Lounsbury: FT article on Islam and Growth [edit]

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December 08, 2003

FT article on Islam and Growth [edit]

I have to say I was surprised to read the idea Muslim societies are intrinsically less conducive to capitalism than the West is a widely held belief, although in reflecting on past commentary I have read, perhaps it is.

Regardless an article of potenitial interest to some, with a link to the underlying study:
Islam no bar to economic growth, says US study
By Alan Beattie in Washington
Published: December 7 2003 21:39
http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1069493785165&p=1012571727102

"There is no evidence that Islam restricts economic growth, according to new research that casts doubt on the widely-held belief that Muslim societies are intrinsically less conducive to capitalism than those dominated by other religions.

The study, by Marcus Noland at the Institute for International Economics think-tank in Washington, reviewed growth in developing countries over the past few decades and found no evidence that countries with large Muslim populations grew more slowly, or had lower productivity growth.

Looking at growth within three religiously mixed countries - India, Malaysia and Ghana - only Malaysia showed statistically significant lower growth within its Muslim population."

I rather wonder if that is not tied, by the way in regards to Malaysia, to two factors - traditional dominance of non-Muslim Chinese in the business sector tied to a somewhat poorly concieved affirmative action program for Malays.

Now, I am not surprised on the following,t hat underlying issues in regards to savings and investment are the fundamental issue:
Excluding the effects of oil production, which dominates the Islamic Middle East, or studying Muslim Arab countries separately made no difference to the results. Conventional economic fundamentals such as the level of education and the share of investment and government in the economy - which were found to be unrelated to the prevalence of Islam - mattered far more for economic success.

No surprise there, of course lazy, sloppy fallacy of composition thinking tends to get people into analytical traps. I refer readers to tacitus.org where the prime writers are particularly prone to this in regards to the Islamic world. (Reminds me I have a long overdue note to write in regards to claims a few days back, or perhaps weeks in re Islam and female circumcision, yet more logical fallacy bounded idiocy) - I rather suggest a combination of ignorance bounded phobia in re Islam, and lack of good materials on the religion and its vast cultural domain, tend to distort views.

"If one is concerned about economic performance in predominantly Muslim regions or countries, conventional economic analysis may yield greater insight than the sociology of religion," the study says.

Mr Noland said his results aroused suspicion, bordering on disbelief, among colleagues when he first produced them.

This last item I find wierd, surprising and ultimately disheartening.

On the other hand I had a friend in the Agency in Langely who undertook a statistical study of human rights in the Muslim world expecting to prove Muslims were more prone to violence, human rights abuses, etc. -- expectation of course driven by selection bias in re information on the Muslim world -- and was stunned to find his own evidence disproved him. Regional issues.

The view that particular religious affiliations affect growth has been a fertile ground for sociologists since the pioneering work of Max Weber, the German sociologist.

Some sociologists have argued that the tendency of Islamic education to rely on reiteration of a finite set of information, together with the disapproval of lending money at interest, has restricted innovation and growth in Muslim countries.

Now, the second paragraph is certainly among the most puzzling. First, of course, most banks in the Islamic world, including in the Arab heartland, charge interest on loans, although of course there are Islamic banking facilities that, in my opinion, use slights of hand, to get around this. On the other hand there are pools of unmobilized capital because some of the more devout do not like interest, etc., but then I see this as much as fear of frankly creaking and dubious financial systems in the Arab world more than an Islamic item. As to the education, well rote education is found all over the developing world and I find it bizarre to attribute this to Islam - again selection bias and fallacious thinking. The bounded set of knowledge is an issue, but that is largely the POV of the truly hidebound religious conservatives, which are actually not that influential in education, ex religious education. Rather more problematic is the political influence - the quasi-secular governments attitudes towards free expression and the rather obvious influence this has on what sorts of academic inquiries can happen. Not an Islamic disease, a disease of totalitarianism or better, authoritarianism.

[edited: added following]
In regards to the hoops of Islamic finance on financing instruments, Henry Azzam has an article which conveys some of this as he discusses new bond choices:
Islamically structured bonds growing in importance / Lebanon Henry T. Azzam
http://www.menafn.com/qn_news_story_s.asp?StoryId=35890

I rather consider all this slights of hand, but if it helps mobilize capital and provide relatively religiously conservative people a real means of entering a modern capital market, why not? On the other hand, I am highly suspicious of many of the actors in this sector.
[end edit]

The study link, by the way, from the FT article:
http://www.iie.com/publications/wp/2003/03-8.pdf

December 08, 2003

FT article on Islam and Growth [edit]

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