As late as 1940 Muslim countries accounted for only eight percent of the world’s oil production. By 1970, however, their share surpassed forty percent.

Prior to the early 1970s, the foreign companies that ran much of the Islamic world’s oil industry adhered to common rules with regard to production, marketing, and host country rights. In effect, they acted as a buyer’s cartel that limited the returns of producers. Iraq and Iran attempted to nationalize oil in the 1950s and 1960s, but they failed to break the power of oil companies enjoying the support of their powerful home governments. The Organization of Petroleum Exporting Countries (OPEC) was formed in 1960 to facilitate cooperation among major producers in their dealings with oil companies. Though initially ineffective, OPEC’s power began to grow by the 1970s. Several developments contributed to the process.

In the early 1970s, the Middle East’s rising share of global oil supplies allowed major oil producers to dictate price increases to individual importers. In the wake of the Arab-Israeli War of 1973, OPEC’s sister organization, the Organization of Arab Petroleum Exporting Countries (OAPEC) imposed an oil embargo on certain countries deemed to have supported Israel, including the United States. This embargo contributed to a quadrupling of the price of crude oil. A further tripling was triggered by the Iranian Revolution of 1978–1979, which resulted in a temporary cutoff of Iranian oil exports, followed by Saudi Arabian production cuts.

These price shocks stimulated oil production outside of OPEC. Partly as a consequence, OPEC’s share of global oil production fell to thirty percent by 1991, well below its almost seventy percent share of proven oil reserves. Energy conservation and investments in alternative sources of energy, both induced by the oil-price rises of the 1970s and early 1980s, caused oil prices to fall back to the levels of the mid-1970s by the late 1990s. As the country with the largest oil reserves and hence the most to lose from alternative sources of energy, Saudi Arabia contributed to the price declines by increasing its output continuously. However, with world energy demand growing rapidly, and Saudi Arabia producing at capacity, concerns about the security of future oil supplies in Iraq, Iran, Nigeria, and even Saudi Arabia itself induced oil prices to triple once again between 2001 and 2007.

The flow of oil revenue to OPEC’s Islamic members served to finance enormous economic development programs. It allowed them to raise their investment rates to unprecedented heights; gain access to advanced technologies; make major improvements in their infrastructures; and provide upgraded and expanded public services. The low-population oil producers, which have few complementary resources, have gained, in addition, the ability to invest substantial sums in world markets. Most of their investments are in Europe and North America, but increasingly also in the newly industrialized countries, including those of the Islamic world. The oil-poor countries of the Islamic world have also benefited from the boom in the oil-rich countries, primarily through higher export earnings, aid, direct investment, and remittances from guest workers.

Along with the many positive economic effects of the periods of sharply increasing oil prices, there have also been some negative consequences for the oil exporters. Their production of other internationally traded commodities, including agricultural goods, has tended to decline. Wage increases in the private sector have outstripped productivity gains, thus limiting private non-oil production. Female labor participation rates have fallen, causing fertility rates to rise. With the local investments of all oil exporters concentrated in industries whose demand suffers from high energy prices —petrochemicals, aluminum refining, dry docks — much established capacity has remained underutilized. Extensive state subsidies to individuals have undermined work effort as well as the incentive to acquire marketable skills. Consequently, despite massive efforts at economic diversification, most of the oil exporters remain as dependent on oil as they were forty years earlier. The exceptions are the United Arab Emirates and Indonesia.

Global Integration

The oil booms have also discouraged economic reforms. The Islamic countries that have undertaken the most ambitious economic reforms have been oil-poor countries, including Malaysia, Turkey, Jordan, Tunisia, and Egypt. In these countries, market-oriented reforms, including trade and capital liberalization, generally followed balance-of-payment crises. The pro-market drive also drew strength from the emergence of East Asia as an economic powerhouse through export-driven growth policies and from the deepening economic crisis of the Soviet bloc. On the whole, however, liberalization and privatization have proceeded slowly, mainly because of resistance from civil servants, labor groups, and industrialists long-accustomed to protection. The largest increases in industrial exports have been achieved by Turkey, Tunisia, Malaysia, Indonesia, and Kuwait (in the latter case, they involve mainly energy-based industries).

