Capitalism in Medieval Islam

8/9/2019 Capitalism in Medieval Islam

1/19

Cambridge University Press and Economic History Association are collaborating with JSTOR to digitize, preserve and extend access to The Journal of Economic History.

http://www.jstor.org

Economic History ssociation

Capitalism in Medieval Islam

Author(s): Subhi Y. LabibSource: The Journal of Economic History, Vol. 29, No. 1, The Tasks of Economic History (Mar.,

1969), pp. 79-96Published by: on behalf of theCambridge University Press Economic History AssociationStable URL: http://www.jstor.org/stable/2115499Accessed: 15-03-2015 09:48 UTC

Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available athttp://www.jstor.org/page/info/about/policies/terms.jsp

JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of contentin a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship.For more information about JSTOR, please contact [email protected].

This content downloaded from 152.118.24.10 on Sun, 15 Mar 2015 09:48:11 UTCAll use subject to JSTOR Terms and Conditions

http://www.jstor.org/http://www.jstor.org/action/showPublisher?publisherCode=cuphttp://www.jstor.org/action/showPublisher?publisherCode=ehahttp://www.jstor.org/stable/2115499http://www.jstor.org/page/info/about/policies/terms.jsphttp://www.jstor.org/page/info/about/policies/terms.jsphttp://www.jstor.org/page/info/about/policies/terms.jsphttp://www.jstor.org/page/info/about/policies/terms.jsphttp://www.jstor.org/page/info/about/policies/terms.jsphttp://www.jstor.org/stable/2115499http://www.jstor.org/action/showPublisher?publisherCode=ehahttp://www.jstor.org/action/showPublisher?publisherCode=cuphttp://www.jstor.org/


2/19

Capitalism

in

Medieval

Islam

E

who

looks

for

the

term

"capitalism"

n the

Islamic

sources

of

the

Middle

Ages

will

look

in

vain.

On

the

other

hand,

the

term

"capital"

has

been

known

since

the

beginning

of Islamic

culture.

Even

in

the

Holy

Book

of

Islam,

in

the

Siirat

al-Bakara,

the idea

of

capital

appears

in

connection

with

trade,

business,

and the

illicit

practice

of

loaning

for

profit-usury.

"O

you

who

believe,

keep

your

duty

to

Allah

and relinquish

what

remains

[due]

from usury,

if

you are believers. But if you do [it] not, then be apprised of war

from

Allah

and

His

messenger;

and

if you

repent,

then you

shall

have

your

capital.

Wrong

not,

and you

shall

not

be wronged."

In

the

same

Sirah

God

forbids

usury

but

not

Bai', trading,

or buying.

At

another

place

God's

commands

clear

the

way

for

investments.

"O

you

who

believe,

devour

not your

property

among yourselves

by

il-

legal

methods,

although

you

may engage

in

trading

by

mutual

con-

sent.

And

kill not your

people.

Surely

Allah

is

merciful

to

you."'

The

Islamic

merchant

tried to follow this system of ethics.

I

Islam

approved

of trading,

and

not only

because

of

the revelation.

Also,

trading was

enhanced

by

its

milieu.

The

Islamic

merchant

was

born

into

an active

trading

community,

and

the Prophet

himself

had

engaged

in

trade.

The

caravan

trade

between

the Indian

Ocean

and

the Mediterranean Sea had passed through the Arabian Peninsula

ever

since

antiquity.

Mecca,

the

birthplace

of Islam,

arose

as

a

South

Arabian

settlement

around

a shrine

and

acquired

significance

as

a

marketing

town

and

religious,

spiritual

pilgrimage

center

after

the

Qurais

tribe

had

captured

it.

The

main

caravans,

one in the

summer

and one

in the winter,

were

communal

undertakings

in which

whole

tribes

took part.

These conditions

led eventually

to a

familiarity

with

money

economy.

Although

barter

predominated,

in

Mecca

Byzantine

and

Persian

coins

circulated.

Mecca and Medina were not only the

holy

places

of

Islam

but

also

the cradle

of its

culture,

its

business,

and

its

government.

1

The

Holy

Book

of

Islam:

Sirat al-Bakara,

vers No. 275;

Sfirat

al-Nisa',

vers

No.

29.

79


http://www.jstor.org/page/info/about/policies/terms.jsphttp://www.jstor.org/page/info/about/policies/terms.jsphttp://www.jstor.org/page/info/about/policies/terms.jsp


3/19

80

Subhi

Y.

Labib

United through

he ProphetMuhammad,

upportedby a

religious

faith, and favored

by the decline

of the world powers of the

time,

the Arabsstreamed n strictlydisciplinedarmiesvictoriously nto the

neighboring

countriesand

founded

an

empire which extended

from

western

Turkestan

to the

Atlantic Ocean.

Three

quarters of

the

coastlandsof the Mediterranean

ea, once the focal point of Roman

culture, now

belonged

to

Islam.

Furthermore,

he Arab

expansion

ended the long Roman-Persian

hallenge in the

Middle East, and

the Islamic Empire

favored

more than before

the

interrelationship

of the Mediterraneanand the Indian Ocean politically and eco-

nomically.

Araband Persian

raderspushed

vigorously o India, Malaya,

and

Indonesia. Merchantsof the Islamic

world became

indispensable

middlemen

because

of their contact

with the

West-either

through

the Mediterranean

r

the Baltic-and also

the Far

East. In

conse-

quence

of their

worldwide

trade

relationships,

he Arabs

brought

sugarcane

rom

India,

cotton

to

Sicily

and

Africa,

and

rice

to

Sicily

and Spain.They learnedfrom the Chinese how to producesilk and

paper and

took

this

knowledge

with them

into

all

parts

of

their

empire. From

China

they

introduced

the

use of

the

compass

and

from India

the so-called

Arabic

numbers.

Everywhere that

Islam

entered,

it

activated business

life,

fostered an

increasing

exchange

of

goods,

and

played

an

important

part

in the

development

of

credit.

Tradingprofits

ormedan

important

ourceof

income

both for

states

and

individuals.

However,

we must

not

overlook the

fact

that

the

prosperityof the world under Islam always depended mainly on

agriculture,

and with

it,

the

closely

connected

handicraft

ndustry.

