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- LECTURE

The History of Capitalism:

Early Islam and the Birth of Capitalism

By Benedikt Koehler

20 February 2014

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Anyonewhosellsahouseandmakesaprofitwantstoknowwhattodowiththemoneytheymade.Iftheyliveinacitywithabullmarketinproperty,often,thesensibledecisionistobuyanotherproperty.Thisinvestmentstrategyisnotnew.ItwasalreadytriedandtestedinacitythathadaboomingpropertymarketintheearlyseventhcenturyinArabia,namelyMedina.There,theleaderofthecommunitygaveoutthefollowingadvicetoanyonewhosoldaproperty:Hewhosellsahouseanddoesnotbuyanotheroneinstead,isnotlikelytoseeblessinginthatmoney.Thisisstraightforwardinvestmentadvice:ifyoumakemoneyinproperty,keepitinproperty.Thereisnothingunusualaboutthisrecommendation,exceptwhereitcamefrom.TherecommendationtoinvestinbricksandmortarisbythefounderofIslam,Muhammad.Prophetswhogiveinvestmentadviceareinaminority.Itwouldbedifficult,forexample,toimaginesomeoneaskingJesusorBuddhawhattodowiththeirsavings.ButforMuhammad,givinginvestmentadvicewasentirelyinkeepingwithhowheconceivedhisoffice.IslamisareligionthatguidesMuslimsineverythingtheydoincludinginbusiness.

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Muhammadknewagreatdealaboutinvestingmoney.Hehadbeenamerchantbyprofessionhehadtakenpartintradecaravans,andformostofhisbusinesscareermostlikelymanagedawarehouseproducingleathergoods.MuhammadwasinhisearlyfiftieswhenhefoundedhiscommunityinMedina,andbythenhehadsomefourdecadesofbusinessexperiencebehindhim.Islamdiffersfromotherreligionsinmanyrespects.ButtheonethatmatterstonightishowIslamareligionbegunbyanentrepreneurmarkedtheadventofcapitalism,firstinMedina,theninArabiaandintherealmofIslam,andatlastbeyondIslamsborders,inEurope.Butbeforeweturntothatstory,letmespendamomentlookingatthetermcapitalismandwhatitmeans.Capitalismisawordusedsooftenthatonewouldthinkeveryoneagreedonwhatitmeans.Butthatisnotthecase.Onemightexpecttofindadefinitionfromtwoeconomists,whocometomindasthosewhofirstexplainedthenatureofcapitalism,AdamSmithandKarlMarx.ButSmithneverusedthetermatall.AndinallofMarxsbooks,thereareonlyahandfulofreferencestocapitalism.Itwasasociologist,MaxWeber,whopointedoutthatcapitalismisnotonlyawayofdoingbusiness.Itismorethanthat,itisamodeoforganisingsociety.Thereismoretocapitalismthanaccumulatinggoods,orbuildingfactories,oroffices.Asocietydoesnotneedtobecapitalisttomanufactureproducts.Whatmakescapitalismdistinctive,saidMaxWeber,isaparticularframeofmindthatmakessomeonewanttoproduceandtradegoods.Capitalism