Industrial ownership exhibits variation, though small, family-owned firms are common everywhere. In Turkey, Pakistan, India, and Lebanon, many large enterprises belong to highly diversified private conglomerates; others are state-owned. In much of the rest of the Islamic world, including most oil-exporting countries, almost all large enterprises belong to the state.

At the start of the twenty-first century, the economic achievements of the Islamic world present a decidedly mixed picture. The oil-rich states of Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Libya, and Brunei enjoy per capita incomes that place them among the world’s high-income countries. Most of the remaining Arab states fall in the middle-income category, as do several other predominantly Muslim countries: Malaysia, Turkey, Iran, Kazakhstan, and Albania. Yet six of the eight countries with the largest Muslim populations — India, Indonesia, Pakistan, Bangladesh, Nigeria, and Egypt — are among the world’s poorest, as are certain smaller Muslim or semi-Muslim states of Africa and Asia. Life expectancy at birth exceeds seventy in the richer Arab countries, Turkey, Albania, Bosnia-Herzegovina, Azerbaijan, Malaysia, and Brunei, but remains below sixty in Afghanistan, Yemen, Sudan and several other largely Islamic countries of sub-Saharan Africa. Adult literacy stands above eighty-five percent in Turkey, Lebanon, Jordan, Malaysia, Bosnia-Herzegovina and the central Asian republics, and above sixty percent in most of the other high- and middle-income countries.

Within individual countries, certain inequalities are very pronounced by global standards. The distributions of wealth and income are highly unequal in most countries because of disparities in land ownership, inequalities in access to education, credit, government services, and opportunities to trade. Most of the large countries show huge inequalities between regions and between cities and the countryside. Finally, there are massive inequalities based on age and gender. Where in most parts of the world life expectancy at birth and child survival rates tend to be considerably higher for females than for males, in parts of the Islamic world, including Bangladesh, India, and Pakistan, they are lower for females. In some countries, males outstrip females in literacy and years of schooling by more than fifty percent, although the gaps have been shrinking rapidly in most countries.

Although interactions with the West have influenced the ideas, priorities, and apprehensions that have undergirded the Islamic world’s development drive since the nineteenth century, local sensibilities, intellectual traditions, and political conditions have colored every concrete reform. Starting in the second half of the twentieth century, attempts have been made to base economic transformations on self-consciously Islamic principles. Some countries, most notably Iran and Pakistan, have tried to eliminate the use of interest and to institute Islamic redistribution schemes. Such efforts have had no major impact on any key indicator of development.

The early twenty-first century has witnessed efforts to deal with home-grown shortcomings of the Islamic world. Most significantly, the annual “Arab Human Development Report,” whose inaugural issue appeared in 2002, promotes the view that Arab economies suffer from three self-sustained deficits: freedom, empowerment of women, and knowledge.

Economic Development

As Europe’s Industrial Revolution got underway, the Islamic world was in the final phase of a protracted decline that began around the twelfth century. The slide had appeared to be over with the rise of the Ottoman Empire, but the Turkish defeats of the seventeenth and eighteenth centuries made it plain that the balance of power now favored the industrializing nations of western Europe. The military failings of the Turks, like those of other Muslim forces, reflected the Islamic world’s economic backwardness in regard to the West. At the beginning of the nineteenth century, Muslims remained overwhelmingly illiterate, whereas in large areas of Europe mass education was already more than an ideal. Few Muslims appreciated, and even fewer sought to capitalize on, the scientific discoveries and organizational innovations that were transfiguring production processes, ushering in new commodities, and boosting living standards in the West. Muslim trade with the outside world, even trade within it, was largely under the control of Europeans, whose local representatives came principally from minority groups. The Islamic world featured no major banks, and its public treasuries were too depleted to finance large‐scale development projects.

Two centuries later, some Muslim countries are on the World Bank’s roster of high‐income countries, with many others in the middle‐income category. The better‐off countries feature well‐capitalized local banks that finance both trade and a wide range of investments. Some have rapidly growing and increasingly diverse industries that export heavily to the West. Their private and public sectors operate dams, power facilities, modern transportation and communication networks, agricultural and industrial enterprises, hospitals, and vast education programs. Against these achievements, the Islamic world also contains some impoverished countries. Yet even the poorest countries have undergone profound transformations: in the most populous ones, the share of agriculture within gross domestic product is now below, and in some cases much below, forty percent.

