Another piece of evidence for the economic benefits of the rise of the Caliphate was an agricultural revolution. This was to some extent a consequence of the rise in trade, which created a much larger market than had existed before. The Arab conquests were followed by the diffusion throughout the region of a variety of crops that had previously not been grown there. These included rice, sorghum, hard wheat, sugar cane, cotton, watermelons, eggplants, spinach, artichokes, sour oranges, lemons, limes, bananas, plantains, mangos, and coconut palms. Many of these plants, indigenous to the tropics, were not easy to grow in the cooler and drier regions into which they were now sown, and necessitated a major reorganization of agriculture. Previously, the growing season had been in the winter, with crops harvested in the spring. During the hot summer months, the land lay fallow. But the new crops came from tropical areas and thrived in the summers, so production was restructured and intensified. Before the Arab conquests of the Middle East, Byzantine practice was to crop the ground once every two years. Now two crops a year were grown, for example, winter wheat followed by summer sorghum, cotton, or rice. All of these innovations were documented in Arab farming manuals that helped to spread best practices throughout the empire.
This intensification of production required fertilizer and irrigation too. Various types of irrigation were already in place in the areas that the Arabs conquered, but those of the Byzantine and Persian Sassanid Empires were often in advanced states of decay. The Arabs repaired these and built a profusion of new public infrastructure, including new kinds of dams, underground canals that tapped groundwater and brought it over long distances, and a variety of wheels for lifting water out of rivers, canals, wells, and storage basins. This infrastructural investment was not based on new technology but involved the adoption and deployment of existing technological know-how. Nevertheless, it greatly increased the productive capacity of the economy.
The state that emerged from Muhammad’s political leadership played a decisive role in building and sustaining these renovated irrigation systems. It also encouraged private individuals to make complementary investments. This was not just because of the relative political stability that emerged with the Caliphate. It was also because Medina was an oasis and Muhammad, in his role as the resolver of disputes, had had to deal with conflicts over water and irrigation and had outlined a series of precedents that formed the basis of a legal system that facilitated investments. Particularly significant was the fact that instead of vesting them collectively in tribes or clans, these rulings individualized water rights. This improved incentives and eased disputes between individuals. Other laws directly encouraged production, including one that gave outright private ownership of a piece of land brought into cultivation for the first time and restricted taxation on such land to one-tenth of its output.
But these early benefits soon evaporated along with the buoyant tax revenues that they generated. Khaldun is indeed clear that these early economic advances could not be sustained.
When the dynasty continues in power and their rulers follow each other in succession … the Bedouin qualities of moderation and restraint disappear. Royal authority with its tyranny, and sedentary culture … make their appearance … individual imposts and assessments upon the subjects, agricultural laborers, farmers, and all the other taxpayers, increase … Customs duties are placed upon articles of commerce and levied at the city gates… . Eventually, the taxes weigh heavily upon the subjects and overburden them … The result is that the interest of the subjects in cultural enterprises disappears, since when they compare expenditures and taxes with their income and gain and see the little profit they make, they lose all hope. Therefore, many of them refrain from all cultural activity. The result is that the total tax revenue goes down.
With tax revenues falling, “the ruler must invent new kinds of taxes. He levies them on commerce. He imposes taxes of a certain amount on prices realized in the markets and on the various imported goods at the city gates … Business falls off … This situation becomes more and more aggravated, until the dynasty disintegrates. Much of this sort happened in the Eastern cities during the later days of the Abbasid and Ubaydid-Fatimid dynasties.” (The Fatimid dynasty is a third caliphate—taking its name from Muhammad’s daughter Fatima—which ruled North Africa from the early tenth to late twelfth centuries.)
Existing evidence supports Khaldun’s account. While the tax rate on land seems to have risen inexorably after the Arab conquests, revenues fell. Revenues from Iraq, for example, decreased from 12.8 million dinars after the conquest to 8.3 million dinars at the end of the Umayyad dynasty, to 5 million by 819 and just over 3 million by 870. The data from Egypt and Mesopotamia tell the same story.
One common response was that the ruler “himself may engage in commerce and agriculture, from desire to increase [his] revenues.” But Khaldun saw that this could be very harmful to the people in the society because “when the ruler, who has so much more money than they, competes with them, scarcely a single one of them will any longer be able to obtain the things he wants, and everybody will be worried and unhappy. Furthermore, the ruler can appropriate much of the agricultural products and the available merchandise … He can do it by force, or by buying things up at the cheapest possible price. Further, there may be no one who would dare bid against him. Thus, he will be able to force the seller to lower his price.” On the other hand, when the ruler is selling, he forces everyone to pay high prices. Competition from the ruler thus generates a situation where “the farmer gives up agriculture and the merchant goes out of business.”
As the Umayyad and Abbasid states disintegrated, the impact of tax farming and their inability to construct effective bureaucratic management also led to a deterioration of infrastructure, and a fall in investment since farmers were at the mercy of local elites. Indeed, land seems to have been abandoned by ordinary farmers who saw no way to make ends meet and instead moved to towns and cities. The entry of elites into the economy had exactly the impact Khaldun identified.
Khaldun explicitly noted how his theory explained the collapse of the Abbasids:
The group feeling of the Arabs had been destroyed by the time of the reign of al-Mutasim and his son al-Wathiq. They tried to maintain their hold over the government thereafter with the help of Persian, Turkish, Daylam, Saljuq, and other clients. Then the Persians (non-Arabs) and clients gained power over the provinces of the realm. The influence of the dynasty grew smaller, and no longer extended beyond the environs of Baghdad.
Janus-Faced Despotic Growth
Khaldun’s theory is a brilliant illustration of the impact of despotic state formation on the economy—not because the type of cycle that Khaldun hypothesized with the bad following the good is some “historical law,” but because it highlights both the good and the bad that an economy under despotism will always embody.
A state can provide many benefits in terms of increased order, security, and peace. It can enforce laws, bringing clarity and predictability to conflicts that inevitably emerge in the process of economic transactions. It helps markets and trade expand. The state, and the state builders controlling it, may also find it in their interest to enforce property rights for the same reasons as the Laffer curve: without property rights and predictability of the state’s policies, it’s as if everyone is facing close to 100 percent tax rates and will lack incentives to produce, work, trade, and invest—and the result would be little tax revenue for the state. Not a desirable outcome. So it’s better to keep taxes low. When that happens, economic activity can potentially flourish, with all the benefits that this brings to society as well as to the Despotic Leviathan. The same logic underlies the reason why state builders might find it in their interest to provide public services, infrastructure, and even education to increase productivity and economic activity.