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followsfromaspecialsetofattitudesspecifically,awillingnesstoinvesttimeandeffort,withaviewtoreapingaprofitinthelongrun.So,eversinceMaxWeber,capitalismhasbeenunderstoodasasetofmentalattitudesthatshapesociety.Butthereisnoagreementonwhenthatattitudefirstappeared,oronwhatbroughtitabout.Forexample,ancientGreeksandRomansbuiltgreatempires,buttheyhadnonotionofcapitalism.GreeksandRomansleftnoeconomicliteratureofnote.ButifGreeksandRomansdidnotoriginatecapitalism,whodid?MaxWebersuggestedProtestantismfosteredcapitalism.HehadanexampleinBenjaminFranklin.WhenBenFranklinsaid,timeismoney,heexplainedcapitalisminanutshell.ButWebersviewhasbeencontested,becausecapitalismexistedearlier,inmercantileItalianrepublicssuchasVenice.Astolocatingthetippingpoint,whencapitalismbegan,thejuryisout.ThisbringsusbacktoIslamandtoMuhammadandhiscareerinbusiness.MuhammadcamefromalonglineofprominententrepreneursinMecca,andhadbeenamerchantinMeccahimself.Hehadlostmostofhismoneywhenhisbusinesswasboycotted,buthemadeitback.ThatfactisanotheraspectthatseparatesMuhammadfromJesusandBuddhatheydiedpoor.ButMuhammad,bythetimehedied,wastherichestArabofhistime.SoletushavealookatMuhammadsbiographyandfamilybackground.ThestandardrecitationofMuhammadsbiographyincludesthefollowingkeyevents:MuhammadsfatherhaddiedbeforehewasbornandMuhammad,asateenager,madealivingasashepherd;attheageof25,hemarriedKhadija,aladyofmeans;butafteropponentstoIslamforcedhim

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outofMecca,hefoundedabreakawaycommunityinMedina;andwithintenyearshadunitedmostofArabiaunderthebannerofIslam.However,thestoryofreligionsandtradeinMeccadidnotbeginwithMuhammad.Fromtheverybeginning,civiclifeinMeccarevolvedaroundthelocalsanctuary,theKaaba.Inthefifthcentury,managementoftheKaabawastakenoverbyacertainKossai,whoclaimedoversightoftheKaabaforhistribe.TwofamiliesbecameguardiansoftheKaaba,theOmayyadsandtheHashimites.Hashim,whogavetheHashimitestheirname,wasamerchantwhobecamefamousbecausehewasatradediplomathesignedtradeagreementswithBedouinsandwithforeignstates.Hashimsaccordsmadecaravanjourneysacrossdesertssaferandmoreprofitable.Thefamilyhadathirdnotablefigure,AbdulMuttalib,wholednegotiationstowardoffanattackonMecca.Kossai,Hashim,andAbdulMuttalibwerekeyfiguresintheshapingofMeccascivicidentity.KossaisetrulesformanagingtheKaaba,Hashimstrucktradeagreements,AbdulMuttalibdefendedMeccaagainstattack.ThesethreealsomatteredtothestoryofMuhammad,becausehewastheirlinealdescendant.WhenMuhammadcameforwardandproclaimedtheneedtoreformreligionandsocietyinMecca,Meccanswerelisteningtosomeonewhosefamilyhadplayedaleadingroleinthetownshistoryformanygenerations,inreligion,intrade,andinwar.

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MuhammadwasaroundtheageoffortywhenhefoundhisvocationtopreachIslam.Letusnowturntohisbusinesscareerupuntilthatpoint.Muhammadhadtopayhiswayinlife.Hisfatherhaddiedbeforehewasborn,hismotherdiedwhenhewassix.Muhammaddidnotinheritalargeestate,however,heinheritedanassetthathelpedhiminhiscareer:hisfamilywasconnectedtoMeccasmerchantelite.WhenMuhammadwasinhismidtwenties,hisuncleintroducedhimtoKhadijabintKhuwaylid,oneofMeccaswealthiestinvestors,whosethimupinbusinessandlatermarriedhim.Muhammadhadmarriedintomoney.MuhammadwasthefirsttouniteArabsinasinglestate.However,hedidnotproclaimanewstatewhenhesettledinMedina.WhatMuhammadestablishedinMedinaweretwoinstitutionsthatshapedthepublicsphereineverycityfoundedbyMuslims:first,themosque,andsecond,themarket.Tonightsfocusisonthemarket.WhenMuhammadarrivedinMedina,thecityalreadyhadfourmarkets.WhenMuhammaddecidedtosetupanewone,Medinaslocalresidentstriedtostophim.However,Muhammadpersistedandinauguratedhismarketbydeclaringtohisadherents: Letthisbeyourmarket,[]andnotaxeswillbeleviedonit. (IbnShabbah,TarikhalMadinahalMunawwarah,1:304306)Muhammadwantedthismarkettobebig.Itwaslargeenoughthatthesaddleofacamel,placedatitscentre,couldbeseenfromtheperiphery.Moreover,Muhammadcreatedafiscal