The economic transformations of the past two centuries have been neither continuous nor free of conflict. Along with periods of feverish reform, there have been times of resistance to institutional change, to integration into the world economy, and to the reallocation of resources.

In the early nineteenth century the Islamic world was rocked by an invasion of mass‐produced goods from Europe. The inflow of industrial commodities dealt a severe blow to the profitability of various craft guilds. Some succumbed quickly to the competition. The majority survived, although they lost both market share and political clout. By and large, they reacted to the competition by seeking to strengthen their customary rules through legal codification. They were generally slow to change their production methods and to reorganize. Under the circumstances, the new European technologies were introduced into local economies primarily by entrepreneurs operating outside the traditional craft guilds.

In the second half of the nineteenth century new industries and trading companies were established, first in the major urban centers and then in the hinterland. Although still centers of fine handicrafts, the guilds progressively declined in economic importance. In the process, they started losing their ablest workers. Even some masters joined the exodus, leaving their time‐honored marketing districts to open shops in new economic centers or to become workers in nascent factories.

Meanwhile, agriculture became increasingly commercialized, with certain crops cultivated primarily for export to Europe. Largely through the initiative of European trading companies, silk became a major export commodity in Syria, Lebanon, Turkey, and Iran; cotton in Egypt, Syria, and Turkey; wine in Algeria and Tunisia; tobacco in Turkey, Iran, and the Dutch East Indies; rubber in Malaya and the Dutch East Indies; palm oil and groundnuts in Central and West Africa; tea and jute in India; and coffee in Yemen and the Dutch East Indies. An indigenous development of the period was the emergence of the Jaffa orange as a lucrative export commodity in Palestine.

These transformations in the private economy were accompanied by revolutionary changes in the scope and character of government. Until the nineteenth century, the economic functions of Muslim governments went scarcely beyond the enlargement, exploitation, and protection of their revenues and modest efforts at redistribution to preserve social stability. Governments undertook few infrastructural investments, did not engage in economic planning, and left many matters that we now consider essential government functions to the guilds, to local communities, or simply to the discretion of individuals. Their revenue came mainly from direct taxes on land, although at various times and places substantial additional sums were raised from the sale of commercial and artisanal licenses. By the mid‐nineteenth century, large regions of the Islamic world, including India, Indonesia, Malaysia, Algeria, and much of sub‐Saharan Africa had fallen under European rule. The economies of these regions had thus come to be administered by Europeans. Around this time, in the non-colonized parts of the Islamic world, government activism in the economic sphere was beginning. With Muḥammad ῾Alī’s reforms in Egypt (1805–1849) and the Tanzimat in Turkey (1839–1876), independent and semi‐independent Muslim governments started promoting new industries; codifying financial, commercial, and administrative procedures; relying increasingly on indirect taxes, including excise taxes, for revenue; and establishing secular schools to train specialists and civil servants. In instituting such reforms, these governments became increasingly centralized.

There nineteenth‐century reformers understood that sustained development would require much new infrastructure. They had neither the funds nor the know‐how, however, to undertake major investments on their own, so they borrowed heavily from Western financiers and relied on foreign enterprise. Some of the great infrastructural projects of the period, including the Suez Canal, the Berlin‐Baghdad Railway, the ports at Port Said, Beirut, and Haydar Paşa, the gas, water, and power systems of Istanbul, Cairo, Baghdad, Damascus, and other cities, and some of the early irrigation systems in Egypt, were undertaken through borrowed funds and with technical and administrative guidance from foreigners.

The first half of the nineteenth century saw the establishment of private banking firms, mostly British, in major cities of the Islamic world. With government debt rising, several foreign‐owned incorporated banks came on the scene in the middle of the century, including the Ottoman Bank, the Bank of Egypt, and the London and Baghdad Association. Shortly thereafter the leading European banks opened their own branches in many places. These banks allowed local government debt to grow enormously, and before long one government after another found itself unable to meet its interest obligations. The standard European response was to put an international commission in charge of the defaulting government’s finances. Some countries, such as Turkey and Iran, continued to retain their political independence even as they lost financial autonomy. Others, notably Morocco, Tunisia, and Egypt, endured foreign occupation.