In the

early

Middle

Ages

a

Pax

Islamica

was the

foundationof an

economic

golden age

of which

the

protagonists

n the

field of

trade

were

Arabs,

Persians,Berbers,Jews,

and Armenians.

slamic

trade

reached

from

Gibraltar o the Sea of China.

The

voyages

of

Chris-

tians,

in

contrast,

were

limited

to

modest

coastal

journeys

along

the shores

of the Adriatic and southern

Italy

and

between

the

islands

of

the Greek

Archipelago.

It was

centuries

before

the

courageous

citizens

of

Italian

republics

were

able,

thanks

to their

political

development

and

their

maritime

progress,

o

make an

end

to

Islamic-Byzantine

ominationof the Mediterranean.

Oriental

and Occidental

(Frankish)

merchants

together

created

a

phase

of

activity

which can be called commercial

capitalism,

but

we

should not

overlook two essential differences between

the




4/19

Capitalism in

Islam

81

Christian

West and

Islamic East.

First,

capitalism

was able

to de-

velop much

earlier in the

Islamic

regions than

in the

Occident.

The

process of the reagrarianization and the dismantling of the great

exchange

economy

which began in Europe in late antiquity

was

in-

tensified

in the time of the

barbarian

invasions

and continued

beyond

the

Carolingian

period.

In the

agrarian society

of

Europe, trade,

although

it

never

wholly disappeared,

played only

a subordinate

role.

In contrast,

the Orient

at

this time was

not

affected by

any

barbarian

invasions

and a growing

trade

economy

was able

there to

attain its peak.

The essential difference

between the economic

development

of

East and West came

about during

the late Middle

Ages.

Internal

trade

in

the entire

Islamic area

could

not keep pace

with

interna-

tional

commercial

developments,

for

the Islamic

lands

of Asia, which

were

affected

by

the Mongolian

invasions, lost

much

of

their produc-

tivity,

and

as a result their business

potential

diminished.2

II

Although

trade was

not

able

to

change

the

social structure

of

Islamic

society

much,

or

to influence

its

social

thought

very

basically,

nevertheless

it had considerable

effect on

the economy,

the accumu-

lation

of capital,

and the

development

of

production.

The great

expense

of

equipping

armies

cannot be

paid

from

an

empty

state

treasury or

the modest

depository

of an

Emir. Only

a

financially

stable upper class can satisfy its desire for precious stones and

jewelry.

The cradle

of Islamic

capitalism

was

in

the

main

cities

of

the

Islamic

world.

In

the

early

Middle

Ages

Baghdad

was the

com-

mercial

metropolis

and

exerted

a marked influence

on

the whole

of

Islamic

big

business.

With

the tenth

century,

however,

the

weight

of Islamic

commerce

was

gradually

shifted from

Iraq

and the

Persian

Gulf

to

Eygpt,

the

Red

Sea,

and

the harbors of the

Arabian Penin-

sula on the Indian Ocean. Cairo became the leading city. The state

fleets

of Fatimid Egypt

and

private

ships

of its

high

ranking

dig-

nitaries

strengthened

commercial

links in the

Mediterranean,

above

all

with Sicily, Tunisia,

and

Syria.

For

Egypt's

relations with

the West the

emergence

of the

Karim-s,

2

B.

Spuler,

Geschichte

Mittelasiens seit

dem Auftreten

der Thirken, n

Handbuch

der

Orientalistik,

erste Abteilung

(Leiden,

1966),

Bd. 5, pp.

215-27.




5/19

82

Sub/i Y. Labib

a unique group

of capitalistic

entrepreneurs,

was of

great impor-

tance. This group

of large-scale

merchants,

of whom

we first hear

in the eleventh century, was distinguished by its enterprise and

competence,

and soon attained wealth and

influence

in all important

eastern

markets and-through

its

considerable

financing

activities

-in the

field of

politics too. From

the twelfth

century, the

Kdrimis

and

the Franks

came by degrees

to dominate

the important trade

between

East

and West

and displaced

the Christian

and Jewish

merchants

of the Byzantine,

Ayyubid, and Mamluk

empires.

Through

commercial privileges obtained in return for military services to

the

Byzantine

emperors,

the

Italians

succeeded

in

eliminating

Greek

merchants

almost entirely, while

Saladin's support for the Muslim

Karimis meant

the

end

of the

important

position

of

the Coptic

and

Jewish

merchants

of

Egypt.

Kdrimi

funduqs

sprang up

on the main

trade routes

from

the

Indian

Ocean

to

the

Mediterranean,

in

par-

ticular

in

Cairo,

Alexandria, Qus

in

Egypt;

in

Aden,

Ta'iz, Zabid,

Ghalafiqua,

Bi'r

ar-Rubdhiyya

in

Yemen;

in

Mecca, Medina,

and

Jidda in Hijdz. The Siiq al-'Att-ar-n r Al-Buhar was presumably the

center

of

all the

Kdrim1 rading

in

Alexandria.

Kdrimi

trade routes

by

sea

led

through

the Red

Sea

and

the Indian Ocean

as far

as

China,

and

the

land

routes

in times

of

peace

went

from

Egypt

through

Syria, Iraq, and

Iran.

As

the

Ottomans

conquered

important

parts

of Asia

Minor, the

Karimls

expanded

their

trading

activities

into this area.

In

Africa they

traded not

only

on

the west

coast of

the

Red Sea but also

on the caravan routes

with

Nubia

and

Ethiopia.

Their trading activities reached into distant Ghana and Mali, where,

from

the most

important gold

mines

of

the

world, they

obtained

gold.3

If

one

estimated

the

average

capital

of

a

wholesale

merchant,

either

Muslim

or

non-Muslim,

at

approximately

30,000

dinars

before

the

Karimi

period

in

Egypt,

the wealth

of

many

Karim1

merchants

would

amount

to

at least

100,000,

or of

a few to

1

million

dinars

or

more.

