EC 165: Economics of the Middle EastWhy Middle East Economics?•Human Development IndicatorsSource: UNDP, Arab Human Development Report, 2002.Oil•Economics of the Middle East• 1. Economic History• 2. Demographics• 3. Economics of Religion• 4. Violence and Civil Wars• 5. Palestine•6. IraqSection 1: Economic HistoryIssawi Ch #1-3Overview1. Pre-Biblical History: Technological progress2. Biblical History: Where did monotheism come from? Some speculation.A. technology, agriculture and trade routesB. the economics of monotheism?3 What Went Wrong? - How did the leading economic region for most of the past 7 millennia become a group of “developing” countries?A. What went right till 1200?B. What went wrong since?1. Pre-Biblical History: Technological Progress• Hand axe and fire: East Africa (-1.5m)• Stone tools/clothing, leaving Africa -100K• Agriculture -10K in Mesopotamia• Potter’s wheel, bronze, writing-3.5K to -4K Mesopotamia• Chariot -2.5K MesopotamiaStandard of Ur-2.5K (Iraq)British MuseumWriting• Critical technology: why? • Cuneiform: Sumer ~-3000 (Southern Iraq)- invented for accounting, contracts• Started out as pictographs, evolved to phonetic syllables, 600-800 symbols- only educated could read• Canaanites ~-1100 drop the vowels and create an alphabet of ~22 consonants • Phoenician traders spread it through Mediterranean• Greeks and Hebrews adopt it: - begin recorded history, literature (Odyssey), science & text based religion (Bible) begin…Arabic, Armenian, Latin, EnglishCuneiform tablet ~-2400Phoenician alphabet ~-1000Cuneiform tablet: beer transaction or storageThe Fertile Crescent - 2000 BC2. Biblical History I: The Fertile Crescent• Resources: forests, farmland, water• Climate (as in Indus and Peru)• Geography and Trade Routes• Technological change: Semi-nomadic grazing to agricultureCamels and trade• Cities of Syria• Economics of slavery• Hebrews conquer Canaan around –1200• Hebrew agriculture by –1000Biblical History II: Palestine• Greek conquest -332• Increased prosperity due to trade and Greek agricultural innovations Æ active temple culture with festivalsand pilgrimages (including trade from rural areas to cities)• By Roman times: (Herod) Galilee had agriculture, animal husbandry, fishing, vineyards, slaveryBiblical History II: Palestine• Tenant farming, seasonal crops and labor => unemployed laborers available to rebel =• Economic fluctuations, Roman conquest, trade create a Jewish Diaspora numbering millions• Priestly (caste) religion dies with end of Temple period• Synagogue tradition invented (service without sacrifice, text based, literacy required)• Conversion to Christianity among Diaspora Jews and slaves Æ western spread of monotheism• Islam would late spread monotheism south and eastLogistics econ.ucsd.edu/~elib/meec/Readings, assignments, exams, grading3.A. What went Right? A. What went right? (till about 1200)Gains from TradeA.1 Ancient Times: In –3K and –4K the leading civilizations of the west were Mesopotamia, Egypt, Syria, Iran and AnatoliaAll shared climate and water resources suited for agricultureAll built diversified economiesEgypt and Mesopotamia• Agriculture required irrigation• Egypt had natural flooding, wind from North, single waterway• Mesopotamia had caravan trade, more private property - is that why Hammurabi code developed here?Anatolia, Syria, Iran• Agriculture from rain rather than irrigation• Anatolia exported minerals (copper, silver, iron)•Olives• Phoenicians invented cities, could sail around Africa in –600.• Alphabet invented in Ugarit? • Persia was largest empire in history by -500.A.2 Greeks and Romans• Greeks bring trade and technology• Trade: with Europe and through Middle East to Asia• Technology: new plants, mining, irrigation techniques (eg., Archimedean screw)• OlivesA.2. Greeks and Romans II• Romans build roads• ~30 million in M.E., ~12% of humans• M.E. exported wheat, manufactures, handicrafts to Rome • Trade with India created active trading ports and cities in, including MeccaA.3. Arab Conquest• Muhammad born in 571 in Mecca• Led Arab conquest of Middle East, which eventually reached Spain and India• Population of 35-40m at peak• Trade with unifying language, single set of laws, and no tarrifs. Traders reached as far as Scandinavia and China.• Brought Islam East to Indonesia and Malaysia.• Brought rice, cotton, sugar cane, oranges from Asia. Coffee from Ethiopia.• Exported silk, linen, cotton and wool goods to Europe.The Islamic Empire in 1000Economic History2.B. What went wrong 1200-1800?1. Trade in 10002. European Trade3. European Technological Progress4. Deteriorating terms of trade5. Wars and domestic turmoil1. Trade in 1000A. Theory: Gains from Trade, Tarrifs, TechnologyB. Gains within empire – food from Egypt and Mesopotamia, textiles and handicrafts from SyriaC. Gains outside empire – textiles exported (e.g., silk, linen, cotton, wool, “gauze”, ceramics, glassware, paper “magazine”) to EU (for food), India & China (for spices), Africa (for raw materials and slaves)Gains from Trade I•Gains from Trade II•Gains from Trade III•2. European TradeA. Europeans dominated transportation in the Mediterranean by 1050. -including inland trade by 1700- why? Greif on organizational structureKuran on legal advantagesB. Shipbuilding leads to direct EU sea trade with West Africa (Portugal) India (Portugal, then Dutch, then British) East Africa (Portugal then British)New World (Spain, Portugal, Dutch, British)Lesson 4: History –Technology, Trade, and RecoveryWhere are we?• A. Biblical History• B. What Went Wrong?B.1 Trade in 1000 B.2 Europeans dominate tradeB.3 TechnologyB.4 TradeB.5 Domestic turmoil• C. From 1800 to the Present: Recovery• (next.. D. Oil)B.3 Solow Growth Model• The Solow Growth model- appropriate for mobile factorsSolow model implies convergence•B. 3 European Technological ProgressA. Agricultural revolution in EUCrop rotationArab empire lost cartels in sugar (to France) and coffee (Dutch East Indies)B. Harnessing water power with watermills widespread by 1000 in EU, .. wind power with windmills (invented in Asia but adapted in EU), .. Eventually led to steam power ÆEU gains comparative advantage at textiles 19thcentury- note that new technology complements EU environment, substitutes for EU shortcomings3. European Technological Progress