Free Trade in the Ancient Middle East
For a long time, Baghdad was one of the wealthiest cities in the world.
By Dr. Nima Sanandaji
European Centre for Entrepreneurship and Policy Reform
Today many people believe that free markets and industrialization are new inventions. In fact, during the early Middle Ages a market model developed in the Islamic world. Europeans envied the economic, scientific and intellectual progress taking place in the Middle East and North Africa. The reason for the success of the Islamic world at that time is simple: free exchange. A system of private ownership and freedom of contract existed in the Middle East and North Africa. Market practices, such as accounting, for-profit investments and manufacturing of goods for international export markets, were common in cities such as Baghdad, Mosul and Aleppo.
Trade in the Ancient Middle East
The Islamic Golden Age lasted from the 8th century A.D. to the 13th century A.D. It was a period characterized by advanced market practices and proto-industrialization. Many kinds of businesses developed during this period. They included agribusiness, astronomical instruments, ceramics, chemicals, distillation technologies for the early oil industry, clocks, mechanical hydro- and wind-powered machinery, matting, mosaics, glass, pulp and paper, perfumery, petroleum, medicines, rope-making, silk, sugar, textiles, and weapons. Early factory complexes (tiraz) were built for these industries. Knowledge of these industries was transmitted to Europe, encouraging early European industrialization. For example, Egyptian craftsmen in Greece founded simple glass factories in Europe in the 11th century.
For a long time, Baghdad was one of the wealthiest cities in the world, as seen in the stories of the One Thousand and One Nights collection of Middle Eastern folk tales. In these tales, the heroes are often merchant capitalists, who – through their pursuit of wealth – benefit themselves as well as the rest of society. The Eastern tradition of portraying entrepreneurs as heroes differs sharply from the modern Western tradition, in which the agent of an economic enterprise is often the villain, while the hero is characterized by his disregard for material wealth. Today, Western institutions are shaped in accordance with the principles of the market economy, yet contemporary Western culture still retains a hostile view of enterprise, commerce, and wealth accumulation. In contrast, those concepts continue to be celebrated in Middle Eastern cultures.
The Middle East has a very long history of enterprise. The first entrepreneurs, enterprises, early banks and financial speculators had already emerged 4,000 years ago in ancient Babylonia and Assyria – in the countries known today as Iraq and Syria. Over time, a large number of clay tablets from these civilizations have been found and deciphered. Many of these clay tablets are receipts of economic transactions, and they paint a clear picture: Middle Eastern civilizations prospered and fostered human progress because they were largely market-driven. Surviving accounts even tell us how the market prices in ancient Babylon fluctuated from month to month, and even week to week.
As Dutch historians Robartus Johannes van der Spek and Kees Mandemakers wrote in the article Sense and nonsense in the statistical approach of Babylonian prices (Bibliotheca orientalis 2003, 60;5-6:521-537), “That market mechanisms played their part in the Babylonian economy seems now to be unquestionable.”
This market tradition was suppressed after the invasion of the Macedonian king Alexander the Great. Under Hellenic control, the Middle Eastern economy turned away from markets. Once local leaders re-established control of the Middle East, a gradual return to the markets took place. Property rights reforms in Persia some time before the Islamic conquest brought on a market renaissance, which continued after the shift towards Islam.
The Prophet Muhammed himself was a merchant for many years. His first wife Khadija was a renowned merchant capitalist who managed some of her trade affairs. Khadija is seen as one of the most important female figures in Islam, commonly regarded by Muslims as the “Mother of the Believers.” She is a rare example of a female entrepreneur in the Middle Ages who had an impact on history. When the tribe of Quraysh in Mecca gathered its caravans to embark upon the summer journey to Syria or the winter journey to Yemen, Khadija’s caravan equaled the caravans of all the other traders of the tribe put together.
