“Islamic Economics” – Islam less, economics more-1

Dr. Javed Jamil   في السبت 28 يونيو 2008

In His Name

Scientific and Social Theories

Derived from Quran-63


Dr. Javed Jamil

Executive Chairman

International Centre for Applied Islamics


Part 3

Theory of Economics – 19

“Islamic Economics” – Islam less, economics more-1

“Islamic Economics” is of course an attractive term, not only for the pious who want to be governed by the Shariah but also for the non-Muslims who aim to cash in on the Muslim proclivities. We are living in a world where economic fundamentalism rules; it is an ideology based on the supremacy of economics in the world affairs. Now that the economic fundamentalism almost everywhere in the world is practiced as market economics, markets are the ultimate judges of what is good or bad for society. If something suits the markets, even the human weaknesses can be commercialized to the hilt; if something threatens the market, it cannot be allowed even if it protects society from medical and social hazards. Morality and healthiness have no standing in the face of profitability. When I penned “Islamic Model for Control of AIDS” in 1996 and included circumcision as part of the programme to control AIDS, along with an effective campaign against promiscuity, prostitution and pornography, I was ridiculously asked by a Hindu sociologist, “Do you now want to circumcise all Hindus?” “Yes I want”, I replied, “because it can protect them against a killer disease.” “No way”, he retorted. “But my dear friend”, I argued with him, “you will see that out of all the components of my programme, circumcision is the only one that will be accepted by the world bodies in due course of time. All others will be rejected.” He looked amused and asked, “Why?” I told him that circumcision would be accepted because it was the only component not detrimental to the interests of the market; it could in fact open a new business. Other components like ban on prostitution and pornography would never be accepted because any such ban would mean a death blow to a number of trades. After about 8 years of the publication of that book, the WHO accepted circumcision as part of AIDS control programme. On the other hand, sex trade has grown ten times in that period.

Recently one of my friends had a long argument with me about my theory of economic fundamentalism. I was explaining to him how economic fundamentalism was fusing with different ventures to give rise to new programmes and concepts. He wanted some examples. I told him that the latest is what we were witnessing right now in India : fusing of economic fundamentalism with Cricket to produce IPL 20-20 bonanza. He asked me if there was any way religion that can be fused with economic fundamentalism. “Why not”, I told him, “if you ask for the complete fusion of a religion with economic fundamentalism, the result is the fusion of Hinduism with economic fundamentalism leading to the religion of Rajneesh.” “Can there be a fusion of Islam with that also. “ “Yes, it is already in the progress at a partial level.” He jumped in his chair, “where and how?” “Though there are many smaller examples” I said, “the most glaring one is what is being called Islamic Economics. It is no wonder that not only Muslim corporate are leaving no stone unturned in making it a hit, the non-Muslim market forces have realized its great potential, and one country after another is planning to introduce Islamic economics as soon as possible. Muslims after all are no small community. More than 1400 million people and more than half living in wealthy countries – how can such a big junk of consumers can be ignored?”

That “Islamic Economics” is a tiny part of the true Islamic Economics and is growing only because it befits globalization will be examined shortly. But the truth remains that, whatever the reasons may be, it is growing fast.. According to, Saleh Kamil, a prominent Saudi businessman and a pioneer in the field, Islamic banking is growing at an annual rate of 35 percent worldwide with assets of Islamic financial institutions amounting to a staggering $600 billion last year. There are more than 470 full-fledged Islamic banks and financial institutions around the world. “Their number rose from 276 in 2005 to over 470 in 2007, Islamic banking, which started as experiments of individuals like Prince Muhammad Al-Faisal and Kamil, the founding chairman of the Jordan Islamic Bank for Finance and Investments, the Arab Union Investment Company of Egypt and the Islamic Arab Insurance Company, has now become a full-blown industry recognized by international bankers and economists. There are more than 300000 employees working in the Islamic financial institutions. A report entitled Islamic Banking: Is It Really Kosher?by Aaron MacLean says:
“A. Hassan of Deutsche Bank predicts that Islamic finance will be the world’s fastest-growing banking sector for years, based on what he calls a modest estimate of 20 percent annual increases in deposits…. Governments are getting in the game, too: Japan is planning to become the first non-Muslim country to issue sharia-compliant bonds; the UK, Gordon Brown announced last summer, is revising its laws to make London the “gateway” for Islamic finance in Europe; and Malaysia has proposed substantial tax incentives in its 2007 budget for its Islamic financial sector. …..Deutsche Bank, Chase, and HSBC, the giant London-based financial institution with an extensive presence in Asia , have all entered the sector within the last ten years. Their moves coincide with rising oil prices, echoing a phenomenon three decades ago. When the 1970s oil boom gave Muslims and their governments wealth that seemed barely countable, Islamic financial institutions bloomed: the Islamic Development Bank (1975), the Kuwait Finance house (1977), the Faisal Islamic Bank of Egypt (1977), the Jordan Islamic Bank (1978), and others. In 1979, Bank Misr, a conventional financial house in Egypt, became the first mainstream bank to build a halal subsidiary, which in the late 1990s began to attract more capital than its chief domestic competitor, the Faisal Islamic Bank…..Oil prices and religious fervor are both on the rise again. This time, Western financial firms have noticed that you don’t have to be Islamic to bank in accordance with sharia. All you need is a board of religious scholars to approve your operation. Muslim is as Muslim does.”

