Trading Places

Maarten Bosker, Eltjo Buringh, and Jan Luiten van Zanden published a new paper on the simultaneous economic decline of Arab cities and economic rise of European cities. Here is an summary article from VOXEU that is well worth reading. The teaser:

Baghdad was a wonder of the world in the year 800 while London was an economic backwater. By 1800, London was the largest city in the world while Arab cities languished. Recent research attributes this ‘trading places’ to institutional differences: Arab cities were tied to the fate of the state while European cities were independent growth poles.

The authors conclude:

Arab cities were part of the ‘predatory’ structure of the state. When the region was unified under the Abbasids, this worked well and the region experienced its ‘Golden Age of Islam’. Efficient institutions regulated exchange, allowing high levels of commercialisation and urbanisation. When state systems disintegrated, so did the urban system and the underlying commercial networks.

In Europe, after a period of disintegration, a different urban system more or less independent of ‘predatory’ states emerged. These managed to claim their own niche in the political economy of the period and developed increasingly effective ways of organising commercial exchange in spite of the fragmented political system.

It is this development in Europe of an economically well integrated urban system largely independent of large territorial states, spurred on by the effect of the Great Discoveries that can explain to a large extent why London, an economic backwater in 800, was able to overtake Baghdad, the formerly thriving capital of the Abbasid caliphate.