From

the

biographical

sources

of

the fourteenth

century,

we

learn

the

following

about

the

Kariml

NMsir

al-Din Muh.

b. Musallam

(died 1374):

"He

was,

as far as his wealth

was

concerned,

the

marvel

of

his

time."4It is

reported

further

that not one of his

slaves

who

worked

for him in oriental

markets

such as

India, Yemen,

3

S.

Labib,

Handelsgeschichte

Agyptens

im

Spdtmittelalter

(Wiesbaden,

1965),

pp.

102-3,

116.

4

Labib,

p.

115.




6/19

Capitalism

in Islam

83

Ethiopia, Ghana,

and Mali

had died abroad,

and thus the

business

from this

standpoint

had suffered

no

setbacks. The

ancestors

of

this Karimlmerchanthad likewisebeen merchants.His grandfather

ibn

Yasir

al-B-alis

as also

amongthe

most famous

merchants

of the

Orient, f

not the

world. His wealth

is

said to have

amounted

o 10

million

dinars.

The fame of his

financial

ability went beyond

the

business circles of

Egypt. A contemporary

described

him

as being

the wealthiest Karimi

merchant

of his

time.

Indian merchants

who

traded

in

Egypt

and Mecca

confirmed

that no Indian

possessed

wealth as great as that of this merchantwith the exceptionof an

unbeliever (of India)

of

whom

he

was

a business colleague.Also

interesting

s the

statement of

the world

traveler

Ibn

Battfita

that

the wealth

of the KarimI

merchants

was comparable

o that

of the

greatest middlemen

of China.5

Among the

most

important merchant

families were

the al-

Kharrfibi,

al Kaubak

(written

also al-Kuwaik),

Yasir, al-Mahalll,

and the

al-Damdnlniwho

inherited

the traditions

of

the

Karimi

group. It should be emphasizedthat these trading establishments

were

family

businesses.

Each

generation

inherited

the

experience,

assets,

and customers of

their ancestors.

A Karimi prepared

his

children

for

their

profession,

and

sent them

to various countries

to

gather

necessary experience

and

to entrench

the family

business

more

firmly.

The

Karimimerchants

n

addition

had

agents,

free and

slave, who represented

heir houses,

imported

and

exported

wares,

and recruited

for

them.

In

addition

to their

business

activity,

these

houses

played

an

important

ole in the historyof Islamiccapitalism

thanks to

their

important

inancial

potential.

The

financing

of

great

projects

was

one

of

their

methods of acquiring

capital,

and

they

conducted

a

type

of

banking

nstitution

or loans and

deposits.

Their

best customerswere

not

only

Frankish

merchants

but also

Sultans

and Emirs, whom they

helped

with

credits

and also with

soldiers

and

weapons

if

necessary.

In the historyof Islamiccapitalismthe Karim-merchantsdiffer

from other

entrepreneurs

f their

time

outside

of the

Egyptian

Em-

pire

and

from the wholesale

merchants

of

this

empire

before

their

time

(before

the twelfth

century)

in

one

important

way:

They

were

neither

andlords

nor tax collectors.

Their

capitalism

rested on

trade

and

financial transactions.

This remained the basic

characteristic

5Labib, p. 116.




7/19

84 Subhi Y. Labib

of their

activity. The most importantJewish merchant families in

Egypt up to the end of the Fatimidperiod and also outside of Egypt

(primarily in Iraq and Iran) were wholesalers, bankers, and tax

farmers of entire provinces. To Joseph b. Phineas and Aaron b.

'Amran, ourtbankers,a certainvizier had to pay 30 percent interest

on

a

loan of

10,000 dinars which he borrowedfrom them. The re-

lationshipof such Jewish financierswith the Abbasidcaliph and his

viziers

at

the beginning of the tenth century s an importantchapter

in the history of oriental capitalismas they loaned the Caliph and

his viziers large sums of money. Ibn 'Allanal-Yahiidli, ho died in

1079,was

a

tax farmerof Basraand served the caliphsfor more than

20

years. He was extremelywealthy and granted a loan of 100,000

dinars to

Nizam

al-Mulk.6

In the

history

of Islamic

trade we find from the beginning the

itinerantmerchant,

al-Thjir

as-Salfhr,

eside the resident merchant,

al-Ta-jir

l-Muqim.To

the former, adventure,associatedwith busi-

ness, became

an

essential part of

his

life. We know of

a

substantial

number of merchantswho traveled between China and Andalusia,

many of whom went

for

learning

n

additionto

business. Many

tales

from the ArabianNights give importantand well-known examples

and

reconstruct

or

us

the

picture

of the adventurousmerchant

of

the Islamic

early

Middle

Ages.

From the late Middle

Ages

a

typical

example

which

has

some

informative

data

is

the

following:

The

merchant Muhamed

b.

'Abd al-Rahmanb. Ism-a il

al-JazlrI died

1302),

one of the most

respected

merchantsof

his

time,

traveled

betweenSyria,Mecca, Egypt, Iraq,and the PersianGulfandunder-

took three trips to

China.At

the beginning

of his

career

he

possessed

500 dinars

as

capital.

At his

death he left

behind the sum of

50,000

dinars.

Often

clever

and

ambitiousbusiness

entrepreneurs

were

the

am-

bassadors

of

their

countries,

and

it

was not

exceptional

for

an

am-

bassador

to

combine

a

diplomatic duty

with

a

good

business

deal

whenever

the

opportunitypresented

itself. An

interesting example

is the

following:

Fakhr al-Din

'Uthmdn,

he Ambassadorof

Egypt

to Aragon

in

the

year 1304,

borrowed

60,000

dirhams

before he

started

his

journey

n

order

to

buy goods

which

he

hoped

to

sell

in

Aragon

or

a

good profit.7

6

W.

Fischel, "The Origin

of Banking

in Medieval

Islam,"

Journal

of

the

Royal

Asiatic Society,

1933.

7

Labib, p.

79.




8/19

Capitalism in Islam

85

The political picture

of Islamic

capitalism would remain

incom-

plete if I did not refer

to

al-Sawdmilli.

Professor Aubin, in

his

work

"Les Princes d'Ormuz" spoke not only of the importance of the

capitalist

merchant

al-Sawdmilli,

but also of the

position of

Hurmuz

Harbor, which from

the thirteenth

to the fifteenth centuries

pre-

sented

the unusual picture

of an autonomous

oriental city.8

In this

important

seaport, economic activity

went hand

in hand with politi-

cal

independence.

