As the Middle East became an economically underdeveloped region, its entrepreneurs did not form movements to constrain either rulers or clerics. They did not bring about liberalization through organizational innovations that strengthened them politically. A basic reason is that, until the transplant of modern economic institutions from Europe, the Middle East’s private enterprises remained small and ephemeral. These characteristics precluded sustained coalitions representing business interests. A further consequence was the failure to institute political checks and balances of the type that made European rulers submit to rule of law. Several elements of the Islamic institutional complex contributed to keeping Middle Eastern enterprises structurally stagnant until the 1800s. Most critically, Islam’s partnership rules allowed partners to pull out at will, and its inheritance system hindered capital accumulation. The upshot is that enterprises did not experience operational challenges of the type that would have stimulated organizational innovations. Among the innovations that did not emerge indigenously are banks, chambers of commerce, business publications, stock exchanges, and formal insurance markets. Their long absence contributed to keeping private economic actors politically weak. It also compounded the endemic weaknesses of civil society.

Every Islamic waqf that adhered to its deed eventually became dysfunctional because of unanticipated changes in conditions. But not all waqfs were managed rigidly. Relaxed legal interpretations enabled waqf caretakers to depart, albeit within limits, from the founder’s instructions. But courts had the final say on whether a caretaker was complying with the deed and, insofar as he was not, whether his exceptions were justified. A judge could rule that the founder, were he alive, would have authorized certain changes that the deed did not explicitly allow. Alternatively, he could treat them as incompatible with the waqf’s spirit. He was thus the arbiter of what resource reallocations were legal. Unsurprisingly, this judicial privilege was abused. Judges commonly withheld permission for a managerial or financial adjustment until they were bribed. So central was the waqf to the region’s premodern economy that efforts to transgress its rules promoted a culture of corruption. Our primary interest here lies in the political consequences. In societies with rampant corruption, individuals tend to solve their problems with the state through bribery and reciprocal favors. They find personal solutions easier than trying to form coalitions with others facing similar challenges. Civil society suffers.

Among the requirements of a liberal order is the ability to pursue collective goals through enduring private organizations. Such organizations contribute to political checks and balances, which sustain individual freedoms. In the Islamic Middle East, a possible starting point for autonomous nonstate organizations was the Islamic waqf, a trust that an individual formed under Islamic law to provide designated social services in perpetuity. Waqfs came to control vast resources. They might have used their enormous wealth to constrain the state and advance the freedoms of their constituents. The resulting decentralization of power could have placed the Middle East on the road to liberalization and perhaps also democratization. However, despite their immense wealth, waqfs remained politically powerless. A key reason is that they were governed according to their deeds, not the preferences of their caretakers or beneficiaries. In these respects, Islamic waqfs differed from European corporations, which were self-governing organizations enjoying legal personhood. In the Middle East, waqfs supplied services that the corporation provided in Western Europe. For instance, whereas churches and universities operated as corporations, mosques and madrasas (Islamic colleges) were financed by waqfs. This institutional difference contributed to the interregional divergence in political patterns.

Zakat returned to Middle Eastern political discourse in the 1930s, through modern Islamism. It became one of two concrete initiatives distinguishing an Islamic modern economy from economies ostensibly corrupted by secularists and colonialists. The other was Islamic finance. In both cases, the focus was more on the symbolism of Islamizing a secularized sphere than on solving actual economic problems. Islamism tacitly stripped zakat of all but one of its original functions: poverty alleviation. Sidelining zakat’s role in public finance and the protection of property rights, it frittered away golden opportunities to draw from Islam’s rich history universal lessons for economic progress and rule of law. Focusing on the functions that made zakat a pillar of Islam would have initiated a dialogue with secularists inclined to dismiss Islam as a source of backwardness. A similar scenario has played out in relation to Islamic finance. Nowhere has a categorical ban on interest, which is absent from the Quran anyway, been enforced. In any case, it is unfeasible. In making Islamic finance seem interest-free through euphemisms and accounting tricks, Islamism reduces economic transparency and institutionalizes dishonesty. Weakening rule of law, it also compounds mistrust.

This chapter explains the logic behind the choice of institutions that the book highlights. A liberal order is impossible without the capacity to form organizations able to act on behalf of private constituencies. Apart from providing shared goods, private organizations restrain entities capable of repression, including the state. Hence, a section of the book is devoted to exploring the political effects of Islamic and modern waqfs. Whereas the former played key roles in keeping civil society anemic, the latter is now invigorating civic life. Religious repression has been ubiquitous in the Middle East. In inducing preference and knowledge falsification in broad domains, it conceals doubts about policies promoted in the name of religion. In the process, it impoverishes and distorts public discourse. For these reasons alone, religious freedoms are also essential to liberal governance. Economic freedoms are pivotal because they shape political incentives and capacities. Private property rights, the freedom to invest, and predictable taxation are among the determinants of private political capacities. So are characteristics of the available forms of economic organization. Institutions that limit the scale, longevity, and complexity of Middle Eastern enterprises have reduced the political reach of private economic actors.

