Money  /  Retrieval

The Muslim Thinker Who Inspired Reagan

How Ibn Khaldun influenced the president and a generation of conservative tax policy.

Abd al-Rahman ibn Khaldun was an Arab Muslim polymath who was born in Tunisia in 1332. He lived in Algeria, Morocco, and Muslim Spain before ultimately settling in Egypt, where he died in 1406. His writings, not all of which survived, include religious texts, but he is primarily known for his historical magnum opus, the seven-volume Kitab-ul Ibar, or “Book of Lessons.” Its very first and most interesting volume, Muqaddimah, or “Introduction,” took a life on its own, with its remarkably insightful observations on the rise and decline of societies, which have fascinated many modern scholars. Among them was the British historian Arnold Toynbee, who described the Muqaddimah as “undoubtedly the greatest work of its kind that has ever yet been created by any mind in any time or place.” 

The book covers many themes relating to ilm al-umran, or “science of civilization,” the origin of what we today call “social sciences.” A famous one among them is how asabiyya, or “group solidarity,” can help nomads conquer a civilization, only to turn into what they conquered and become prey to new nomads, creating a cyclical pattern of history. 

The book also includes economic insights that resemble Adam Smith’s, though preceding the Scottish thinker by hundreds of years. These insights include the benefits of the division of labor, the law of supply and demand, and the harms of state involvement in trade and production. They also describe the fundamental prerequisite of classical liberal economics, which is property rights. In one striking passage, Ibn Khaldun explained how “civilization” collapses when these rights are not protected:

It should be known that 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 the incentive to acquire and obtain property is gone, people no longer make efforts to acquire any … 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.

This was the basis of the observation that Ronald Reagan would introduce to the American public: Lower taxes help the economy because they incentivize people to do business. Here again, Ibn Khaldun explained, “When tax assessments and imposts upon the subjects are low, the latter have the energy and desire to do things.” Under these circumstances, “cultural enterprises grow,” whereas higher taxes—imposed to finance opulent palaces or large armies—had the opposite effect. When entrepreneurs “compare expenditures and taxes with their income and gain and see the little profit they make, they lose all hope,” refrain from business, and thereby decrease the total tax revenue.