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incentivetoattractmerchantsawayfromothermarkets,becausetradeonthismarketwastaxfree.Nosurprise,then,thatlocalmerchantsresentedthiscompetitor.WhenMuhammadsetafiscalincentivetoattractbusiness,itwasinkeepingwithhisgeneralmanagementapproach.Muhammadoftenpromotedhispoliciesbyestablishingtaxincentivesandfiscalprovisions.Iwillgiveoneexample:inwar,awarriorwhoprovidedahorsewasentitledtothreetimesthesalaryofawarriorwhocameonfoot.Byofferingsoldiersinhiscavalrytriplethestandardrate,Muhammadwassoonabletofieldalargercavalrythanhisenemies,oneofthereasonsforhismilitarysuccess.FiscalincentivesweregermanetoMuhammadsmilitaryplanning.However,myfocustonightisnotonwar,butontradeandcommerce,andthatbringsmetoMuhammadsframeworkforbusiness.Letmespendamomentondescribingwhatthatbusinesswas.LongbeforetheadventofIslam,ArabswerelongdistancetraderswhoconnectedEuropetoAsia.Traderstravelledincaravans,andinMuhammadsdayacaravandepartingfromMeccacouldcompriseasmanyas2,500camels.Acaravanwasahighlycomplexundertaking;alargenumberofparticipantshadtoagreeonadeparturedate,andhadtomakesuretheirgoodsandsupplieswerereadyintimeforthatdate.Somethingelsehadtobeinplaceforallthistohappen:caravanswouldbegoneforalongtime,thereforesomeoneneededtoadvancethemoneytopayforthegoodsthey

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carried,andhopedtosell.Somebodyneededtounderwritetheriskofaventure.Inotherwords,caravantradeneededinvestors.Muhammadsfirstventurewassmall,onlytwocamels.Consideringacaravancouldnumberover2,000camels,onehasanotionofhowmanyinvestorsandmanagerstheremusthavebeeninMecca.Thesecompanieswerecalledqirad,andtheyworkedmuchlikeventurecapitalcompaniesdotoday:eachpartnershipneededtoagreeonhowtosplitprofits,losses,andwhoshouldpayforexpenses.Khadija,Muhammadswife,wasonesuchprofessionalinvestorinqirads.MuhammadandKhadijaweremarriedfor24years,sohehadfirsthandknowledgeoftheissuesinvolvedininvestinginqirads.InMedina,Muhammadnotonlyestablishedamarket,healsosetrulesonhowtradeshouldbeconducted.LetmenowturntothecornerstoneofIslamicbusinessethics,theKoranspronouncement:

Godhaspermittedtradingandmadeusuryunlawful.(Koran2:275)

Thisisaconjoinedstatementandbothcomponentsmatter.TheKoranbansactivitiesthatexploitborrowers,butendorsestradethatisfair.TherearecountlessramificationsoftheKoransbanonusury,andwecannotgothroughallofthem.Butforourpurposestonight,whatmattersisthattheKoranapprovesofinvestmentssuchasthosemadeinqirads.