Though the Islamic waqf is defunct, the Middle East now features modern organizations known also as waqfs. The modern waqf is essentially a philanthropic or charitable corporation. It is self-governing and has a perpetual existence. Along with other autonomous nongovernmental organizations known under different names, the modern waqf provides the institutional basis for a vigorous civil society. Yet across the Middle East civil society remains weak. This is due to two factors, both legacies of the Islamic waqf. First, a century is a short time to develop the civic skills that the Islamic waqf left uncultivated for a millennium. The region is still learning how to build politically effective NGOs. And second, the anemic civic life engendered by the Islamic waqf provided fertile ground for the repressive regimes of modern times. The region’s autocracies try systematically to keep civil society politically weak. From the standpoint of liberalization, a hopeful sign is that the region’s current NGOs, unless captured by the state, are serving as founts of civic education. Promoting a culture of bargaining and compromise, they are teaching how to communicate ideas and form coalitions.

In the Middle East’s secularist regimes, the exclusion of religion from public life sowed discontent, as did the regulation of private religious activity. Defiance of secular mandates became increasingly common. In response, secularist leaders intensified the repression of groups opposed to reforms. But they also made concessions to politically tame groups that wanted to lead openly religious lives. The resurfacing of public religiosity induced adjustments in the public persona of secular elites themselves. Politicians, entertainers, and journalists started pandering to the pious by feigning religiosity. Reversing direction, religious preference falsification now exaggerated not genuine irreligiosity but, rather, genuine piety. Regimes that were once assertively secularist turned into religiously hybrid regimes drawing some legitimacy from Islam. This softening of secularism set the stage for regimes dedicated, in one form or another, to homogenizing society according to a religious blueprint. Under assertively Islamist regimes, longstanding Islamic instruments of repression have transformed religious freedoms, with some groups becoming freer and others less so. Secularists and heterodox believers have been among the losers. The breadth and severity of the ensuing religious repression hides diverse strands of discontent. Public religious discourses and performances disguise rising irreligiosity, deism, and atheism.

Disagreements over a religion’s interpretation can cause a schism – a formal division into variants with their own officials, doctrines, and rituals. Islam’s Sunni–Shii split over succession disputes came early in its history. One might expect either Muslim modernizers or liberal Muslims to have split Islam further. They have done so only informally, in that the global Muslim community is divided between practicing and nominal Muslims. But nowhere in the Middle East is discontent lacking among practicing Muslims over state-approved interpretations. This is evident in the popularity of unregulated fatwa services. Substantial constituencies consider rituals outdated, clerics unprincipled, and gender discrimination unacceptable. But widespread discontent within a religious community need not generate a disunion. If the risk of joining the leavers is grave enough, disaffected members will stick with the status quo. A successful schism requires, at some stage, open collective action on the part of a constituency with a shared religious vision, possibly under leaders able to strategize, represent the membership, and coordinate moves. Also necessary is that supporters of the religious status quo lack the organizational capacity to erect roadblocks. At present, any group trying to develop an alternative to Sunnism or Shiism would face major resistance.

Islamic waqfs did not produce a vigorous civil society. On the contrary, they inhibited mass political participation and collective civic action through several channels. Firstly, a waqf’s beneficiaries had no say over its activities. Second, each waqf was required to provide services on its own, which kept it from participating in political coalitions. Third, the waqf’s beneficiaries played no formal role in appointing its officers. Such organizational features constitute key reasons why, as the West developed political checks and balances, no such tendency emerged in the Middle East. The West liberalized and democratized through epic struggles involving universities, cities, religious orders, and guilds, all organized as corporations. Challenging power structures, such corporations developed ideologies supportive of personal and associational rights. A virtuous circle thus emerged. As civil society strengthened, it took steps to bolster private organizations, which then strengthened civil society further. In the Middle East, by contrast, the waqf created a vicious circle. By keeping civil society weak, it limited freedoms and perpetuated autocracy. The absence of strong nongovernmental organizations made it hard to challenge rulers through organized collective action from outside the state. Tellingly, over more than a millennium, waqfs fostered no political movements or ideologies.

Millions of “secular Muslims” would become “practicing Muslims” if there existed a variant of Islam compatible with their values, for instance one that would broaden women’s rights and adapt rites to the rhythms of modern life. If no liberal variant has emerged, the reason is not that Islam is monolithic. As with other religions, it admits diverse interpretations. Yet over fourteen centuries, variations in interpretation have produced just one major schism: the Sunni–Shii split of 661. This is puzzling because Christianity, the other monotheism with over a billion adherents, sees schisms frequently. If the collective action necessary for a liberal schism has not materialized, a basic reason lies in obstacles to conducting honest discussions on what Islam represents. Liberal Muslims are intrinsically opposed to settling conflicts through violence, which handicaps them vis-à-vis groups prepared to charge them with physically punishable religious offenses. Easily victimized, they cannot fight back as effectively. Thus, apostasy and blasphemy rules, the two most lethal weapons of Islamic illiberalism, reproduce the fears that allow their preservation. To avoid personal trouble, liberal Muslims, atheists, non-Muslim believers, and assorted other dissenters all avoid repudiating the notion that apostasy and blasphemy are acts that require temporal punishment.