I have looked in

vain in Arabic

sources for a

con-

nection between the

K-ariml

merchants

and

al-Sawamili.

Steady traffic and relative safety of the roads contributed con-

siderably

to the growth of trade.

However, the

distance and danger

of the route as well as

the scarcity

of wares influenced prices.

1bn

Khaldfin

analyzed these

things well

and arrived at the conclusion

that

usually

the merchants who traded

and

exchanged their mer-

chandise

in

distant

marketplaces could acquire

great wealth.9

On

the other hand, merchants

who simply

traveled between cities

and

villages

of one province could count

on only

small profits, since

in

most cases their merchandise was obtainable in large quantities.

Therefore, the more

experienced merchants

were advised

to buy

goods through long-distance

trade

when the goods were

in

season

and

in

demand. This

in turn required

a thorough knowledge

of the

conditions of the wares

in their

original locations. Traders

had to

learn whether

or not a product

might be found

there

in

large or

small quantities;

whether it was expensive

or

inexpensive; whether

or not

it

turned out scanty or faulty;

and whether

or

not

the

routes

for import were safe or impeded. Some of this information had to be

obtained

through inquiries

and close questioning

of

caravans.

In

other words, business

required many rational decisions

and

prepara-

tory

calculations.

Of

great significance

for

the medieval

capitalistic

trade

of

Islam

was

the establishment

of the

funduqs, specialized

large-scale

com-

mercial institutions

and

markets

which

developed

into

virtual

stock

exchanges.

They

dominated the

townscape

of

the

great

cities in

the

entire

Islamic

world.

A

few examples

which give

an

approximate

idea of

the trade transactions which

took

place

there

are

as

follows:

At the time

of the

Crusades

Cairo

possessed

four

funduqs

for

the

8

J.

Aubin,

"Les Princes

d'Ormuz

du

XIIIe

siecle,"

Journal

Asiatique,

1953;

Labib,

p. 117.

9

Ibn Khaldfin, Prolegomena

(English

translation by

Franz

Rostenthal,

New

York,

1958)

Vol. II,

pp.

298 if.




9/19

86 Subbi

Y. Labib

commercial

exchange

between

Egypt

and Syria. One of them was

concerned

with the import

of

oil from Syria.

According

to the

sources,an oil traderwho lived in the fourteenthcenturydisbursed

20,000

silver dirhams

for

his oil imports

and

a further90,000

for

other goods he imported

from Syria. In

the

Dar

at-Tuffah

n Cairo

the

wholesale

fruit merchants

of

Egypt and Syria

stored

their goods

-apples,

pears, quinces,

etc.-after

having

purchased

them at the

fruit

market,

the funduq Qiisiin.

funduq al-'Ambar

pecialized

in

amber which

was imported

even

from the Baltic

region

and which

found a ready market in Egypt, for it was-and still is-a popular

ornament

in

the

Egyptian countryside.

In addition

to Egyptian

products,

goods of Chinese,

Indian,

African,

Western,

and Levan-

tine

origin were

sold in

the Cairene

funduqs.

The fur

market

of

Cairo

grew

rapidly toward

the

end of the fourteenth

century, for

fur was

in this

period

much in demand

in male

fashion.

W-alls

and

provincial

governors

could

profit from

this trade;

thus, we

hear for

instance

of

a

Wall

(and

merchant)

who brought

at one

time 300,000

garmentsof gray squirrel o sell on the Cairenemarket.Funduqsfor

grain

or textiles

belonged

in the

pictureof

all large

cities such

as

Baghdad,

Cordova,and

Damascus.

Baghdad

had a

special market

for

Chinese

imports

where profits

reached many

times the original

cost.

III

Among

the important ines

of business

were

the

grain

trade,

the

spice trade, and mining;becauseof lack of space only the produc-

tion

of

textiles

will be

described

here.

The

trade

in

fabrics was

especially

highly

esteemed.

The

Caliph

Abi Bakr himself had been

a

textile

merchant.

"If

there were

trade

in

Paradise,

I

would

choose cloth-trade

because

Abii

Bakr

al-Siddiq was

a

fabric-merchant."'0

he

production

of

fabrics

n

which the

entire

family participated

hroughspinning

and

weaving

was

done

not

only

in

the

home for home use but

it was

also encouragedby the state,which eventuallymonopolized he in-

dustry.

The

Umayyads

and Abbasids

housed

in their

palaces

the

cloth

mills

which

made cloth for

their

wardrobes,

or the

covering

of

the

Ka'baas

well

as

for

royal

presentations

robes

of

honor)

and

gifts.

The

importance

of these fabrics

ncreased

under

the

splendor-

10

al-Dimashki/H.

Ritter,

"Ein arabisches

Handbuch

der

Handelswissenschaft,"

Der Islam,

17,

1917.




10/19

Capitalism

in Islam

87

loving Fatimids.

Royal

factories, called Dar al-Tiraz,

were

of course

built not

only

in

Egypt

and Syria; they were

all over the

Islamic

world.

In

Spain

they

were in

Almeria, Murcia,

Sevilla, Granada,

and Malaga;

in Asia Minor there

was a Tiraz

factory at the Saljuq's

court. Even

in Sicily, where the

Arabs ruled

for a long time, the

tradition

of state factories

was preserved and

in Palermo

the regium

ergasterium

produced

finely woven silk down

to the thirteenth

cen-

tury. The same system

also spread

in Persia.

In

Iraq,

Baghdad re-

mained

the most important center

of royal

production.

Factories built and maintained by the state were not only produc-

ing for the private

needs of

the rulers, which were in

fact very

great, but

also for commerce. Tinnis

(Egypt)

is an important ex-

ample:

5000 looms

and a factory of the court

were producing

tex-

tiles. The export of

Tinnis textiles was considerable,

and

down to the

year 360/971

reached a value of

20-30,000 dinars

annually. It is sig-

nificant

that the treasuries of the

towns of

Tinnis, Damiette, and

Al-Ashminayn

in

363/974 (Fatimid period)

could pay

200,000

dinars into the treasury in one day. The expenditure for gold thread

was

usually 31,000,

and

under the Fatimid

Caliph

al-Amir it

even

mounted

to

43,000

dinars.