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MuhammadintroducedmanyotherimportantinnovationsinMedina.Iwouldliketohighlightoneinparticular,namelyderestrictionofprices.Once,therewasafamineinMedina,andasonemightexpect,thepriceoffoodshotup.ManyhouseholdscameunderfinancialpressureandtheyturnedtoMuhammadforhelp.WhattheyaskedMuhammadtodo,wastosetapricecap.Muhammadwasamanagerwhonevershiedawayfrommakingtoughdecisionstoachievehisaims.Sohisfollowersweresurprisedbytheirleadersreaction:Muhammadrefusedtointerveneinpricessetbythemarket.Theyaskedhimwhyandheexplainedhisreasons:Prices,hesaid,areinthehandofGod(IbnHajaralAsqalaniquotingAnasibnMalik,BulughlMaram,834).Muhammadpronouncedthat,eventhoughhewasaProphet,hehadnomandatetoregulateprices.Byimplication,iftheProphethadnomandatetodothat,neitherdidanyothergovernmentauthority.WhenMuhammadderestrictedpricesontheMedinamarket,hethrewouttherulebookofeconomicmanagementthathadbeeninplacefromthebeginningofMesopotamianhistory.Traditionally,whereverpossible,governmentauthoritiesprescribedpricesandcustomerscouldfilecomplaintswhenevertheythoughtatraderwaschargingtoomuch.SoitwasahighlysignificantstepwhenMuhammadsaidthathedidnotwanttosetpricesbecausedoingsowouldbeirreligious.

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AfterMuhammaddied,hissuccessorswereatpainstofollowMuhammadspromarketmeasures.Forexample,Ali,Muhammadssoninlaw,oncespottedatraderonMedinasmarketwhohadbuiltastall.Aliinsistedheremoveitandtoldhim,FortheMuslims,themarketissimilartotheplaceofworship:hewhoarrivesfirstcanholdhisseatalldayuntilheleavesit.Soeveryevening,tradershadtoremovetheirstalls,andeverymorning,thecompetitivefieldwasopentoanyone.Toexplainwhythesemeasuresmatterforthehistoryofcapitalism,letmeturnbrieflytoaneconomistofthetwentiethcenturywhothoughtdeeplyaboutthenatureofmarkets,FriedrichvonHayek.AccordingtoHayek,thehallmarkofeverycapitalistsocietyisthepresenceofmarkets.Today,weoftenusetermmarketeconomyinsteadofthetermcapitalism.AsHayekhaspointedout,promarketpolicieshavearippleeffectonsociety.Whenmarketsarefreetosetprices,thereareconsequentialimpactsonwidersociety.Marketsthatcreatewealthneedlegalframeworksthatprotectproperty.Therealsoarerepercussionsonintellectuallife:asocietyexposedtonewproductswillfosteraclimateofacademicenquiryandofindividualism.ThehistoryofearlyIslamproceededonatrackthatHayekwouldhaveexpected:prosperouscitizensendowedprivatecharities,thewaqfs,topromotepublicservices,andtherewasvigorousgrowthoflegalscholarshiptaughtatthemadrasas.Hayekstatedthatfreemarketsevolveanotherinnovation,soundmoney.ThishappenedinthelateseventhcenturyinIslam,whenthecaliphAbdalMalikintroducedanIslamic

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currencybasedongoldandsilver.TheIslamicgoldcoinswerecalleddinars,andthesilvercoinswerecalleddirhams.TheancientRomangoldcoinwasthedenariusandtheGreeksilvercointhedrachma,sothesedesignationsshowthatAbdalMalikwishedtobeseenasasuccessortoancientGreeceandRome.Hayekpointedoutthatmarketeconomiesdonotneedgovernmentstoevolve,andheassertedacorollarystronggovernmentscangetinthewayofmarkets.ThehistoryofArabiaillustrateshispointArabscreatedmarketslongbeforetheycreatedastate.LetusnowhavealookateconomiesinEuropeatthetime.AfterthecollapseoftheRomanEmpire,thestandardoflivingacrossofmostofEuropedroppedandstagnatedforcenturies.EvenafterCharlemagnefoundedanewempire,economicgrowthdidnotpickupinWesternEurope.ThroughouttheMiddleAges,thestandardoflivinginmostofEuropehardlyimproved.WhencommerceinEuropedidcometolife,itdidnothappeninplacesonemighthaveexpected.OnemighthavethoughttradeandcommerceinEuropewouldtakeoffincitiesthathadalreadybeenwealthyinAntiquity,suchasRome,orRavenna,orMilan.However,noneofthesefamouscentresofpowerandculturebecameleadingtradehubs.Insomecases,thecitieswherebusinessclusteredhadnotevenexistedinAntiquity.