Scant industrial investment took place in the Islamic world until the aftermath of World War I, partly because international treaties precluded local governments from developing industries to compete with foreign enterprises. During World War I, certain local governments found their supplies of industrial commodities cut off, so they began producing domestic substitutes, generally at high cost. After the war, many independent governments as well as some colonial administrations continued promoting nascent local industries, through both subsidies and preferential buying schemes. A highlight of this era of economic nationalism is the opening of the first banks owned and managed by locals: Bank Misr in Egypt and Iş Bank in Turkey.

With the onset of the Great Depression, the drive toward self‐sufficiency accelerated. Declining world prices for the Islamic world’s traditional export products prompted governments facing trade deficits to give their industries high tariff protection. Many Muslim governments were free by this time of treating restrictions on their tariff policies. In addition to regulating trade, they started to manage consumption patterns and the sectoral allocation of investments. Their efforts coincided with expanding government interventionism in the Soviet Union and in Germany.As world trade entered a new expansionary phase after World War II, operating the infant industries established to substitute for imports became increasingly costly. Yet most governments went on protecting them through high import barriers.

The most significant economic development of the post — World War II era has been the emergence of oil as an overwhelmingly important source of government revenue and foreign exchange in Saudi Arabia, Kuwait, Qatar, Oman, the United Arab Emirates, Iraq, Iran, Algeria, Libya, Nigeria, Brunei, and Indonesia. All these countries have become major exporters of oil.

The oil industry of the Islamic world had its beginnings in the late nineteenth century in exclusive concessions granted to foreign oil companies in Iran and the Dutch East Indies. Its rise to global prominence came much later, in the mid‐twentieth century. In 1940 Muslim countries accounted for eight percent of the world’s oil production. By 1970 their share had surpassed forty percent.

Prior to the early 1970s, the foreign companies that ran much of the Islamic world’s oil industry adhered to common rules with regard to production, marketing, and host country rights. In effect, they acted as a cartel limiting returns to the producing countries. The 1950s and 1960s featured some attempts at nationalization on the part of local governments, but they were generally unsuccessful. Against this background, the Organization of Petroleum Exporting Countries (OPEC) was formed in 1960 to facilitate cooperation among major producers in their dealings with oil companies. In the first decade of its existence, OPEC provided only modest benefits to its members. By 1970, however, its clout was growing as cracks appeared within the cartel of foreign companies. The subsequent decade saw two OPEC‐supported jumps in the world price of oil: a quadrupling in 1973–1974 and a further tripling in 1979–1980. Each price hike was triggered by political events in the Middle East. The first occurred when OPEC’s sister organization, the Organization of Arab Petroleum Exporting Countries (OAPEC) imposed an oil embargo on certain countries deemed to have supported Israel in the Arab‐Israeli War of 1973, including the United States. The second was precipitated by the Iranian Revolution of 1979 and the decision of Iran’s new government to slash its oil production.

The price shocks of the 1970s stimulated exploration and production outside of OPEC. Partly as a consequence, OPEC’s share of world production fell to thirty percent by 1991, even though it holds about two‐thirds of the world’s proven reserves. Meanwhile, the price of oil receded to its mid‐1970s level. Most analysts attribute the decline not to OPEC as a whole but rather to the efforts of Saudi Arabia, OPEC’s leading producer, to preserve the value of its vast reserves by discouraging substitution away from oil in the industrialized West.

The flow of oil revenue to OPEC’s Islamic members has served to finance enormous economic development programs. It has allowed these countries to raise their saving and investment rates to unprecedented heights; gain access to advanced technologies; make major improvements in their infrastructures; and offer their populations greatly upgraded and expanded public services. The low‐population countries, which have few complementary resources, have gained, in addition, the ability to invest substantial sums in world markets. Most of their investments are in Europe and North America. The oil‐poor countries of the Islamic world have benefited in several ways from the boom in the oil‐rich countries: higher export earnings, foreign aid, and remittances of guest workers.