Through

the

Resala-ye Falakiyyd

it

is

pos-

sible

to

give

a

few

examples

of

capitalistic

Mongolian

court proce-

dures

of the late Middle

Ages: Baghdad

manufactured

royal

garments

(Bayt al-Athw-ab)

with a budget

of 20,000

dinars."1

Tabriz

produced

them

with

a

budget

of 10,000

dinars

and

at the

same time

manu-

factured

brocade

(Bayt

al-Zarduziyya)

with

a

budget

of

20,000

dinars. For the production of calico in the royal weaving mills of

the

city

of Isfahan

10,000

dinars were

used. For the

production

of

taffeta

(Bayt

al-Taftagat), with

which

the

city

of Yazd

supplied

the

court,

20,000

dinars

were spent.

The

same

figure

is

given

by

the

city

of

Nishapur

for

their

production

of silk damask

(al-Kamkh-awt).

It

was only

with

the decline of

the

great

Muslim

empires

that

the

Tiraz production

system

came to

an end.

Ibn Khaldfin

tells

us

that

the fabrics

and

garments with

Tirazes were

no

longer

made

in

their

factories

and

palace

workshops

in

Egypt

or

produced

by

the

state

in

its

own

buildings,

but

what

the state

required

was

simply

woven

in

the houses of

the

weavers.'2

In fact

throughout

the

Middle

11

W.

Hinz,

"Das

Rechnungswesen

orientalischer Reichsfinanziimter,"

Der

Islam,

28, 1950.

12

Encyclopaedia of

Islam,

article

"Tirdz";

S.

M. Imamuddin,

The

Economic His-

tory of Spain (Asiatic

Society of Pakistan,

Dacca, 1963),

pp. 197

ff.; Labib,

pp. 293-

94.




11/19

88

Subbi

Y.

Labib

Ages textiles

were manufactured

in private

homes

as well

as

in the

state factories.

In

Almeria (Spain),

where 800

looms

were working

in Idrisi's time, valuable brocades,

siqlatun

and silver, were made in

the style

of those

of Djurdjan

and

Isfahan.

In the

Nile

Delta, in the

early Islamic

period,

the lot of

the

private cloth

makers was

wretched.

Their

private

production

was strictly controlled-at

least

during

the

Fatimid

period. They

had to obtain

their

materials

from

the Caliph's

officials.The

finished

fabrics

could

only

be sold through

brokers

appointed

by

the

state

and a government

official

kept a

record

of all

transactions

because

of the

Caliph's

large

profits

from

this business.

Many governors

invested in the

fabric

business

through contracts.

They sometimes

had their

own

house factories,

the

production

of

which

was

considerable.

A few examples

are

known

of respected dignitaries

who

carried

on the home

weaving.

It

is related

that on

his accession

Hisham

I

(788-96

A.D.) sent

for

Mus'ab

b. 'Imrdn

al-Hamad-ahn,whom

he desired to

appoint

as chief

Qadi

of Cordova.

His

wife was

seen regulating

the loom while

Mus'ab was at a distance from her preparing the threads. It cannot

be

determined how

much the scholar

in

question

produced

for

the

market.

The

weavers

were

divided

into

two groups:

the

artisans

who

worked

for

wages

and the owners

of

weaving

looms. Some

of

the

latter processed

the already

woven

threads

which

were

brought

to

them

by

their

employers.

A

contract

was

drawn

up

to determine

wages

and conditions

for

production.

Other weavers

themselves

bought the thread and turned it into fabrics to be sold. In every

large city

there was

a

qaysariyya

for

the trade

of

fabrics;

in

small

towns

it was

a

sfiq (bazaar).

Textiles of

all

kinds and

types

were

offered

at

weekly

markets

and trade

fairs.

Every piece

of

cloth,

whether

woolen

or

cotton,

silk or linen,

cheap or dear,

bore

the

name

of

the

producing

city,

so

that the

purchaser

could

know

for

what

he was

paying.

IV

There

is

much

material which

shows

that the free loan was

known

in the

Islamic

world,

but

it

was

customary

for the creditor

to

cal-

culate

his

interest

and include

it in the sum

owed without

stating

it separately

in

the

credit

agreement.

Money

changers

and

private

bankers worked

on a

capitalistic

basis

and

played

a

major

role in the

deposit

and

loan business

and




12/19

Capitalism

in

Islam 89

in

the

clearinghouse raffic.Some businessmenhad greater trust

in

judges, however,

and

in

some dependable scholars who accepted

their deposits and managed the settlementof their accounts. The

deposit

and loan business

conducted under

state supervisionwas

also not unheard of, although our

knowledge about this is very

limited.

Currencyproblems and the decline in

value of coins forced a

search for safer

forms of payments,

particularly n the late Middle

Ages. This

tendency to devise a traffic in money independent of

coinage troublescharacterizes he wholehistoryof paymenttransac-

tions in

the Islamic

era, particularlyregarding large private and

state (official) transactions.One of the

results was that the bill of

exchange obtained a solid place in state and

private commerce.It

was

so familiar

that it

appeared

in

the

adage:

"Take out

a bill of

exchange on your mother"; his advice was

given to

a

son who

wanted

his mother

broughtsafely

to Basra.

Adam Mez

collected the best

material

on

suftajahs

(bills of ex-

change) that we findin the earlyIslamicliterature.He said:

A savant who

journeys

to

Spain

takes

with

him

a letter of

credit (suftajah),

and 5,000 dirhams n

cash.

NMsir-i

Khusraureceived from an

acquaintance in

Asuan

a

blank letter of

credit

addressed

to

his

agent (wakil) in

'Aidhdb,

of

the

following

content: "Give NMsir

all that

he

may

demand,

obtain a

receipt

from him

and

debit the sum to me."

The Viceroy

of

Egypt

sent his

representa-

tive

in

Baghdad

letters

of credit for the

cashiered vizier. The

representative

accepted them,

and

put

the

money

at

the vizier's

disposal.