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Letmeciteanexample:thehistoryofVenice.Veniceisanunlikelyspottobuildacity.Thecityisringedbymarshesandlagoons.Nobodywouldsettlethereunlesstheyhadto.Venicehadasinglenaturaladvantage:itwasagoodplacetohide.VenicewasfoundedatatimewhenItalywasoverrunbyHunsandabandonedtoanarchy.InNorthernItaly,anxiousfamiliesfledtheirhomesandlookedforaplacewhereinvaderswereunlikelytofindthem.Venice,thecitythatbecameItalysrichesttradehub,beganlifeasahideaway.AftertheHunswithdrew,Venetiansmadethefirstofmanyshrewddiplomaticmoves:theyplacedthemselvesundertheprotectionoftheByzantineemperorinConstantinople.Bothpartiesbenefitedfromthisaccord;theemperoracquiredabridgeheadinNorthernItaly,andtheVenetiansreceivedtradeprivilegesinConstantinople.Venicedidnotaimattakingcontroloverterritory.WhatVenetiansperfectedwasabusinessmodel;theyleftittotheemperorinConstantinopletoconsiderhimselftheiroverlord,meanwhile,Venetiansconcentratedonwhattheydidbest:promotingtradeoverlongdistances.Stepbystep,overaperiodofseveralcenturies,theVenetiansnegotiatedimprovedtradeprivilegesuntilatlasttheyhadtherighttotradethroughouttheByzantineEmpire.Inparallel,theystrucktradeagreementswithauthoritiesintherealmofIslam.IntheMiddleAges,thepositionofVeniceinEuropewassimilartothat,inthetwentiethcentury,ofHongKongintheFarEastsubjectofasovereignsofarawaythattherewasno

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realistichopethatthecitycouldeverbedefendedagainstaseriousattack.However,noonewouldeverwanttoattackthecity,becausethecitystradeprivilegeswouldbeworthlessonceitnolongerbelongedtoanempire.ToleaveVenicealonesuitedeveryone.TherearesomeparallelsbetweenVeniceandMecca:bothcitiesarelocatedinbarrenenvironments,lackafertilehinterland,andanytradersettingforthonajourneyhadtocrossanimmensedistancebeforehefoundatradingpartner.Thedifferencebetweencaravansandconvoyswasthatonecrosseddeserts,andtheothersailedacrossthesea.Thedangersweredaunting.TheMediterraneanSeawasoutsidegovernmentcontrolandinfestedwithbanditsandpirates.Europeangovernments,attimes,wouldhavelikedtradebetweenEastandWesttostop,buttheyneversucceeded.TradebetweenChristiansandMuslimswentonregardlessofwhethertheirpoliticalmasterswereatwar.ThusVenice(andcitieslikeher,suchasGenoa)accumulatedtradelinksandtradeexpertise,andintheprocessgrewrich.Emperorsandkingshadlittletocontributetopromotingtrade,eitherforMeccaorforVenice.Thismaysoundanoddcoincidence.ButitfitswithwhatHayekwouldhavepredicted:marketsdonotneedgovernmentstothrive.Andthereisacorollarytothat:marketsmaybeheldbackwheregovernmentsarestrong.ThatiswhathappenedinEurope.MercantilerepublicsonItalyscoastgrewrichatamuchfasterpacethancountrieswithlargedomesticeconomies.Inthetwelfthcentury,therepublicofGenoaraisedmoretaxesthanallofFrance.