Today we associate cities such as Mosul and Aleppo with fundamentalism, war and conflict. Yet, these are cities in which free exchange flourished for centuries before that institution had reached Europe. Mosul was one of the megacities that existed along the ancient Silk Road, which bound China, India, the Middle East, Northern Africa, and Europe together in a global trade network. The cities along the Silk Road were not only markets through which many goods flowed, but also cities that were home to large manufacturing industries which produced international exports.
Mosul was also one of the most important industrial centers of the Middle Ages. In the area around the city, crude oil (naft) was extracted and distilled, mixed with white clay or ammonium chloride to form a dough, and then distilled again. The petrochemical products that were thus created were then used as fuel for lighting, ingredients in medicine, in the extraction of certain gems and minerals, and to make fire projectiles for warfare.
Alongside its petrochemical industry, Mosul was also a weaving center where curtains, striped robes and other textile products were manufactured. The etymological roots of the cotton fabric “muslin” lies in the name of the city. Early muslin was handwoven of rare delicate handspun yarn and imported to Europe until the 18th century. The French similarly use the word “mousseline” for a very fine, semi-opaque fabric like muslin. When the famed Venetian explorer Marco Polo visited Mosul during the early 14th century, he observed that Mosul had a mixed population, consisting of Arabs as well as Nestorian and Jacobite Christians. In the nearby regions lived Kurds, some of whom were Muslims and some Christians. We now know that other minorities, such as Jews, also lived there, but they were not mentioned by Marco Polo.
Aleppo is mentioned in early tablets describing the rule of the ancient Syrian king Zimri-Lim, who came to power in 1775 B.C. According to the tablets, Aleppo or Halabu as it was known then had an important role in the manufacturing of cloth and garments. The market tradition of this Syrian city dates back almost four thousand years, according to surviving texts. Through the centuries, trade and business activity flourished in Aleppo. Many of the caravans which carried goods between Europe and China, India, and Persia, went through Aleppo.
Aleppo used to be the largest city in Syria before parts of it were devastated in the Syrian Civil War. It was famous for its bazaar, teeming with over a thousand stalls and stretching over 13 kilometers. It was one of the largest bazaars in the world and used to impress tourists before the war. If Aleppo’s bazaar amazed modern visitors, one can only imagine the effect it must have had upon those who visited the city hundreds of years ago. The bazaar was a historical market institution, and each section of it bore the name of trades of products such as copper and wool.
The Role of Trade in the Modern Middle East
In our modern age, international cities such as New York have inspired fusion food, which is the combination of different food cultures to create a new cuisine. In ancient times, Aleppo was one of the cities where cultures were brought together, thanks to the markets. Fusion food first made during this time can still be bought in Aleppo. For example, quince kubbeh, a sweet and sour delicacy, is the result of Chinese inspiration.
During the early modern age, the seeds of modern capitalism were planted in Italy, through deep interaction with cities such as Aleppo and Mosul. Venetian traders traveled all the way from Aleppo to Persia and even India. They brought cloths which they exchanged for goods such as raw silk, spices, and drugs. Representatives from the English Russian Company on a visit to Persia remarked that much Venetian cloth was worn in Persia. Similarly, when the English Levant Company tried to establish a land-based trade route to India in 1591, they found that the Venetians had built manufactories along the entire trade route going from Aleppo to Baghdad, Hormuz, and Goa. An extensive commercial network, in which Europeans, Middle Easterners, and Indians worked together, existed in the 16th century.
Mosul and Aleppo could have thrived again in our modern age, but were drawn into international conflicts revolving around oil, religious and political extremism and ethnic tensions. But even today, the enterprising tradition of these metropolitan centers lives on. Shortly after the bullets had started flying over Aleppo last year, citizens gathered around Chahba Palace Hotel in Western Aleppo. The event that attracted more than 6 000 visitors each day was the 15th annual three-day festival which starts on International Women’s Day. Organized by the women’s committee of the Aleppo chamber of commerce, the festival aims to encourage women to take part in the business life of the city. Around 300 stalls were put up by business owners – predominantly women business owners – forming a temporary bazaar. The event allowed entrepreneurs whose shops had been destroyed during the civil war to attract new customers.