A

sort of bill

of

exchange

was

the

sakk

. . .

In

Audagusht

in

the western

Sudan,

ibn

Hauqal

saw a checkfor42,000 dinarsdrawn by a man of Sijihmasahn one Muhammad

ibn 'All Sa'dfin

n

Sijihmasah;

t

was

officiallycertified.

The

paper

had

travelled

through

a

great part of

the

Sahara.

In

Islamic

metropolises

the

sakk

was

a

regular check

in

connection

wherewith

the

banker

plays

an

important part.

In

the 3rd/9th century (to which the anecdotes

connected

with Harfin

al-

Rdshldbelong)

a

magnate

drew

checks

on

his bankers.About

300/900

a

great

man

paid

a

poet

in

this way, only the

banker refused the

check,

so

that the

disappointed poet

composed

a

verse to the

effect that he would

gladly pay

a

million on

the

same plan.

A

patron

of the same

poet

and

singer (320/936)

during a concert wrote a check (ruq'ah, "note") in his favour on a banker

(5airaft)

for 500 dinars.When paying,

the

bankergave

the

poet

to understand

that

it was

customary o charge

one

dirhem discount

on each

dinar, i.e.,

about

ten

per cent. Only

if

the poet would spend

the

afternoon and

evening

with

him, he would make no deduction. Anotherbanker

(Jahbadh),

who

was

even

a

greater patron

of

the fine

arts,

not

only

made

no

deduction,

but

presented

the

poet

with

an

extra 10

per

cent. There

was

therefore

plenty

of

employment

for

bankers,

and it

is

not

surprising

that

in Isfahan there

were 200

banks in

the Bankers'

Bazaar-for these too

sat

together.




13/19

90 Subbi

Y. Labib

About 400/1000 the banker had made himself indispensable

in

Basrah:

every

trader had his banking account, and

paid only in checks on his bank

(Khatt-

saraf) in the bazaar. This would appearto have been the most importantrefine-

ment

of

monetary operation in the

empire, on the frontier between

Faris and

Iraq. For the people of Basrah, the Persians of

Faris,

and the South Arabians

were the best traders among the

Believers, and had their colonies wherever

anything could be produced. About the year 290/902 al-Faqlh

al-Hamadhanli

observes: "The people of Basrah

and the Himiarites are the greatest money-

grubbers.One who travels to the remotest

region of Ferghanah or the Western

edge of Morocco s sure to find a

man from Basrahor a Himiaritethere."'3

Ibn Battiita discussesan occasionworthy of notice in which credit

brought an enormousprofit:

Every person proceeding to the court

of the King of India, Sultan Muhammad

Shah, must needs have a gift ready to present to him, in order to gain

his

favours. The sultan requites him for

it by a gift many times its value. When

his subjects grew accustomed to this practice, the merchants n Sind and

India

began to furnish each newcomer

with thousands of dinars as a loan, and to

supply him with whatever he might desire to offer as a gift or to use

on his

own behalf, such as riding animals,

camels, and goods. They place both their

money and their persons at his service, and stand before him like attendants.

When

he

reaches the Sultan, he receives

a magnificent gift from him and pays

off

his debt to them. This trade of

theirs is a flourishingone and brings in

vast

profits.

Ibn

Battfta

himself made use of the occasion.

He

says:

On

reaching Sind

I

followed this

practice

and

bought horses, camels,

white

slaves

and other

goods

from the

merchants.

I

had

already bought

from

an

IraqImerchant

n

Ghazna about thirtyhorses and

a camel

with

a load

of

arrows,

for

this

is

one of the

things presented

to the

sultan. This

merchant

went off

to

Khurdsdn

nd on

returning o

India received his money

from

me.

He

made

an

enormousprofitthroughme and became one of the principal

merchants.'4

Interest

and

usury

were legally prohibited;

however

they

were

customary.Usury and excessive profit played

an

important

role in

Islamic

capitalism.

Neither Muslims

nor

Christians

nor

Jews

shunned

usuriousbusiness dealings.

Even

Caliphs, Sultans,

and Emirs

re-

ceived loans carryingtoo high an interestrate.

These

credit

dealings were

not carried out

only

to

gain profit

in

the

form

of interest.From

the

heads of

states

one

could

ask

for

im-

portant trade, tariff,rent,

and tax privileges

instead.

With the

growth

of commerce

trading companies

were

formed.

13

A. Mez,

Die Renaissance

des Islam (Heidelberg,

1922)

p. 448.

14

H. A.

R. Gibb,

Ibn Battfita, Travels

in Asia and

Africa (London, 1929), pp.

184-85.




14/19

Capitalism

in Islam

91

Some were

family

enterprises

n

which the profits

went into a

com-

mon fund

without

an accurate

settlement of

the

accounts of

the

various partners.The exampleof the prophet Muhammadhimself

serves

as

a prototype.

It was

no secretthat

the

prophetand

his

wife

Khadija had

established

a commenda.

The principle

of

the

com-

menda was

that within

the

association he

partners

were equal,

and

one furnished

the

capital

while the other

managed

the business.

I

found a rare

commenda

contractsetting

forth this type

of

agreement

between

a

Venetian

and a native

made in

the early fifteenth

century

with Alexandriaas the place of the agreement.' While this record

does

not deal

with the details

of

the contract,

t does

reportthat

the

native sent

a letter

to the

Venetian

consul in

Alexandria

o inform

him

that

certainproblems

which had arisen

had

been cleared

up

in

the

meantime,

and

that he

and others

had written

to the

Q-dd

al-

Qud-h

in

Alexandria o

that the

Venetianmerchant

would

no

longer

be prosecuted.

The

suppliersof

the monies

of the

commenda

com-

panies

were not

only

merchants

but also

the wealthy

who

wanted

to invest theirsurplus n trade for profit.

As

we know,

the

commendawas

intended

to be a

form

of capital

investment

wherein

the profits

were

distributed

according

to

what

the partners

had agreed

upon.

Here we

have

a

capitalistic

calcula-

tionof accounts.

