Economic and Financial Crises in Fifteenth-century Egypt: Lessons from the History

A study is made of the economic and financial crises of fifteenth-century Egypt, which was ruled by the Mamluk dynasty. During the fifteenth century, especially the first half, Egypt faced terrible economic crises caused sometimes by the ill-governance and corruption of rulers, and sometimes by natural catastrophes such as the flooding or drying up of the Nile, outbreaks of epidemics, crop diseases, etc. In many cases two or more factors existed simultaneously. Financial crises emanated mainly from monetary mismanagement. Two social thinkers of the time – al-Maqrizi at the beginning of the century and al-Asadi at the middle – addressed the situation. They analyzed the problem, pointed out the causes, and suggested remedies. For al-Maqrizi, the deterioration of Egypt’s monetary system was the single most important cause of its economic and financial difficulties. As a panacea, he prescribed a return to a gold and silver standard and restriction of copper coinage to petty transactions. Al-Maqrizi did not realize that the reason for the widespread use of copper money was Egypt’s dependence on the import of precious metals, especially silver, from Europe and this was adversely affected in the fifteenth century, being known as the “silver famine”. Al-Asadi divided the factors responsible for the economic and financial crises of his time into two main categories – socio-economic factors and monetary factors. In the former category he included neglect of agriculture, disturbances by Bedouins, oppression of farmers, and sale of government positions. As far as the monetary factor is concerned, he dealt with this separately and held the poor currency system to be the reason behind the high prices which were disturbing the whole economy. Al-Asadi did not confine his analysis to the monetary problem only. He advocated an overall reform and strict management of the whole economy, the monetary aspect being one aspect. He did not restrict money to gold and silver; to him, precious metals and copper all had their utility as money and all could be used at the same time. However, the issuing of money and minting of coins should be structured in such a way that counterfeiting and debasement is kept in check. The main financial problem, in his opinion, was debasement of the currency leading to an unrestricted supply of money, and not the dominance of copper coins. The paper concludes with an appraisal of this diagnosis of the problem, the solution suggested by the two social thinkers, and the lessons learned from them.