Muslim scholar Ibn Khaldun (1332-1406) understood economics and human incentives in a way many modern-day politicians do not.
by Lawrence W. Reed
Daniel Hannan, the same Lord Hannan of Kingsclere who served as an elected member of the European Parliament from 1999 until 2020, is a remarkably eloquent defender of British sovereignty and individual liberty, and a fellow history lover. He wrote a brilliant Introduction for my last book, Was Jesus a Socialist?. When he speaks or writes, I follow intently.
Commenting in The Telegraph, Daniel noted Prime Minister Boris Johnson’s recent reference to a scholar who died more than 600 years ago:
In the run-up to the 2019 election, asked on Sky News how his spending pledges squared with his promised tax cuts, Boris Johnson replied that lower rates can lead to higher revenue, impressively attributing this insight not, as is common, to the twentieth-century American economist Arthur Laffer, but to the fourteenth-century Tunisian historian Ibn Khaldun [1332-1406]. Khaldun’s wisdom has been demonstrated in practice again and again. But it is counterintuitive, and therefore polls badly. Most people approve of taxes as long as they believe that someone else is paying them.
Art Laffer of Laffer Curve fame would tell you that he wasn’t the first person to observe that government revenues will rise when incentive-crushing tax rates are cut. He points out all the time that President Kennedy reduced the top marginal income tax rate from more than 90 percent to 70 percent in the 1960s for that very reason. Many times, Laffer has also cited Andrew Mellon, Treasury Secretary to three Presidents in the 1920s, as a man who knew that you get more juice from taxpaying turnips if you don’t squeeze them so hard.
(See Joe Coco’s Roaring 20s article or my own on Mellon himself. As an aside, I want it on the record that if we cut government tax rates and revenues go up, I think it’s proof we didn’t cut them enough.)
It is remarkable, as Daniel Hannan pointed out, that a leading politician such as Boris Johnson would know enough history to cite Ibn Khaldun. The 14th Century historian, sociologist and proto economist was arguably one of the greatest scholars of medieval times, though he is largely forgotten in most of the world today. So let’s dust him off.
First, I should point out that “Ibn Khaldun” is a merciful abbreviation of the man’s real full name, which was Abdurahman bin Muhammad bin Muhammad bin Muhammad bin Al-Hasan bin Jabir bin Muhammad bin Ibrahim bin Abdurahman bin Ibn Khaldun al-Hadrami. (If you had to fit that on your mailbox, you’d shorten it too.)
Ibn Khaldun was born in Tunis in north Africa to a well-to-do family known for its high political connections. For much of his life, he held diplomatic and other government positions for various sultanates in the Islamic world. One such position, a very risky one, required him to collect taxes from wild and unruly Berber tribes.
His most ambitious written works were his own comprehensive autobiography and a monumental seven-volume history of the world. The best known of those volumes is easily The Muqaddimah (“The Introduction”), which runs 512 pages all by itself. His insights on the rise and fall of civilizations make for fascinating reading to this day.
Ibn Khaldun didn’t get everything right. For instance, his views on black Africans are unspeakably cruel. The kindest thing he said about them, a widely-held view at the time, is that they were “the only people who accept slavery.” Whether he intended it to or not, it’s likely that his racist perspective helped further the very extensive Arab slave trade of his day.
On taxes, big government, sound money, and the rise and fall of civilizations, however, he nailed it. If those important matters interest you but you’d rather not read seven volumes and thousands of pages, here’s my recommendation: Just read Chapter 3 of The Muqaddimah. It’s only 140 pages and is titled, On Dynasties, Royal Authority, the Caliphate, Government Ranks, and All That Goes With These Things.
Ibn Khaldun endorsed a precious metal standard for money. “God created the two minerals, gold and silver, as the measure of value for all capital accumulations,” he wrote. “These the inhabitants of the world, by preference, consider treasure and property…They are the basis of profit, property, and treasure.” I can find no evidence he would support the inflationary, fiat paper money “tree standard” we suffer from today.
