Monday, September 22, 2008

Islamic Economy As We Believe

We believe that the foregoing discussion is enough to clarify the meaning and purport of a school of economics and the science of economics, and now we can make clear what we believe about Islamic economy.

Islamic economy, as we observed in the course of not preceding study, consists of a school of economics and not the science of economics. Hence, when we say that Islam has a school of economics, we do not mean that it has the science of economics. Islam has not come to discover the phenomena of economic life and their causes. That is not its responsibility. Just as it is not supposed to state the laws of astronomy, it is also not supposed to state the laws of economics. Islam has come to organize the economic life and to evolve a system based on social justice.

Islamic economy represents a just system of economic life, but it has nothing to do with the scientific discovery of the economic relationship as it actually exists. That is what mean when we say that Islamic economy is a school and not a science.

In other words, if for example, Islam had discussed the causes of the rise in the price of interest bearing shares, its discussion would have been scientific, but it has, on the other hand, evaluated these shares and declared them forbidden. According to it only equal participation and profit sharing should form the basis of the relationship between financier and an entrepreneur.

Now as we clearly know the nature of Islamic economy, we can see what prevents the people from believing that there exists such a thing as Islamic economy.

Most of the people deny the existence of Islamic economy because they do not differentiate between the science of economics and the school of economics. They ask as to how there can be an Islamic economy when in Islam there is no such discussion of economic problems as conducted by Adam Smith and Ricardo. Islam has made no mention of the law of diminishing returns, the law of supply and demand and the law of wages and has not also discussed the general theory of value.

How can the existence of Islamic economy be admitted when it is known that economic discussion have developed only during the past four centuries with the efforts of such pioneers as Adam Smith and the physiocrats[1] and the commercialists who preceded him?

Those who deny the existence of Islamic economy uphold the above arguments. They seem to be under the impression that we claim the existence of economic discussion in Islam.

But after we know the difference between the science of economics and the school of economics and understand the Islamic economy is a school, no room is left for the denial of its existence. It is not claimed that Islam talks of the law of supply and demand. What is meant is that Islam has propounded the principles for the organization of economic life, and has invited the people to follow them. Hence it is reasonable to believe that Islam has a separate system of economy.

Owing to lack of space we do not propose to go into the details of Islamic economy and to quote extensively from the holy Qur'an and the traditions of the House of the Prophet of Islam (peace be upon him). Anyhow, we purpose to throw some light on the methods of the holy Qur'an and the traditions in this respect and show how economic theory can be deduced from the general principles and concepts of Islam.

Comprehensiveness of Islamic laws

Islam is a comprehensive system and embraces all facets of human life. It provides guidance in all walks of life. This point not only can be deduced from the Islamic laws, but the Islamic sources themselves stress upon it. We draw the attention of the readers to the following reports pertaining to the sayings and remarks of the Imams of the house of the holy Prophet of Islam (pbuh):

1. Abu-Basir reports the Imam Jaffer al-Sadiq (a.s.) while talking about the comprehensiveness of Islam and the Imam's knowledge of all its details, said:
"Islam has fully explained what is lawful and what is unlawful. It has an answer to every question that people may be confronted with to solve in their lives. It has mentioned even the penalty for a minor scratch".

Then the Imam put his hand on Abu-Basir and said:

"With your permission, may I press your hand a little bit?"

"I am at your disposal, my lord." replied Abu-Basir.

The Imam then pressed him a little and said:

"Even the penalty for this is there in Islam".

2. According to another report the Imam Jaffer al-Sadiq (a.s.) once said:
"Islam gives an answer to all that is required by the people. There is no point which has not been discussed by Islam. Even the compensation for a little scratch inflicted upon the body of someone else has been mentioned."