The

original

capital

invested

is compared

with

the

final

sum

and

the surplus

is

marked profit

to

be

distributed.

This

type

of settlement

was

not

unknown

n

the

civilized

countrieswhich

the Arabs

conquered.

However, it was

not widely

utilized

in

the

Islamic civilizationuntil the introductionof numerals.At the begin-

ning of the

ninth century

the

Islamic mathematician

Muh.

b. Musa

al-Khwarizmi

ntroduced

he

Indian

positional

numeralswith

index

value

and

zero.

One

began

thinking

in

numbers

and the numerical

system

became

the

framework

or the

capitalistic

ndustrial

conomy.

In

the

introduction

al-Khwarizmi

himself

states

that his book

was

compiled to

meet

the

needs

of

people

in

solving

questions

of

in-

heritance,wills,

purchase

and

sales

agreements,

n

money

exchange,

in surveying,

in the cleaning

and

digging

of

rivers

and

canals,

in

the

measuring

of

goods,

and

in technical

matters.'6

We

must

not

forget

that

the

Fiqh

schools

placed

great

emphasis

on the fact

that

their

graduates

distinguished

hemselves

n

having

a

good

knowledge

of

Arabic

mathematics.

A

glance

at the

introduction f

mathematical

15

Labib, p.

501 (b. Private

No.

2).

16

Labib,

p. 216.




15/19

92

Subbi

Y. Labib

works

is

enough

to

confirm

that this knowledge was not

only re-

quired of merchants

but also was

part of the trainingof the

'Ulamda'.

Thepreferenceof the orientalprivatebusinessmenand of the scribes

of

the state

for mental

arithmetic

and fingerarithmetic,as well as

the use of

the mysterious

Siydq

and

coptic numerals

has been main-

tained until moderntimes. We should

not be

deceived into thinking

that

the

introductionof Arabic

numbers was

to be of importance

mostly

in

the development

of privateaccounting.

Al-Dimasql,

n

his

often quoted

booklet about trade, advised

the

merchants:"Everythinghat is being bought and sold shallbe mea-

sured by

the dry measure,or by

time, or in

numbers.Thereforea

merchantshould

know the swindler and the

methods which

he

ap-

plies when

measuring,

weighing and counting,

so that he

shall not

be

dependent

upon unreliable

people."'17

Credit

transactions

as

well

as the organizationof

trading

com-

panies

made

accurate accounting imperative.

Bankers

and money

changers

were required

o keep recordsand to

enter the

transactions

of theirclientsaccuratelyn ledgers,although hey werenot required

to specify

their own profit. Generally

bankers

received deposits

which

could be

withdrawn

by

means of

a

written

assignment.

The

double

entry

method was

an

importantpart

of a

merchant'sskill.

It allowed

him

to watch

not only the flow of

single values

but also

the circulation

of the

capital, and

it

enabled

him to register

quanti-

tatively its change

and transformation

nd to controlthe success

and

the

developmentof the

business.

The accountswere of goods or of completedbusiness. Normallya

merchant

would settle

a sale immediately

and would enter

the

profit

or

loss

in

his ledger.

This method gave

a

current

account

of

profit

and

loss. A periodic

balancing

was therefore

not necessary.

If one

was

made,

it

only

served

the

purpose

of

a control. This information

on

medieval Islamic

accounting,

unfortunately,does

not come

from

commercial

ccounting edgers,

since to

this

day

we

have been

unable

to

find any such books,

but rather it

is

a

compilation

of details

which

I

have

been

able

to

crystallize

rom

egal

books,

notarial

books,

and

treatiseson

financialadministration.

The

private

business

of

the Islamic

princes

was

extensive.

The

state

treasury

was

in

reality

also

the

privy purse

of the

prince.

Viziers'

households and

businesses

were separated

n name

only.

Their en-

17

al-Dimashki/H. Ritter,

p. 62.




16/19

Capitalism

in Islam

93

terprises

were

among

the largest

capitalistic

undertakings

of their

time

and needed

accurate

accounting

so

that

they

might

not lose

sight of their credits and debits. In medieval Islam, rulers bought,

sold,

and filled

their

magazines

with

native

and

foreign

goods;

the

Fatimid

Caliphs possessed

many

funduqs

and

thousands

of

shops

and

were

at the same

time the

largest

merchants,

producers,

and

consumers

in

their

realm.

Leasing

the

privilege

of

collecting

taxes

was

the

surest way

to

build capital

in the

Islamic

Orient.

It was well

known that

oriental

tax farming was essentially

a concession

by the

state

to a

private

or

official

finance contractor

who

as a rule

had to put

up his own

means

as collateral

in collecting

the

revenue

debit

due.

These

tax farmers

understood well

how to let

profits

work

for

them in

new

business

undertakings.

They were

active

in trade and

manufacturing,

where

they invested

their surplus.

There

are

many examples

which

show

how deeply

tax

farmers

and

officials

penetrated

into

the economy.

V

Islamic capitalism

was

mainly

a

commercial

and consumer-credit

capitalism,

and its unstable organization

is revealed

in

the

fact

that

princes

and

regents were

bad debtors.

They not

only

failed to

pay

their

obligations

but

in

times of

need

they

confiscated

the wealth

of

their creditors.

Confiscation

in

times

of unrest

and invasion

was

the

order of

the

day.

On

the

other

hand,

the privileges

and advantages

received from the heads of state brought such high profits that some

creditors were

able

to amortize

the debts

and

cover even

the

losses.

Neither

Islamic

law nor

the Islamic

rulers

recognized

the

inde-

pendence

of the

city-nor

did

they

offer

it

autonomy.

In

addition,

the

urban

community,

which

was

supposed

to

remain

religiously

oriented,

was unable to develop

into

a

politically

effective

com-

munity-neither

through

autonomy

nor

by

compromises

with

the

rulers.

This had

a definite

influence

upon

the

economy.

The

Islamic state did not take steps to found a national bank.

Savings

or

checking

accounts

were not new

to the Islamic world,

and pawning,

loaning,

trusts,

money

changing,

transfer

of

credit,

and

transfer

of

debts were

all

important

divisions

of business

life

in

any

large

Islamic

city.