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LetmeturntospinoffsofIslamiclegalandcommercialinstitutionsinEurope.ThoseEuropeanswhotradedwithIslamiccountrieshadimmediateexposuretoIslamicinstitutionsandappliedwhattheysawathome.IwouldliketohighlightfourinnovationsinEurope:

thefirst,ishowfirmswerestructured, thesecond,isbusinessstudies, thethird,istheevolutionoftrusts, thefourth,ismonetaryreform.

Letmestartwiththeforerunneroffirmsandcorporations.ImentionedthatcaravansinMeccaconsistedofamultitudeofindividualventures,whereeachventurewasgovernedbyanagreementbetweeninvestorsandmanagers.ConvoysinVenicehadasimilarcorporatestructure.Thenameoftheseagreementswascommenda,whichofferedprofitshareagreementsbetweeninvestorsandmanagersthatwereanalogoustotheqiradsusedtounderwritecaravans.Wehavedocumentationforsuchagreementsdatingbacktothetenthcentury.AnothercrossoverfromIslamtoChristendomwasthedevelopmentofaskillsettomanageabusiness.Torunabusiness,amanagerneedstobeabletowriteandknowhowtocount.InmedievalEurope,levelsofliteracyandnumeracywereverylow.ManymerchantsintenthcenturyVenice,forexample,signedagreementssettinganxwherethereoughttobeasignature.However,bytheearly1200s,thedemandfortraininginquantitativeskillshad

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grown,andaleadingmathematicianofthetime,LeonardoFibonacci,madeasuccessofabookoncommercialarithmetic.Fibonaccisbookshowedhowtocalculatefractionsandratesofreturn.FibonacciwasaprofessionalmathematicianwhocamefromPisabutgrewupinAlgeria,wherehisfatherworkedinaPisantradecolony.LikemanyotherEuropeanmathematicians,FibonaccilearnedhismathematicsfromanArabteacher.TherewerealsocrossoversintoEuropefromIslamicjurisprudence.ImentionedthatbenefactorsinearlyIslamendowedschoolsattachedtomosques,calledmadrasas.Thepurposeofthemadrasaswastotrainlawyers.Europeanorganisationswithapresenceinthecrusaderstates,theKnightsTemplarandtheFranciscanFriars,hadfirsthandexposuretohowtheseinstitutionsworked,andtheyplayedakeyroleinreplicatingtheminEurope.TheKnightsTemplarwerekeytoestablishingLondonsInnsofCourt.OnehighrankingEnglishofficialofthetime,withclosetiestotheKnightsTemplar,WalterdeMerton,endowedMertonCollegeinOxford.ThestatutesofMertonCollegeareanearlyexampleofanewformoflegalentityinEurope,whatwenowcallatrust.Letmerecapbrieflyhowatrustisstructured.Atrustneedsthreeparties:first,adonor,whohandsoverassetsthatmakeupthetrustsendowment;second,amanager,whoisatarmslengthfromthedonor;andthird,atrustneedstonominatetheintendedbeneficiariesandwhattheyareentitledto.

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InCommonLaw,thetrilateralstructureofatrustwasanovellegalconcept.Butithadaprecedent,namelytheIslamicwaqf.TrustlawinEnglandwasestablishedinmanytestcases,andtheplaintiffsinthesecaseswereoftenmembersoftheKnightsTemplarorFranciscanFriars.ConsideringFranciscanshadagreaterpresenceinIslamiccountriesthananyotherreligiousorder,thiscanhardlybecoincidental.AfourthexamplewhereEuropeansfollowedanIslamictemplateismonetaryreform.Untilthe1200s,thesoleissuerofgoldcoinsinEuropehadbeentheByzantineEmpire.However,afterissuancetherestopped,severalpartiestriedtofillthegap.InEurope,thefirstthreestatesthatlaunchedtheirowngoldcoinswereVenice,Sicily,andGenoa.SowehaveIslamicantecedentsforahostofinstitutionalinnovations:howtoestablishacompany,advancebusinessstudies,foundcollegesandtrusts,andlaunchagoldcurrency.Thisbegsaquestion.ThemerefactthatEuropeanstooklongertomakecertaindiscoveriesdoesnotquiteprovethattheydependedonIslamicmodelstomakethem.HowcanweclaimthatIslamictemplatesprovidedtheinspirationfortheseinnovations?Toanswerthatquestion,letuslookatwhotheinnovatorswere.Then,weseeapattern.LeonardoFibonacci,theKnightsTemplar,andtheFranciscanFriarstheyallhadexposuretoIslamicapproachestomanaginginstitutions.Next,letushavealookatthecentreswhereinnovationoccurred.Thevanguardofcommercialprogresswasnotinpoliticalpowercentres,notinRomeorParis,butincitieswiththebesttraderelationswithIslamic

