INSTITUTIONAL ANALYSIS OF UNDERDEVELOPMENT IN THE ISLAMIC MIDDLE EAST: A CRITICAL PERSPECTIVE

Abstract

This study delves into the intricate relationship between social norms, cultural values, and economic development, as elucidated in the recent literature on the "Paradox of the West." The central premise of this neoinstitutional discourse posits that the remarkable growth and historical transformation witnessed in Western Europe between the tenth and eighteenth centuries can be largely attributed to its institutional framework. Over time, Western societies crafted complex legal and organizational structures that not only facilitated economic growth but also curtailed government power, minimized uncertainty in social interactions, lowered transaction costs, and safeguarded property rights. A pivotal juncture in the development of Western institutionalism occurred during the Glorious Revolution of 1688 in England, where the fusion of individual rights and constitutional parliamentary government set the stage for unprecedented economic prosperity. Moreover, this discourse highlights the instrumental role played by private institutions such as guilds, fairs, and coalitions, which emerged across Europe and effectively supplanted public authorities in enforcing institutional norms governing economic activities. The study also examines the pivotal role of the commercial revolution that spanned from the 10th to the 18th century, particularly the transatlantic commerce that commenced around 1500, as a driving force behind economic progress in Europe (North & Weingast, 1989; Greif, 2006; Acemoglu & Robinson, 2005).