Reading the New Yorker on Islam and economic growth

It is not often that I can agree with an article’s conclusion and disagree with almost everything the author did to reach it, but such is the case with the piece (subscription required) in the recent New Yorker by John Cassidy called Prophet Motive — puns in the title are always a discouraging sign — which carries the ominously deterministic sub-hed “The economies of the Arab world lag behind the West.  Is Islam to blame?”

Cassidy’s conclusion, in short, is: no.  That’s good.  The reasons for his no wander aimlessly through uncompelling argument and can be summarized in two points that belie the sub-hed: Turkey and Indonesia are both economically successful and overwhelmingly Muslim, though neither is Arab which is the defining culture of the economies under discussion; also, deterministic explanations are lame and it wasn’t “Hinduism [that] held back India or Roman Catholicism [that] held back Ireland,” which is true but makes one wonder what thesis Cassidy was testing all along.

I have a more simple explanation for the poor Arab economic performance: bad government.  If you want to complicate it, you can add in a vestigial attachment to bad economic ideas imported by Gamal Abdel Nasser’s generation from the (avowedly atheistic) Soviet Union.  I have a particular reason for reaching this simple conclusion because in the late-1990s I wrote an economics column (two of which can be read here and here) for the Cairo Times, then Egypt’s leading independent news magazine, advocating greater liberalization.  As it happens, I don’t think I mentioned Islam as a factor in any of the columns.  This is not because Islam was unimportant in the daily life of Egyptians but because it was practically irrelevant in shaping Egyptian economic policy, a point that Cassidy fails to take up in surveying Islam’s role in the local economy.  With the exception of niche financial services marketed as “Islamic banking” — which paid something like interest but grounded it in something other than the time value of money, in order to avoid religious prohibitions on usury (or riba) — the business climate in Egypt was shaped far less by Islam than by the government’s desire to exercise control over (for which read, extract a rentier cut of) every significant sector of the economy and the public’s acquiescence to this state of affairs because of a misplaced faith in public ownership of industry as a source of protection for the poor.  But even that misplaced faith was more subtle and sophisticated than was apparent at first: when privatization finally came in the early-2000s, it principally provided an opportunity for a rentier state to transfer public assets to private hands at a steep discount — theft, in other words.  This, too, is not a product of Islam (something similar happened in Russsia, of course) so much as weak institutions and ineffectual government.

As I argue in a related piece on social justice in Egypt (which can be read here) there was no shortage of talented Egyptians with initiative and a willingness to work hard for long hours — they just had to move to New York, London, or Dubai to do anything with their skills because those places offered more conducive policy environments.  This is a common experience in developing countries: for decades, India exported some of the most talented people on earth because their economic policies at home were ill-conceived and self-defeating; as soon as those policies changed, the much-lamented ‘brain drain’ reversed course and Indians from the diaspora flowed back in.  In Egypt, even after its bogus ‘reform’ policies of the 2000s, economic competition has always been based on connections or wasta; elsewhere, it could be based on skills.  This, not Islam, was the source of the middle class crisis in Egypt: middle classes everywhere compete on skills, principally through education acquisition.  In Egypt, many of them had the educations — or, anyway, the degrees, since the deterioration of the quality of higher education was part of the general putrefaction of services delivered by the state — but their skills were debased in an economy that valued control, submission, connections, and rent skimming.  John Cassidy makes a living by displaying his cognitive skills in print; it is easy, in such a context, to take for granted the material value of an education.  Some day, one hopes, Egyptians will have that problem too.

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