It is reported in Nahj al-Balagah, that the Imam Ali (a.s.) while eulogizing the Holy Prophet (pbuh) and the Holy Qur'an, said:
"Allah the Almighty raised the Holy Prophet (pbuh) at a time when there had been no Prophet since long, and the people were in a deep slumber. They were all violating the commandments of Allah. At such a critical juncture the Prophet (pbuh) was raised with a beacon of the light of guidance, i.e. Holy Qur'an. It contains the remedies of all your ills. It tells you how to arrange your livelihood and groom your relations".

It is clear from these reports that the Islamic laws cover all spheres of life. If Islam has a rule for even the slightest problems of life, it must provide a solution for economic problems also, for if it ignores such an important aspect, its comprehensiveness would have no meaning.

Is it imaginable that Islam lays down rules for the compensation of a scratch, but says nothing about the right of man vis-a-vis his productive activity or the relationship between the workers and the employees?

Is it reasonable to think that Islam, which determines your right in the matter of a scratch, does not determine it when you bring waste land under cultivation, extract minerals, dig a canal or acquire a forest?

Those who have full faith in Islam and its original sources are convinced that Islam can solve all the problems of economic organization and it is possible to derive an economic system from the Qur'an and Hadiths[2].

From the above it is clear that those who say that Islam has organized only individual life and not that of the society and that the economic theory being a part of the social organization is outside its purview, are sadly mistaken. The above quoted traditions prove beyond any shadow of doubt that the Islamic teachings cover both the individual and the social organizations.

In fact a statement that Islam organizes individual and not social behavior, besides being repugnant to Islamic traditions is self-contradictory, for it is wrong to make a distinction between the behavior of their organizations and the society. The social organizations, whether political or economic, always influence the behavior of the individuals. Hence, the conduct of the individuals cannot be separated from that of the social organizations.

Let us consider capitalism as a social system. It organizes economic life on the basis of the principles of economic freedom. This principle is reflected in the behavior of the employer and the capitalist towards the workers and in the contract which is concluded between them. Similarly it is reflected in the life of the individuals.

As such, if it is admitted that Islam organizes the behavior of an individual when he takes loan from anyone, employs a worker or is himself employed by someone else it shows that this organizing is inevitably related to a social system. Hence, separation between the individual and his social behavior amounts to self-contradiction. When we admit that Islam organizes the behavior of the individual and acknowledges that it has rules in respect of every human action, we must also believe that it has its own economic system and social organization.

Application of Islam is Another Witness

We do not know what those, who doubt the existence of Islamic economy and the solution of economic problems in Islam, think of the early period of Islam when the Islamic system was applied to the collective life of the Muslims. Did the Muslims not have any economic life at that time? Is it not a fact that at that time the leadership of the society was in the hands of the holy Prophet (pbuh)? Did he not have a solution for the problems of his society, including the questions relating to production and distribution?

Is there any harm if we say that his solutions represented the Islamic way of the organization of the economic system and in the final analysis formed the economic theory of Islam?

It cannot be imagined during the Holy Prophet's (pbuh) time the society had no economic system, for no society can exist without having its own ways of production and distribution of wealth.

At the same time the economic system prevailing in the Islamic society during the Holy Prophet's (pbuh) time cannot be considered to be disconnected with Islam. The Holy Prophet (pbuh) had a great mission to fulfill. He guided the Muslims at every step and set an example for them. The economic system also must have been evolved by him or at least it must have had his approval. In other words, the sources of the economic system of the early period of Islam were either the sayings of the Holy Prophet (pbuh), or the methods employed as the patron and ruler of the community, or the conduct of other people having had his approval. The system derived from any of these sources must have the Islamic form and label.

Islamic Theory Needs to be Brought Into Definite Shape

When we say that economic system exists in Islam or that Islam has an economic theory we do not intend to mean that there exist in the Islamic sources all those views which generally characterize a school of economics.

What we mean is that Islamic sources contain a vast collection of laws concerning various fields of economic activity, such as the Islamic laws about bringing the waste land under cultivation and the discovery of minerals, or the laws about letting and hiring, partnership, interest etc. Islam also has laws about zakat, khums , taxes and public treasury.