Yet neither

the

government

nor the

busi-

nessmen

took

upon

themselves

the task of

founding

a state

bank

which

would

take care of business transactions

well

and

efficiently.




17/19

94 Subbi

Y. Labib

Such

an

institution

would have become

a political force

and would

have assumed

an unusual

position between state economy

and

private enterprise. It would have helped to prevent or overcome

many

a

great

economic catastrophe.

The

Maudi' al-Hukm might

be called the preliminary

step to such

an institution. Al-Maudi'

was a bank, a

depository, a building, or a

vault

in

which the state placed

certain funds

for definite purposes.

Also

the

Qadi al-Hukm

had

a

bank,

a vault,

in

which he kept under

his protection the possessions

and important

documents of orphans

or of persons temporarily away from the

city. In addition I

have

already mentioned

that Qadis too occupied

an important

position

in business circles.

Amari, Dozy, Canale,

and

Quatremere

were

the

first to

refer

to

the

very

interesting appearance

of the maona

in the Islamic world.

The maona

was

a

kind

of

private

bank

which

loaned out

state

money.

The

word

maona

(in

Arabic

ma'iina)

means

support

or

help

or,

as

the case

might

be,

reciprocal help.

The

Arabic

maona

did

not

undergo the same development as did the occidental maona; it was

not used

for

financing

wars

or

mining.

The

function of

the

ma'iina

in

Islamic

society

remained restricted

to

giving

financial

help

on a

very

limited

scale.

Amari has

established that

the

idea

of the

maona was

used

also in

Tuscany

and

signified

a

general

company

founded

for

the

exploitation

of

iron

mines and

a

large

trade

in iron.'8

One can find

precursors

of the

modern

bourse

in

Islam:

there was

not

only

the

capitalistic

business

in

the

funduqs, but also business

activity typical of the modern commodity exchange, i.e., the trading

in wares not present

at

the

marketplace

but to be delivered later.

Dates

were

legally

sold at auction before

they

were

ripe

and

har-

vested.

Even the

wholesaling

of

many

kinds of

tuberous

vegetables

such

as

onions, garlic, carrots, turnips,

radish,

and

colocasia took

place

before

the

products

were out

of

the

earth-that

is,

before the

merchant

ever

saw

the

harvested

product.

According

to

many

a

jurist

this was

legal.

Insurance

however

remained

inaccessible

to

the

purely

religiously

bound

Islamic

mentality.

The insurance

of wares

by distributing

and

sharing

the risk is of course included

quite

naturally

in

the com-

menda but

insurance

in

the

service of the

development

of

a

capi-

talistic

business and the reduction

of business

risk

remained

18

R.

Dozy, Suppl6ment

aux dictionnaires

arabes

(Leiden

and Paris, 1927),

article

awana,

ma 'fina;

with

references.




18/19

Capitalism

in

Islam

95

practically outside the scope of Islamic economic thought (except

in Mughal India).

One should neither consider nor treat the capitalism of the Middle

Ages

in

terms of national economy or even from its point of view.

Economics of the Middle Ages is the study of the house, of Oikos.

The tradition of this system of economics in the Occident begins

with

Xenophon and Aristotle, and survives through Scholasticism

of the Middle Ages to the modern period. In the Orient it is known

as 'Ilm

Tadbir

al-Manzil. With this name, 'Ilm

Tadbir

al-Manzil, the

Muslim refers to the second of the three sciences belonging to the

Aristotelian scheme of practical philosophy, ethics, economics, and

politics. An illustrative quotation follows:

The

goal

of

home economics is the knowledge of managing the household,

which is composedof husband, wife, children, and slaves, with which its (the

house's) state of affairs s arrangedand their (the mentioned persons') condi-

tion is regulated. This assists the persons in developing virtues and avoiding

evils. Brfis (that is, Bryson) from the ancients wrote about this and also other

learned

persons.19

The

elements of home economy are five: father, mother, children,

slaves, and food supply. As with every community, the home requires

cooperative endeavor. This depends primarily upon the

man of

the

house. The man must look to the best interest of the family through

maintenance and order. A statement of the Prophet Muhammad

makes

reference to this:

"Every one

of

you

is

a

shepherd

and

every

one

of you will be held accountable for his herd."

The economy of the home included the totality of all its human

relationships, the relationships

of man

to wife, parents

to

children,

lord to servants (slaves),

and the

carrying out

of

their

duties

in

the

home. Home economy

is

not formed

by

the market or

oriented

toward

it but toward

the

economy

of

the

household

and the farm.

Trade

is

necessary

and

permissible

insofar as

it

serves to

supplement

the

self-sufficiency

of the

home;

but

in

and

of

itself

it

may

not

be

concerned

with making money.

Ancient

thought

and

Islamic

revela-

tion

confirm

this idea.

Ethics,

or

"practical philosophy,"

is

essentially

a moral

system

for

the individual,

the head

of the

house,

the statesman. Within

the

moral

system

it

is

possible

for

a

man,

a

home,

and

a

state to

approach

their

"essence,"

their

true

being.

This remained the

ultimate

goal

of

19

M.

Plessner,

Der

Oikonomikoe

des

Neupythagoreers

"Bryson"

und

sein Einfluss

auf

die

islamische

Wissenschaft (Heidelberg,

1928), pp.

40,

59-61,

144.




19/19

96

Subhi

Y.

Labib

Islamic morality.

Both

Orient and Occident during the

Middle Ages

endeavored

always to unite

ethics, economics, and politics

in a sys-

tem of morality

of the person,

the head of the house, the

statesman.

There was

a

very strong

"urge for gain"which cannot be

overlooked,

to be sure,

but it was different

from the factory production and the

calculation

of modern

capitalism.

In

short, the concrete

historical

meaning of Islamic commerce

(one

can almost

say "of Islamic

capitalism")

is to be found

by proceeding from the

concept of the

"whole

house" and not

simply

from the

concepts

of economics which

have been formed by the modern market and are oriented toward it.

With this we reach the

core

of

the

question

concerning

oriental

capitalism.

SUBHI

Y.

LABIB, University

of Hamburg

Capitalism in Medieval Islam

Documents