creative destruction under extractive institutions puts a limit
on sustained growth. How the Soviets ran hard into these
limits will be discussed in greater detail in the next chapter.
I F THE POLITICAL and economic institutions of Latin America
over the past five hundred years were shaped by Spanish
colonialism, those of the Middle East were shaped by
Ottoman colonialism. In 1453 the Ottomans under Sultan
Mehmet II captured Constantinople, making it their capital.
During the rest of the century, the Ottomans conquered
large parts of the Balkans and most of the rest of Turkey. In
the first half of the sixteenth century, Ottoman rule spread
throughout the Middle East and North Africa. By 1566, at
the death of Sultan Süleyman I, known as the Magnificent,
their empire stretched from Tunisia in the East, through
Egypt, all the way to Mecca in the Arabian Peninsula, and
on to what is now modern Iraq. The Ottoman state was
absolutist, with the sultan accountable to few and sharing
power with none. The economic institutions the Ottomans
imposed were highly extractive. There was no private
property in land, which all formally belonged to the state.
Taxation of land and agricultural output, together with loot
from war, was the main source of government revenues.
However, the Ottoman state did not dominate the Middle
East in the same way that it could dominate its heartland in
Anatolia or even to the extent that the Spanish state
dominated Latin American society. The Ottoman state was
continuously challenged by Bedouins and other tribal
powers in the Arabian Peninsula. It lacked not only the
ability to impose a stable order in much of the Middle East
but also the administrative capacity to collect taxes. So it
“farmed” them out to individuals, selling off the right to
others to collect taxes in whatever way they could. These
tax farmers became autonomous and powerful. Rates of
taxation in the Middle Eastern territories were very high,
varying between one-half or two-thirds of what farmers
produced. Much of this revenue was kept by the tax
farmers. Because the Ottoman state failed to establish a
stable order in these areas, property rights were far from
secure, and there was a great deal of lawlessness and
banditry as armed groups vied for local control. In