Along with many positive economic effects, the oil boom has also had some negative consequences for the oil exporters. The production of other internationally traded commodities, including agricultural goods, has tended to decline. Wage increases have outstripped productivity gains, thus rendering local industrialization unprofitable. Female labor participation rates have fallen, causing fertility rates to rise. With the local investments of all oil exporters concentrated in industries whose demand has suffered from high energy prices — petrochemicals, aluminum refining, dry docks — much established capacity has remained underutilized. Extensive state subsidies to individuals have undermined work effort as well as the incentive to acquire marketable skills.

By the mid‐1980s, these adverse effects, together with falling oil revenues, had prompted many oil exporters to seek to diversify their economies and privatize their public enterprises. Such policies were already in place in many of the oil‐poor countries, including Malaysia, Turkey, and Egypt. In these countries market‐oriented reforms, encompassing also the liberalization of foreign trade, had generally followed balance‐of‐payments crises. The pro‐market drive also drew strength from the emergence of East Asia as an economic powerhouse through export‐driven growth policies and from the deepening economic crisis of the Soviet bloc. On the whole, however, liberalization and privatization have proceeded slowly, partly because, in both oil‐rich and oil‐poor countries, reforms have encountered stiff resistance from civil servants, labor groups, and industrialists long‐accustomed to protection. The largest increases in industrial exports have been achieved by Turkey, Tunisia, Malaysia, Indonesia, and Kuwait.

The ownership structure of industry exhibits some variation, although family‐owned, small firms are common everywhere. In Turkey, Pakistan, India, and Lebanon, many large enterprises belong to highly diversified private conglomerates; others are state owned. In much of the rest of the Islamic world, including most oil‐exporting countries, almost all large enterprises are under state ownership. A few countries allow foreign ownership, but most permit only joint ventures. Inter‐Arab joint ventures, both public and private, have become increasingly common since the 1970s.

As the twentieth century draws to a close, the economic achievements of the Islamic world present a decidedly mixed picture. The oil‐rich states of Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Libya, and Brunei have attained per capita incomes that place them among the world’s high‐income countries. Most of the remaining Arab states fall in the middle‐income category, as do four other predominantly Muslim countries, Turkey, Iran, Albania, and Malaysia. Yet six of the eight countries with the largest Muslim populations — India, Indonesia, Pakistan, Bangladesh, Nigeria, and Egypt — are among the world’s poorest, as are certain smaller Muslim or semi‐Muslim states of Africa and Asia. Life expectancy at birth exceeds sixty‐five in Jordan, Lebanon, Turkey, Tunisia, Algeria, Malaysia, the United Arab Emirates, Kuwait, Qatar, and Brunei, whereas it remains below fifty in Afghanistan, Yemen, and several largely Islamic countries of sub‐Saharan Africa. Adult literacy stands above eighty percent in Turkey, Lebanon, and Jordan, and above fifty percent in all the other high‐ and middle‐income countries. In the poor countries, by contrast, literacy lies between twenty and fifty percent.

Within individual countries, certain inequalities are very pronounced by global standards. The distributions of wealth and income are highly unequal in most countries because of disparities in land ownership, inequalities in access to education, and in some cases, ineffective redistribution systems. Most of the large countries show huge inequalities between regions and between cities and the countryside. Finally, there are remarkably high inequalities based on age and gender. Where in most parts of the world life expectancy at birth and child survival rates tend to be considerably higher for females than for males, in some parts of the Islamic world, including Bangladesh, India, and Pakistan, they are lower for females. In some countries, males out number females in educational attainment, measured in years, by as much as fifty percent, although the gap has been shrinking rapidly.

The ideas, expectations, priorities, and apprehensions that have undergirded the Islamic world’s development drive since the nineteenth century have been shaped largely by interactions with the West, although local sensibilities, intellectual traditions, and political conditions have colored every concrete reform. In the second half of the twentieth century, attempts have been made to base the economic transformation of the Islamic world on self‐consciously Islamic principles. Some countries, most notably Iran and Pakistan, have tried to eliminate the use of interest and to institute Islamic redistribution schemes. Such efforts have had no major impact on any key indicator of development.

Economic Development

410 – 005

https://discerning-Islam.org

Last Update: 02/2021