Aspects of Islamic Economics

Suntou Touray, October 2008.
What is Islamic Economics?
Introductions:
The question on a face value seems very easy to understand but on close scrutiny, the question is very unusual. This is so because economics as a field or discipline is well defined and tones of text and resources are available on the wider subject.
The purpose of the question is to trigger a thought provoking analogy of comparative economics. When one asks what is Islamic this or that, the questions straight away implies faith-base concepts and key elements. To understand anything Islamic, one requires a certain amount of religious understanding of the Muslim world view and perspective.
To clearly demonstrate an understanding of the question, the term or definition of economics in general must be stated and then a specific explanation of the Muslim or Islamic understanding on economics.
Economics as a social science is define in many different ways. One such is the Penguin dictionary of economics. “The study of the production, distribution and consumptions of wealth in human society”. (Bannock, G; baxter, R,E and Davis, E; 2003, pp 114-115)
This simple definition is what economics is commonly defined with but other writers has their own explanation of what economics is. For this short topical essay, time and other limitations will not allow me to divulge further into the disagreements about the different definitions and explanations of economics. Conventional economists understand it in the secular concepts. This means the production, distribution and eventual consumption of goods and services are perform without any spiritual attachments or conditions. The means to produce say a bag of flower does not have to take account of how the original capital is secured to start the production facilities. Whether this is by bank loan at an interest or otherwise is of little or no importance.
There are two key economic concepts according to ken Ferguson, command economy, the market economy or a mixture of both. Islamic economic system can also be a mixture of both but not purely command. Command economy is where “resources is decided by a central administrative process” the central government allocate resources to sectors of the economy. Whilst the market economy is where the “the allocation of resources is accomplished by the forces of demand and supply”. The free market doctrines, no central government interference, the market regulate itself. (Kerguson, K; 2002, pp 2-5)
In all this brief explanations of economics, there is no religious or spiritual dimension postulated by the writers. This is because that has no bearing on the forces of economic functions.
Now then what is Islamic economics?
Islam is a faith based religion that teaches the belief in One God and that God through is prophets teaches man how to live a social responsible life with a spiritual and ethical dimension. The quran states that “everything on earth is created for man utilisation” (Al-quran 2:29). This declaration comes with a conditions of values, “righteous living” by which the wellbeing of man is safeguarded.
Men are advice to work and make a honest and ethical living, the quran states that “and the monasticism which they have innovated, we did not prescribe it for them”.(Al-quran 57:27)
Umer chapra further elucidated that every sector of the human society is regulated by spiritual means. He went further to state that
Actions in every field of human activity, including the economy, is spiritually provided, it is harmony with goals and values of islam. It is really these goals and values that determine the nature of the economic system of Islam. (Capra, Umer; 1996, pp 5-7).
What Dr Capra in the above commentary did is to make a clear distinction between the muslim world view and the western conventional economic world view. The Islamic economics in short takes its guidelines from the scriptures as explained by scholars and muslims economist.
These are the economic goal that Umer Chapra is referring to:
A. an economic well-being within the framework of moral norms of islam.
B. Universal brotherhood and justice
C. Equitable distribution of income
D. Freedom of the individual within the context of social welfare.
The above goal are a starting point according to Chapra, but they are a basis by which muslim economist can advance the course of the debate.
Dr Khushid Ahmad has sum-up the need for Islamic economics so accurately, it needs stating here. All other economic concepts adopted by muslim countries fail to yield any economic development. The package western economic policies also fail to have any impact in directing economic growth.
He went on to state the pattern by which Islamic economics can be adopted.
The first premise which muslims want to establish is that economic development in an Islamic framework and Islamic development economics are rooted in the value-pattern embodied in the quran and sunnah. And the second premise is that the approach clearly rules out imitativeness. (Ahmad, K; 1994, pp 6-10)
This above statement indicates the wiliness and attitude some Muslim scholars has towards directing the affairs of the muslim economic debate. Imitation has been a destructive element in the affairs of Islamic states, the government apparent inferiority concepts in their own potentials and ideals drove them to copy everything western whether good or bad for their value systems.
The capitalist and socialist economic orders fail the muslim world.
Tagi usmani have this to say on why muslims needs an alternative economic order free from the greed of capitalism and the lack of direction of communism.