If all these laws are collectively brought into a definite shape and on their analogy some other laws are deduced and added to them it is possible to evolve an Islamic system.

It is not necessary that the Islamic sources should produce general principles comparable to such principles as that of say, economic freedom in capitalism. Anyhow, in the Islamic sources and traditions we come across a number of laws and regulations which make the position of Islam clear vis-a-vis economic freedom, and enable us to get its substitute from Islamic point of view. Islam has forbidden the use of capital for earning interest. It does not allow to own land without cultivating it. It allows the Muslim rulers to fix prices. These laws put together make the position of Islam vis-a-vis economic system clear.

Morality of Islamic Economy

It may be argued that the economy that exists in Islam is not an economic theory. It is only a moral system which every religion is expected to offer its believers and ask them to follow it.

Hence, just as Islam exhorts the people to truthfulness, honesty, patience and politeness and restrains them from forgery and creating discord, similarly it exhorts them to help the poor and restrains them from doing injustice, encroaching upon the rights of others and collecting money through unlawful means. As it has enjoined prayers, fasting and pilgrimage, it has prescribed zakat also as a compulsory meritorious act, to implement its policy of helping the poor.

All these laws represent the moral injunctions of Islam and aim at the moral uplift of the Muslims. They do not mean the formation of an economic theory with a view to organize the society.

The difference between these teachings and an economic theory is similar to that which exists between a preacher and a reformer. A preacher calls upon the people to cooperate with others and have mercy on them and warns them against injustice and tyranny. But a social reformer chalks out a plan for the organization of the mutual relations of the people with a view to fix the rights and obligations of everybody.

We admit that all Islamic teachings have a moral aspect and it is true that Islam gives many moral directions in the various fields of life. It is also true that Islam has adopted the most beautiful method to put the Muslims on the basis of moral values.

But that does not mean that Islam is concerned only with moral order of the life of the individual and has not paid any attention to the social organization or has offered no program for economic life. Islam is not a religion which may invite the people to do justice and abstain from injustice without making clear its concept of these terms.

In fact Islam has not neglected to explain the concepts of justice, injustice and human rights. Like preachers it has not left their interpretation to others. Islam has defined the limits of justice and has laid down general laws for social life in the various fields of production, distribution of wealth and mutual dealings. It has described any violation or neglect of these laws and commandments as injustice and transgression.

Here lies the difference between the duty of a preacher and the responsibility of a school of economics. A preacher urges his audience to do justice and warns them against injustice, but does not lay down a standard for them. He leaves the meaning of these terms to the intelligence of his listeners. On the other hand, a school of economics defines the standard of justice and injustice and seeks to lay down an economic system covering all the aspects of economic life.

Islam could be described as a preacher only if it had merely invited the people to do justice in general terms having left it to their own taste and requirements to give a practical shape to this principle and to determine its requirements. But Islam has not done so. It has made its concepts of justice and injustice clear and has kept its just methods of production, distribution and mutual dealings distinct from other unjust methods of these activities.

Islam says that to acquire the ownership of land without utilizing it is unjust. The private ownership of land is just only on the basis of making exertion for its utilization. Similarly in other matters Islam separates the concept of injustice from that of justice.

It is true that Islam exhorts the rich to help their poor neighbors and brethren, but that is not all that it does. It has enjoined upon the mulsim government to ensure a respectable life for the poor and the needy. This direction is an integral part of the Islamic system governing the relations between the rulers and the ruled.

While explaining a ruler's responsibility in regard to zakat, Imam Musa ibn Jaffer (a.s.) is reported to have said:
"He should collect money as ordered by Allah and should disburse it to the eight categories of the poor and the needy. Money should be disbursed in a way that it should be enough for the recipients for a year without facing any hardship. If any surplus is left it should be enough for the recipients for a year without facing any hardship. If any surplus is left it should go back to the treasury. In case of a shortfall, the ruler has to augment the zakat fund from other resources available to him."

It is clear from this report that the principle of providing means of living to all citizens is not a matter of preaching. It is a legal duty of the muslims rulers, and a part of the Islamic program for economic life.

