Islamic Economics in the Light of Quran o Sunnah

8/9/2019 Islamic Economics in the Light of Quran o Sunnah

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ISLAMIC

ECONOMI

C SYSTEM


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CurrentDebateAmongMuslims

What was there in the message of Islam which changed the course of human history?

Does this message have the same power, relevance and importance today as it didfourteen centuries ago?

As we have seen, non-Muslim historians acknowledge the power of the message ofIslam, in its historical context !owever, they "elieve that this power was availa"le insimpler times, and is no longer relevant to the complex modern world #he simplemessage of Islam no longer has the power to radically transform human lives andliving experience, and to change the course of history

$adly and unfortunately most Muslims have also come to agree with this westernanalysis #hey "elieve that progress of Muslims today depends on mastering%hemistry, &iology, and 'hysics, and on ac(uiring democratic governance,industriali)ing, and generally imitating developments in *urope over the past threecenturies or so


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Scarcity inIslamic &WesternView

+$carcity is at the heart of economic theory If there is ana"undance of all material wealth, then there would "e no need todiscuss economic issues

After agreement on this fundamental issue, Islamic economics andconventional Western economics part ways

#he Westernanalysis of the causes of scarcity, how to handle thepro"lem, and the conse(uences of solving the pro"lem are radicallydifferent from Islamic views #he purpose of this note is to discussthese differences and argue that the Islamic views are superior, andin accordance with o"servations


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Selfishness &Greed orCooperation?

*conomic text"ooks teach us that men "ehave purely selfishly

Islam teaches us that men have "oth the tendency towards evil, and thecapa"ility of "eing good

When we look at the world, we o"serve very large amounts of charita"le,compassionate and self-sacrificing "ehavior, which violates the teachings ofeconomics theory &ecause of the wrong predictions of economic theory,economists are almost always surprised "y the results of the ultimatum game,which show that human "eing often choose to take a loss rather than "etreated unustly .%amerer /0012

#hus, empirical evidence strongly favors Islamic views over those taught incurrent conventional economic texts


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Comparison withNeoclassicalViews

*conomics text"ook agree with the idea of men "eing motived "y thelove of worldly possessions expressed in verse .314562

!owever, neoclassical text"ooks do not mention the possi"ility of

.317472 8 that men may "e generous enough to give to others evenwhile "eing poor themselves

Money donated to charities forms a significant component of the 9D'in most countries, and charita"le "ehavior is an important element ofthe social safety network for the poor

#he 3uran places great emphasis on spending for the needy, "ut thereare no chapters on charity in neoclassical text"ooks


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ComparisonwithNeoclassicalVie

&ecause of their single minded focus onselfishness, some economists have even

attempted to explain altruism as emerging fromselfish motives .if we help others, they will helpus in times of our need2


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TheNeeds &WantsDistinction

Islam encourages fulfillment of needs : discourages fulfillment of idledesires

%onventional economics does not make such a distinction

#he Islamic view matches o"served "ehavior and is essential for sustaina"ledevelopment

#he luxurious lifestyles currently "eing pursued "y the rich are causing

tremendous amounts of environmental damage and can neither "e sustainedinto the future, nor can they "e shared with the masses

#hus Islamic views offer greater wisdom than is contained in currentconventional economic text"ooks


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IslamicViews onNeeds &Desires

; %hildren of Adam< #ake your adornment ."y wearing your clean clothes2,

while prayingand going round .the Tawafof 2 the =a>"ah, and eat and drink "ut

waste not "y extravagance, certainly !e .Allah2 likes not those who waste "y

extravagance2 . $urah Al-Araf 4 152 !uman needs are limited

Wants or desires are unlimited

If Adam>s son had a valley full of gold, he would like to have two valleys,for nothing fills his mouth except dust .of the grave2 And Allah forgives himwho repents to !im

.Al-Bukhari: Volume 8, Book 76, Number 447)


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NeoclassicalTheoryRejectsNeeds &WantsDistinction

%omplex historical processes starting with the corruption of the %atholic

%hurch, su"se(uent emergence of 'rotestant sects, and their violent fights

with each other, led eventually to the reection of faith in *urope

In accordance with the !adeeth that the life of this world is a prison for

"elievers "ut heaven for the un"elievers, one of the high priorities of secular

thought has "een to "uild heaven on earth, "y pursuing wealth and desires

as much as possi"le

#here is a tension "etween pursuit of selfish desires and social harmony,

and resolving this was one of the maor issues tackled "y secular political

philosophy in *urope


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While religious thought condemns selfish "ehavior, a secular worlddemanded a philosophy to ustify freedom to pursue self-interest so as to"e a"le to enoy a heaven on earth .which would replace the heaven inafterlife promised "y religion

