I’ve been mugging, scouring Wikipedia for decent fundaes, and reading Cryptonomicon and The Baroque Cycle, and I’ve been coming up with some interesting connections.
The Baroque Cycle is about a lot of things- it’s a quizzers delight that way- but one of the important subplots is about how modern banking developed- starting with moneylending, discounting bills of receipts, and taking gold deposits, and evolving on from there. This took place in the late seventeenth century: the 1660s onwards- in fact, just before the English middle class began to grow.
Can we say that the English middle class was helped by the presence of banks? To an extent, of course. It wouldn’t have been the only contributing factor, but banks would have helped to move capital from landowners to merchants. This would lead to the rise of the East India Company, but it also helped power to shift from landed nobles to urban ‘gentlemen’ and merchants. The Guild of Grocers, one of the most powerful political bodies in London at this time, was not composed of small-time fruit-and-vegetable sellers, but of merchant princes who imported and exported in bulk- hence the name: they bought and sold in gross.
This shift in economic power also led to a shift in political power. The new merchants and colonialists were represented in Parliament by the Whigs, who were of course keen to cater to their constituency- and grow it. The middle class bloomed. The Whigs put limits on the power of the king, and encouraged the growth of financial markets and banks- which further helped commerce and the middle class to grow. About a hundred and fifty years later, their brand of liberalism would see its greatest success with the abolishing of slavery throughout the British Empire.
What about the Muslim world?
Banks run into a problem here. The Koran does not just prohibit usury, as the Bible does, but it prohibits all financial transactions involving interest. The first bank in the Ottoman Empire was not started until 1856, and then it was established as an English concern. Even now, there is widespread opposition in Arabian countries to traditional interest-based banking, which has led to the evolution of Islamic Banking.
Did the lack of (and opposition to) banking and financial services retard the growth of a middle class in Arab countries? Probably. Has this historical absence of a middle class contributed to democracy being so weak in Arab countries today? Very likely. Is it the only reason? Of course not, but is it a major reason? That’s a question which deserves more research.
And if it is, then Islamic banking, complicated though its contracts may be, might just help an Arab middle class to develop. Which is good for them, and good for everyone else too.
By the way, you may find these links useful or interesting:
The 1688-1750 Financial Revolution.
The Chronology of Money.
Interesting theory, am sure there has been more research on this..
Btw, have put up some questions from my kqa open on my blog. please to read, attempt and tell people in campus…