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The Social Challenge Ahead
Edited by Ulf Bernitz, Moa Mårtensson, Lars Oxelheim and Thomas Persson
Chapter 1 examines how a polity evolved without anything resembling a corporation law. In the Islamic world, corporations did not develop until the mid-19th century, even though it was economically far ahead of Europe for centuries. Taking the Ottoman Empire as a case study, Jared Rubin attributes this to a dampening effect of Islamic law—being careful, however, to note that his argument is not that ‘Islam is incapable of change or it is some inherent Islamic conservatism that is at fault.’ Rather, he argues, in Islamic polities rulers’ legitimacy rested heavily on the clerical establishment, and resulted in large areas of law being ceded to that establishment—including commercial law. Yet, while Islamic law provided for partnerships, those partnerships were dissolved on a partner’s death, and inheritance law provided for distribution of the partner’s assets to heirs by a fixed formula. These inflexible rules hindered the growth of large-scale partnerships similar to those that, in Europe, slowly led to joint-stock companies and then corporations. In sum, the power arrangement that left commercial law to the clerical establishment ultimately blocked the development of corporations as well as other commercial arrangements that, in Europe, helped spur economic growth.