Chapter 3 of The Muqaddimah is where you’ll find the Laffer Curve as it was observed six centuries before Laffer. It begins,
It should be known that at the beginning of a dynasty, taxation yields a large revenue from small assessments. At the end of the dynasty, taxation yields a small revenue from large assessments.
The author notes that the attitudes of government officials change as government ages and grows. Early on, as a civilization is rising, its limited state is accompanied by “kindness, reverence, humility, respect for the property of other people and disinclination to appropriate it, except in rare instances.” Tax rates are low and as long as they stay low, society prospers and revenues to the government rise. But future generations of greedy politicians look for opportunities to increase both spending and the taxes to pay for it. They then overdo it, to their own and society’s detriment:
Eventually, the taxes will weigh heavily upon the subjects and overburden them. Heavy taxes become an obligation and tradition because the increases took place gradually, and no one knows specifically who increased them or levied them. They lie upon the subjects like an obligation and tradition…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…Finally, civilization is destroyed, because the incentive for activity is gone.
Ibn Khaldun concludes what is painfully obvious to wealth-creating entrepreneurs but to which wealth-destroying politicians seem oblivious:
If one understands this, he will realize that the strongest incentive for cultural (commercial and civil society) activity is to lower as much as possible the amounts of individual imposts levied upon persons capable of undertaking such enterprises.
Even the greediest of politicians don’t spend all of government revenues on themselves. As we know from modern welfare states, an integral part of attaining and keeping power is bribing the people with entitlements and other cynical, vote-buying benefits. Each generation of politicians tries to outdo the previous one. Ibn Khaldun explains,
Therefore, the ruler must invent new kinds of taxes. He levies them on commerce…He is, after all, forced to this because people have become spoiled by the generous allowances…In the latter years of a dynasty, taxation may become excessive. Business falls off, because all hopes of profit are destroyed, permitting the dissolution of civilization. This situation becomes more and more aggravated, until the dynasty disintegrates.
Biographers of Ibn Khaldun claim that he memorized the entire Koran. Perhaps so. In any event, this one passage from the scholar himself is something that everyone the world over, regardless of faith, should memorize:
It should be known that the finances of a ruler can be increased, and his financial resources improved, only through the revenue from taxes. This can be improved only through the equitable treatment of people with property and through regard for them, so that their hopes rise, and they have the incentive to start making their capital bear fruit and grow…
Attacks on people’s property remove the incentive to acquire and gain property. People, then, become of the opinion that the purpose and ultimate destiny of acquiring property is to have it taken away from them…When attacks on property are extensive and general, affecting all means of making a livelihood, business inactivity, too, becomes general…Civilization and its well-being as well as business prosperity depend on productivity and people’s efforts in all directions in their own interest and profit. When people no longer do business in order to make a living, and when they cease all gainful activity, the business of civilization slumps, and everything decays.
Writing earlier this year in Forbes, Robert W. Wood pointed out that rising price inflation is not the only “tax” that President Joe Biden seeks to foist on Americans. Biden also is calling for higher marginal income tax rates on individuals, higher capital gains taxes, higher death taxes, and various higher taxes on business enterprise. Many of his persuasion even want to tax gains that are on paper only (the notorious “wealth tax”).
If I could tell President Biden just one thing in person, perhaps it would be, “Joe, there’s a 14th Century Arab scholar you desperately need to read.”
Lawrence W. Reed is FEE’s President Emeritus, Humphreys Family Senior Fellow, and Ron Manners Global Ambassador for Liberty, having served for nearly 11 years as FEE’s president (2008-2019). He is author of the 2020 book, Was Jesus a Socialist? as well as Real Heroes: Incredible True Stories of Courage, Character, and Conviction and Excuse Me, Professor: Challenging the Myths of Progressivism. Follow on LinkedIn and Like his public figure page on Facebook. His website is www.lawrencewreed.com.
This article was originally published on FEE.org. Read the original article.