#he invisi"le hand was the first such philosophy, which suggested thatselfish "ehavior would lead to socially optimal outcomes $u"se(uentdevelopments have also "een motivated "y the need and desire to ustify

the maximum amount of freedom for all economic agents

As 9al"raith recogni)ed4 +#he modern conservative is engaged in one ofman>s oldest exercises in moral philosophy that is, the search for a

superior moral ustification for selfishness


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In economic, political, and social domains, secular Western thought has "eendriven "y the idea of giving as much freedom to individuals as possi"le

Within economic theory, ustification of free markets has "een a central concern#he %hicago school and Austrian economists represent a polar extreme indefending free markets even in the presence of monopolies, externalities and othermarket imperfections

#he 9reat Depression of 57/7 led nearly everyone to the clear recognition that freemarkets can lead to catastrophic performance and misery for millions, and madesocialist and communist solutions to economic pro"lems appear attractive to many

=eynes rescued the free market "y providing a theory which suggested that freemarkets would function well as long as the government ensured full employment

"y fiscal or monetary policy


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Causes ofScarcity

;ne Western diagnosis for the reasons for scarcity is that there are

too many people #his was initiated "y Malthus, and the ideacontinues to guide policy to this day

#he 3uran explicitly denies this idea, and states that 9od sends

sustenance for all his creation

Misguided Western policies "ased on the idea of surplus peoplehave caused tremendous damage, as well as degrading and devaluing

human "eings

Islamic views accord with the empirical data which shows that foodsupplies have kept up with population, despite tremendous increasesin population


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IslamicView:God isBountiful

#he 3uran tells us clearly that we need not fear that population willexceed the food supplies4

And kill not your children for fear of poverty We provide for them

and for you $urely, the killing of them is a great sin .$urah Al-Isra 4152

#o each these as well as those We "estow from the &ounties of yourord And the &ounties of your ord can never "e for"idden

.$urah Al-Isra4 /02 \J \S@ \J SX z[ {|} P B \H _ ~@^ Z@_CZ[\H @J V @XT

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Islamic scholars have concluded from these, and other verses, that there is

no scarcity at the level of needs, contrary to the views of Malthus and hisfollowers

#his is also in accordance with the data, which shows that the food topopulation ratio has remained remarka"le sta"le, despite tremendous

increases in population

Men informed "y the 3uranic vision would not have made the policymistakes documented in the previous section, which continue to adverselyaffect the world today
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And no .moving2 living creature is there on earth "ut its provision is duefrom Allah And !e knows its dwelling place and its deposit .in the uterous,grave, etc2 all is in a %lear &ook .Al-Lauh Al-Mahfuz - the &ook of Decreeswith Allah2

.$urah !ud4 2

#he 3uran pinpoints the nature of the pro"lem, and gives the exact solutionre(uired4

#he pro"lems of hunger, famine, and deprivation are created "ecause thewealthy do not acknowledge the right of those who are needy for a share of thiswealth

#he 3uran narrates the story of the owners of a 9arden who sought to avoidsharing the fruits of the harvest with the poor, and how their 9arden wasdestroyed "ecause of this


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Solving theProblem ofScarcity

#he Western viewon how to solve the pro"lem of scarcity is "y theaccumulation of wealth As discussed "elow, =eynes thought thatencouraging selfishness and greed in the society would lead to rapidaccumulation of wealth With enough wealth, all social, political, andeven moral pro"lem of man would "e solved #his has not turned outto "e the case empirically

#he Islamic viewis that there is no scarcity at the level of needs#here are enough resources for every"ody, "ut pro"lems arise

"ecause the wealthy do not acknowledge the right of the poor to ashare of their wealth #he solution is to encourage compassion,sharing, and to enjoin the good.


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WesternSolution toScarcity

As "elief in religion and afterlife diminished in the West, it was naturalfor them to turn to the pursuit of the pleasures of this world ack ofsufficient material resources was the "iggest o"stacle to this pursuit, andscarcity "ecame the central pro"lem for man

;ne of the most clear sighted statements of Western concepts in thisdirection has "een given "y =eynes !e thought it was temporarilynecessary to +pretend that fair is foul, and foul is fair for +foul is useful,and fair is not

&y pursuing wealth using foul means of avarice and greed, mankindshould free itself from the economic pro"lem, so as to "e free to turn tohigher pursuits


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IslamDenies theValidity of theWestern

Solution

#he 3uran denies that accumulation of wealth will solve thepro"lems of man

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Who has gathered wealth and counted it !e thinks that hiswealth will make him last forever

Islamic Economics in the Light of Quran o Sunnah

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