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countries,inVeniceandGenoa.TheagentsofchangeinEuropewereinnovatorswhohadinsightintoIslamicpractices.VeniceandGenoahadacompetitiveadvantagebecausetheyhadclosetradelinkswiththerealmofIslam.Thepatternofcommercialinnovation,kickstartedbyentrepreneurswhotaketheriskofinvesting,thatthenspreadstopromoteadvancesinlawandeconomics,notonlyreplicatedthepatternthatwesawintheearlyIslamicEmpireitalsoconformedtowhatHayekwouldleadonetoexpect:socialprogressoriginatesinmarkets,ratherthanfromgovernmentactions.AwordaboutthelossofdynamisminIslamiceconomies.Therewereseveralreasonsforthis.OnewasthediscoveryofnewtraderoutesthatbypassedtheMiddleEast.ThePortuguesesailedaroundAfricatoreachIndiaandtradewithAsiabypassedtheMiddleEast.TheSpanishsentoutafleetthatsailedtotheAmericas,andacrosstheAtlanticnewmarketsopenedupofferingbiggeropportunities.However,anotherreasonwasofIslamsownmaking.IslamreachedapointwhereitwasthoughtthateverythingwhichwasunclearintheKoranhadbeensettled.Fromthatmoment,thedrivetodiscoverandinnovatedrainedaway.Letmewrapupmytalk.Forthesakeofheadingoffmisunderstanding,letmestatetheobvious:Islamisareligion,andareligioncannotbereducedtoaneconomicsystem.

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However,MuhammadalsohadaseminalimpactonchangingeconomicsystemsintheMiddleEast,andthereweresecondroundimpactsoneconomiesinEurope.IbeganmytalkbyquotingMuhammadsadviceonpropertyinvestment.AndIpointedoutthatArabia,priortotheadventofIslam,wasacommonwealththatdidnothaveasinglegovernment,anddidnotneedonetodevelopmarkets.ManyaspectsofthatlegacywerecarriedoverintoIslam.EarlyIslampromotedpromarketpolicies,andframedinstitutionsthatsupportedentrepreneurs.Followingfromthese,therewereadvancesinlaw,economics,andthecreationofagoldcurrency.ThesamepatternemergedwhenEuropeanscopiedtheseinnovations:marketsdevelopedontheperipheryofEuropeanempires,notattheircentre.WhenMuhammadpronounced,pricesareinthehandofGodheexpressedanotionwhichcorrespondswithAdamSmithsconceptoftheinvisiblehandthatguidesmarkets.TheanthropologistDavidGraeberhasnoticedastrikingresemblancebetweenthenotionsofAdamSmithandMuhammad.WhatAdamSmithandMuhammadhaveincommon,inmyview,isthatbothoverturnedconventionalwisdomonhowtoregulatemarkets.IfAdamSmith,whoassertedthataninvisiblehandguidesmarkets,isconsideredthefatherofmarketeconomics,then,inmyopinion,somewhereinthefamilytreeofeconomists,thereoughttobeaplaceforMuhammad.Ladiesandgentlemen,thankyouforyourattention.