In Mosul, local entrepreneurs have had an important role in the rebuilding of society. While much of the city was a battleground, businesses opened in the neighborhoods which were relatively safe. In Eastern Mosul, which at the time had been liberated from the Islamic State, markets had already returned while war was raging in other parts of the city. Local entrepreneurs offered water and supplied electricity before the city authorities had managed to restore services.
Ancient Iran likewise has a very deep story of enterprise. Adam Smith is often considered to be the father of economics and the first intellectual supporter of free-market ideals. This belief stems from the assumption that Smith was the first to explain how markets develop through the division of labor and specialization. This, however, is not true. The first account was given by the Greek historian Xenophon, who described the workings of a marketplace of ancient Persia fully 2,000 years before Adam Smith.
Additionally, in Xenophon’s retelling of a Persian story, the world’s first known defense of voluntary market exchange takes form. Xenophon’s story concerned Cyrus the Great, arguably the most important political figure of his time. The moral of the story was that a wise ruler should not regulate the marketplace based on what the ruler believed to be an efficient exchange. Rather, he should only concern himself with whether the transaction had been conducted in proper accordance with property rights and voluntary exchange. That is the essence of free enterprise.
Herodotus notes that Cyrus dismissed Spartan diplomats by saying, “I have never yet been afraid of any men, who have a set place in the middle of their city, where they come together to cheat each other and foreswear themselves.” That quote has been widely interpreted as proof that the Persians did not appreciate exchange in the marketplace. In fact, ancient civilizations that became incorporated in the Persian Empire, such as Babylonia and Assyria, had a tradition of market practice that was around 1,500 years old by the time of Cyrus’ reign.
As Carl J. Richards explains in his 2008 book Greeks & Romans Bearing Gifts: How the ancients inspired the founding fathers, Cyrus was expressing Persians’ sense of moral superiority over the Greeks.
Since honesty was the most important requirement of the [Persian Zoroastrian] religion,” Richards wrote, “Zoroastrians like Cyrus were shocked at the immorality of the Greek marketplace (the agora), claiming that the Greeks maintained ‘a special place, marked out, where they meet to cheat one another.’”
Such belittling attitudes toward the enemy were common among the ancients.
The tradition of free exchange in Iran continued until the early modern age, not least on the island of Hormuz in the Persian Gulf. In the 16th century, Portuguese explorer Pedro Teixeira, for example, wrote that “mighty Caravans usually report from all parts of Persia, to Hormuz” in order to trade with the outside world, which would have been the Portuguese, other Christians, Muslims, and people of other faiths.
The commodities traded on the Persian island of Hormuz included agricultural and animal husbandry products such as horses, madder (a plant used since ancient times as a red dye for leather, wool, silk, and cotton), and rhubarb as well as processed agricultural products such as rose water. Industrial products such as very fine cloths, raw and processed silk, brocades (richly decorative shuttle-woven fabrics), and carpets are also mentioned.
Some of the technological achievements in Persian industry impressed the Portuguese explorer, who amongst other things mentions “extraordinary pure Silver Coin” manufactured in the Persian city of Lara. Why was this city in a Muslim country so advanced? The answer is that the port of Gerun in Hormuz was “a free Mart and Fair,” or a free market in modern language.
An entrepreneurial culture still lives on in Mosul, Aleppo and Hormuz. In fact, market exchange is very much a part of the cultural DNA of all Middle Easterners – whether they are Arab, Iranian, Turkish, Kurdish, Jewish or Armenian. Oil dependency, being at the center of global conflicts and extremism, made the Islamic region stagnate during recent times. Iraq and Syria were both ruled by Baathist parties whose ideology was heavily inspired by Marxism.
But today, beneath all the conflict, there is an urge to return to a market economy throughout the Middle East. For that to happen, the attitude of the rest of the world matters greatly. Do we send goods over the borders, or armies? Free exchange is the alternative to interventionist foreign policy.
Originally published by the Foundation for Economic Education, 06.19.2018, under the terms of a Creative Commons Attribution 4.0 International license.