This article explains the level of economic freedom in Muslim countries through the theory of institutional path dependency. Islamic countries are generally not free and they have a poor record regarding property rights. To explain these realities we use the institutional history of Muslim countries. We define three steps: the Arab and Ottoman Empires when Islamic law was of great importance, European colonisation, and the contemporary era with its movement towards a revival of Islam. Islamic law is not liberal. This explain why in general Muslim countries are not free. Colonisation radically changed institutional life in the twentieth century. British colonisation proved to be better than did French or Soviet colonisation. This explains why the Persian Gulf countries are freer. The collapse of the Soviet model explains the speed of liberalisation in former socialist countries (such as Albania, Kyrgyz Republic, and Kazakhstan). Nevertheless, the twentieth century was not just the century of Westernisation. It was also the century of the revival of Islam. The article concludes that the history of the twentieth century does not explain the way in which Muslim countries are attracted by the ideal of the Muslim city. The revival of Islamic intellectual innovations and the evolution of Muslim opinion sustain this thesis. Therefore, there is a dependency on the past and on an imagined future. Islam acts, like yesterday, on the world of institutional possibilities.