The Princeton Encyclopedia of Islamic Political Thought

trade and commerce

Politics and trade have been closely intertwined in the Islamic world since the dawn of Islam. Perhaps the best known example of this connection is spelled out in the work of Montgomery Watt, who claimed that Mecca was the center of a vast trade hub across the Arabian Peninsula at the time of Muhammad. In this view, it was the social and moral disorder created by commercial wealth that facilitated the initial spread of Islam. Patricia Crone forcefully argues against this thesis, suggesting that Meccan trade centered on humble goods, such as leather, clothing, and animals—not the types of goods that foster immense wealth or attract merchants from far away. It is clear, however, that the expansion of trade in the first few Islamic centuries was intimately tied to the growing power and stability provided by Islamic empires.

The Arab conquests of the seventh and eighth centuries, extending as far west as the Iberian Peninsula and North Africa and as far east as India, provided security and a unifying language and religion under which trade blossomed. This period is considered the Golden Age of Islam, and the success of trade was dependent on the rise of new Islamic polities. An agricultural revolution followed from the Arab conquests as a new set of crops and agricultural techniques were introduced, especially from India. The agricultural surplus and local agricultural trade that followed permitted the rapid growth of cities throughout the Islamic world. Likewise, the relative security provided by the Umayyads (661–750), Abbasids (750–1258), and Fatimids (909–1171) allowed for the unprecedented movement of people, ideas, and goods over huge areas. The flow of goods was extremely important to the development of cities and wealth in the early Islamic period. The importance of trade is perhaps best seen in the design of the Abbasid capital of Baghdad. It was located on the Tigris River and connected to the Euphrates River by canal, allowing shipments from the Mediterranean to be transported downstream toward the Persian Gulf and imports from India shipped upstream. Baghdad was constructed in a circular manner, with four gates leading outward to the major trading routes: Iran and Transoxiana in the northeast, Syria in the northwest, lower Mesopotamia in the southeast, and Egypt in the southwest. In part because of its role as a center of trade, Baghdad became one of the largest and most important cities in the world, with 500,000 to one million inhabitants. Many of the important Muslim cities in Persia and Central Asia, such as Nishapur, Samarkand, Tashkent, Kandahar, and Kabul, were depots on trade routes connecting Baghdad to China. Many of these cities existed before the Islamic conquest, while others such as Fustat, Qayrawan, Fez, and Tunis were the creation of the conquest or of later dynasties.

The caravans that traversed these trade routes were often extraordinarily large, employing numerous camels to carry goods over land. In the early Islamic period, the primary goods traded were spices, textiles, and glass from China; gold from Ethiopia; and slaves from Sudan and Ethiopia. In conjunction with these caravans, a bevy of financial instruments and arrangements arose to facilitate trade. Among the most important of these was the bill of exchange (suftaja), which allowed merchants to travel from one land to another without having to carry specie. The suftaja predated its important European counterpart by centuries. Other financial instruments created in the early Islamic period include transfers of debt (ḥawāla) and orders of payment (ruq‘a or sakk). Trade was often financed through partnerships, structured according to Islamic law generally as sleeping partnerships (muḍāraba, or ‘‘mutual loan”) or ‘inān, in which both partners invested some capital. Although direct lending at interest (ribā) was illegal, it was easy to circumvent antiusury laws through legal fictions or partnerships. Documented evidence suggests that direct lending at interest did prevail at certain times and places in the Ottoman Empire.

Beginning in the 13th and 14th centuries, the center of trade slowly moved from the Islamic world to Europe—and with it, political and economic power. Some of this relative decline in trade can be directly attributed to political authorities. For example, the Egyptian Mamluks were notorious for squeezing revenues out of the spice trade, hence encouraging merchants to find alternate routes. A huge problem for the Mamluks was finding ways to divert trade from the Far East to Europe through the Red Sea instead of overland through Central Asia or (eventually) around the southern tip of Africa. The broader shift was one from the Middle East to the Italian city-states, placing the Islamic world more in the role of the “periphery” than in centuries past. Differing reactions to this sea change between the Mamluks and the Ottomans were among the key factors determining Islamic political power in the late medieval and early modern periods. The Mamluks, who controlled the most powerful Islamic state between the fall of the Abbasids and the rise of the Ottomans in the 15th century, did not integrate themselves (at least, relative to the Ottomans) in the new patterns of world trade, instead turning inward. The Ottomans, on the other hand, readily accepted many of the new goods coming from Europe—including firearms and artillery—and were able to defeat the Safavids and Mamluks, taking control of much of the Middle East, North Africa, and the Balkan Peninsula for centuries.

As in earlier Islamic empires, the security and rule of law offered by the rapid rise of the Ottoman Empire was a boon to trade and among the primary reasons for the early expansion of wealth of the empire. Ottoman policy was specifically designed to nurture the merchant class. Unlike farmers, whose actions were highly regulated by the state, merchants were free to accumulate and invest as much capital (māl) as desired. Indeed, merchants were largely viewed favorably by political authorities and as such were accorded a privileged position. As the primary holders of ready money, merchants were used to make loans to the state, ensure revenues through customs charges, and act as agents and ambassadors. On the other hand, merchants and moneylenders often faced hostility from the broader population. This was especially true in the smaller cities, where guilds dominated production, which was primarily in local markets. Within the guilds, excessive profit was frowned upon, and merchants were frequently demonized as speculators who drove up the price of raw materials or hoarders who caused coinage shortages.

Trade played an important role in Ottoman relations with the West. Although the Ottomans were able to threaten Europe numerous times in the 15th and 16th centuries—getting as far west as the gates of Vienna—their power in relation to the European powers began to wane by the end of the 16th century as trade imbalances grew. Perhaps most famously, the weakened Ottomans allied themselves with the French and English (against their mutual enemy the Habsburgs of Austria and Spain) through trade agreements known as “capitulations,” whereby the French and English were granted the right to trade with reduced customs duties. The capitulations persisted for centuries and were symbolic of diminishing Ottoman power relative to Europe. By the end of the 18th century, it was clear that Europe was far in front politically and economically. Areas vital to Eurasian trade that had once been firmly in Islamic hands—such as intermediating Chinese-Indian and European spice and silk trades—were controlled by Europeans. The loss of the revenues associated with taxation of such trade greatly weakened the Ottoman Empire.

Enormous changes have occurred since the fall of the Ottoman Empire in the early 20th century. European nations attempted with varying levels of success to colonize much of the Islamic world, in many cases redrawing geopolitical boundaries. Yet trade still plays an extremely important role in the politics of the Islamic world. In the Middle East in particular, trade in oil has provided excessive wealth and has been used by some polities, such as Iran, to provide a level of stability in the face of an otherwise unpopular regime. A primary challenge of the 21st century for the oil-based economies of the Islamic world will be how they handle—both politically and economically—the worldwide transition away from oil as the essential fossil fuel and the immense political ramifications of this change.