The economic principles taught by the Quran and Sunnah of the Prophet (Sall-Allahu alayhi wa sallam) are quite capable of solving the major economic problems faced by the world today. While they allow private ownership and market economy, they also provide a well considered system of distributive justice, which may eliminate the inequities and bring about a system in which profit motive works with the collective interest of the society. (Usmani, Tagi; 2008)
The main reasons of muslims wanting Islamic economy as their way of dealings is rooted in what Taqi Usmani referred to has, “the economic principles taught by the quran and sunnah”. Muslims are not satisfied with any economic principles just to get on with their every day transactions; they need an order than conforms with their faith.
Nejatullah Siddiqi on his part in the Islamic economic debate, highlighted the concept of Tawheed. He defines Tawheed as “ a coin with two faces: one implies that Allah is the creator and the other that men are equal partners or that each man is brother to another man”. (Siddigi, Najatullah; 1988,pp 4-8)
The above concept is talking about the relationship between man and God and man and man. This relationship should be based on honesty and ethical values. Man shouldn’t oppress another man. The overall over-seer is God the most high. Muslims with inbuilt God-consciousness will avoid deception, injustice and corruption in their everyday dealings. Whilst some aspect of capitalist ideals may look fair, but in reality they are tools for the powerful to oppress the weak. This is what the whole Riba system is about.
The Quran clearly teaches Muslims of certain economic behaviours.
Eat and drink of that which God has provided and act not corruptly, making mischief in the world (Al-Quran 2:60)
Another verse states the following: O mankind! Eat of what is lawful and good on earth and follow not the footsteps of the devil (Al-Quran 2:168). The Quran as the supreme source of information for Muslims further commanded: O you who believe! Forbid not the good things which God has made lawful and exceed not the limits. Surely, God loves not those who exceed the limits. And eat of the lawful and good that God has given you, and keep your duty to God in whom you believe. (Al-Quran 5: 87-88) cited by Chapra (Chapra,U; 1996, 6-7)
This above verses are just a few among the many Quranic injuction on believers every day dealings.
The prohibition of interest is key to muslims determine to find an alternative economics system. Interest according to Siddiqi is the root cause of instability, the key concept of “liquidity preference” is sternly criticised. Siddiqi further cited many renown muslim scholars who hold similar views among them, is Uziar, Mawdudi, Mannan. All those scholars linked the “the institution of interest occurrence to crises in the economic system”. (Siddiqi, N. 1988, 62-63)
Interest most be avoided by muslim at all cost, this ruling makes Islamic economic a necessity and a system that muslims must institute.
Conclusions:
Islamic economic from the above facts can be define as a system of everyday dealings that conforms with the Quranic teaching and the ways of the prophet of Islam. The economic mechanism that tries to avoid Riba, exploitations and unjust taxations. A system that don’t only allow the rich and powerful to dictate economic policies can be considered an Islamic economics.
All the writers cited above linked the Islamic economic principles with Quran and Sunnah whilst the conventional system doesn’t link the economic order with any faith or religion. Where has it may comment about moral values, this is not in the religious sense. Islamic economics links mans’ actions with his hereafter. The responsibility of catering for the needs of this life whilst bearing in mind the condition of meeting God. This makes clear distinctions between a Muslim and a non-Muslim. Our actions are not just judge here, also in the afterlife. The Islamic economics thoughts gave rise to the Islamic financial industry which is now worth more than 1 trillion dollars in Assets and product value. The industry is growing at a rapid paste and the future is looking good. The global financial crisis has had little impact on the islamic financial sector, beacuse that industry forbid dealing in bonds and colaterised securities.

References:
Ahmad, K. (1994) Economic development in an Islamic framework. Leicester U.K, Islamic foundation. PP 5-16
Bannocks, G (2003), The penguin dictionary of Economics. Suffock, U.K: penguin books, pp 114-115.
Ferguson, K (2002), essential economics: a guide for business students. Hampshire, U.K: Palgrave macmillan, pp 2-5
Chapra, Umer. (1996), Objectives of Islamic economic order, Leicester U.K: Islamic foundation, pp 5-8
Siddiqi, M, N (1988). Muslim economic thinking: A survey of contemporary literature, Leicester, U.K. The Islamic foundation, pp 4-25
Usmani, Tagi (2008). The Economic Challenge for the Ummah: Restructing our Economic Systems, available at: < http://www.albalagh.net/Islamic_economics/economy.shtml> accessed on the 28 october, 2008.