It is widely believed that free markets, individual liberty and limited government are new concepts with roots in Christian society. However, in fact these ideals and institutions have a much older eastern origin. Ideological support for free individuals and free markets can therefore be found in Islamic golden age philosophy, as well as the ancient Persian religion of Zoroastrianism.
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 flourished during the Persian Empire founded by Cyrus the Great – an empire which encompassed nearly half the world population at the time and which was unique because it was built upon religious and cultural tolerance.
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.
Even the ancient Persian faith Zoroastrianism has an interesting connection with markets. The core of this religion is the teachings of the prophet Zoroaster, who founded an early monotheistic religion which heavily influenced Christianity, Islam and Judaism. Zoroastrianism, however differs from Christianity and Judaism in that this philosophical tradition is supportive of material wealth gathering and self-reliance.
Another interesting feature of Zoroastrianism is that it is largely opposed to slavery. There are some accounts of slaves being taken after wars in ancient Persia, but the society and the economic model was not based on slavery – which was the case in ancient Egypt, ancient Greece, and ancient Rome. As described in the Bible, Cyrus liberated the Jews from the Babylonian captivity and allowed them to resettle and rebuild Jerusalem. The existence of slavery seems to have impeded the development of market-oriented economic institutions in Egypt, Greece, and Rome.
This market tradition of the Middle East was suppressed after the Macedonian king Alexander the Great conquered the Persian Empire. 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 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.
Hamid S. Hosseini writes about the Islamic economic tradition in the book A Companion to the History of Economic Thought. He explains that medieval Muslim writers held a much more favorable view of economic activity and wealth accumulation than contemporary Christian thinkers. Hosseini cites several influential Persian Muslim thinkers, who praised wealth accumulation and self-interest. He notes: “In contrast to their European counterparts, medieval Muslim writers praised economic activity and the accumulation of wealth, viewed individuals as acquisitive, and scorned poverty.”
Khajeh Nasir Tusi, an influential Persian Islamic intellectual during the 13th century, as well as other Islamic thinkers of the time, formulated intellectual support for individual wealth accumulation on the marketplace. The ideals of rational self-interest, many centuries later made popular by Western intellectuals such as Adam Smith and Ayn Rand, was first expressed during the Islamic Golden Age. So, while the roots of individual liberty and market based philosophy are relatively young in the Christian tradition – they are millennia old in the Middle Eastern religious tradition. This is worth keeping in mind, since it teaches us that the ideals of free individuals and free markets are much older and much more universal than commonly acknowledged.