There is a difference in the content of the tradition which says:
"He who sleeps satiated while his neighbor is hungry, is not a true believer in Allah and the Hereafter"
and another tradition which says:
"It is binding on the rulers to help the poor from their own resources in order to satisfy their needs".
The first tradition is commendatory and reflects the moral aspect of Islam, while the second is binding and shows the general spirit of the Islamic social system. There is no doubt that zakat is one of the most important devotional acts and falls in the same category as prayers and fasting. But its being a devotional act does not mean that it has no economic content or that it does not reflect the existence of a social system of economic life in Islam.

Zakat is a part of the social scheme in the Muslim society. It is not an individual act of worship nor is it a part of moral culture prescribed for the rich. It falls in the category of social schemes.

Furthermore, zakat represents the general approach of Islam as a system. The tradition in respect of zakat indicate that it is paid to the poor to bring them up to the general standard of the society. In other words it is a part of the plan to introduce a common standard of living and not a mere moral exhortation. It is definitely a step towards creating a school of economics.

What is lacking in Islam as compared to other economic theories?

We wonder how those who deny the existence of Islamic economy and assert that Islam has only a set of moral laws have been generous enough to acknowledge capitalism and socialism as schools of economics.

We have a right to ask how it is that these two are schools of economics and Islam is not, for we see that Islam also has expressed its opinion about all those questions with which, for example, capitalism had dealt. It may be a different thing that the viewpoint of the two is different from each other but that does not mean that capitalism is a school and Islam is only a set of sermons and moral counsels.

Here are two specimens to show that against every solution of an economic problem offered by any other school, Islam has its own opinions and beliefs.

The first specimen concerns property which is the basic point of contention between various schools of economics. Capitalism is of the view that all kinds of wealth including gifts of nature are, as a principle, included in private property, public property being only an exception. Accordingly nothing should be acquired by the state unless the national interests demand to do so. In contrast, Marxism believes that all natural wealth is public property and private property can be allowed only in case of a definite need to the extent of need. But Islam proclaims the principle of dual property. It believes both in private property and public property and puts them on an equal footing.

Does this view not show that like capitalism and socialism, Islam too, has its own economy theory? If private property is regarded as a basic principle of capitalism and public property is considered to be a principle of socialism, why should dual property be not believed to be a principle of Islamic economy?

The second specimen concerns the income accruing from the ownership of the factors of production. Capitalism allows such income in every case. It allows the owners of the factors of production to let them out and share profit without doing any work. The Marxism socialism, in contrast, considers all kinds of income not involving effort and exertion to be unlawful. As such the charges made by the owner of a water-mill for the use of his mill and the interest charged by a capitalist on the money advanced by him as loan are regarded unlawful by the Marxists, whereas the capitalists have no objection to them.

Islam has its own point of view, it disallows interest, but allows the charge of water-mill, keeping in view the principle of economic freedom. The logic of socialism is that income can be derived from work only, and the capitalist while lending money and the owner of the water-mill while letting it out have performed no work, and hence they are not entitled to any remuneration.

Anyhow Islam does not allow the capitalist to charge interest, but allows the mill-owner to let his mill, because this policy is consistent with its theory of distribution. As such is there any valid reason why capitalism and communism are called schools of economics and Islam is quite different from the theories of capitalism and Marxism, and as such should be regarded as a third school of economies along with them.

(ترجمة: ماذا تعرف عن اقتصادنا للسيد محمد باقر الصدر)

The above is one of four articles, together meant as introduction to Islamic Economy

  1. Physiocrats on Wikipedia
  2. Hadiths: meaning the sayings/traditions of Prophet Muhammad & his House-Hold, peace and blessings of Allah be upon them.

Further reading:


Mohammed Berdai said...

Thanks Mohammad. It was a long read but an insightful one.
Keep up the good work!

MJ said...

And thank you too Mohammed for reading it. I do appreciate it.