The last remark in the report sums up what “Islamic Economics” is all about. As we will see below, “Islamic Economics” is only a tiny portion of True Islamic economics, the portion that is acceptable to Muslim and non-Muslim protagonists of globalization, and should better be called “Muslim Economics”. True Islamic Economics has to be an economic system for the whole world, the current model of Islamic Economics is nothing more than a world economic system for Muslims. If Muslims are celebrating, it is only because it is helping some of them in reaping huge benefits and is satisfying the religious concerns of some others, for whom Islamic economics is nothing more than an interest-free economy.

To understand the true nature, scope and extent of the Islamic philosophy of economics however, we will have to discuss in detail what Quran intends and how the aims of Islamic philosophy are different from the current philosophy.

1. The current economic philosophy that rules the world revolves around economic fundamentalism, which dominates all the spheres of life. Its overriding influence can be seen in all the programmes at every level and in every field. Islamic economic philosophy is based on the supremacy of peace, which is a comprehensive state covering individuals, family and society; human peace, health, security and welfare are the guiding factors, and howsoever strong are the economic reasons, any activity that threatens comprehensive peace cannot be permitted.

2. In Islam, economics cannot be seen or developed separately from the grand objectives of the system; the economic system has not only to work within the framework of Fundamental Rights, Fundamental Duties and Fundamental Prohibitions but has to play a proactive role in achieving those objectives. In the current economic scenario, market forces rule and play the most decisive role in determining what is good or bad for society; their interests are often directly opposite to the interests of a healthy, secure and peaceful society.

3. In Islam, all actions are economic activities but it makes a clear distinction between prohibited, undesirable, desirable and highly desirable activities depending upon their effects on society. An activity that is prohibited cannot be allowed to take place; if it takes place, the culprits will have to be punished in accordance with the procedure of Law, the punishment being proportional to the dangers posed by the activity. In the current international system dominated by the market, only an activity that is supportive of the market interests is a desirable economic activity; other activities are either totally disregarded or are given minimal importance. I will give a few interesting examples. Suppose, a patient comes to a doctor friend and receives medical care worth 20 dollars. But the doctor obliges him by not taking any charges from him. In return, the patient, a Car mechanic, rectifies his car, an activity for which he would normally charge 20 dollars. But he obliges his doctor friend by not charging anything. Now, these activities will not find any place in the Gross Domestic Product of the country, as no currency has been exchanged. If on the other hand, the mechanic would have given the doctor 20 dollars and the doctor would have given the mechanic 20 dollars, an economic activity of 40 dollars would have been recorded. If a woman serves food to her husband, she performs no or an insignificant economic activity but if she serves food to a customer in a hotel, this becomes a significant economic activity. If one sleeps in one’s own house, howsoever palatial it is, he does not perform a significant economic activity, but if he sleeps in a hotel, howsoever cheap it is, it again becomes a significant economic activity.

4. The aims and objectives of Islamic philosophy of economics are for the whole world, not just for the Muslim world. Its aims are: (1) To ensure the overall peace in society at every level: individual, family, national and international; (2) To ensure that no individual or group of individual indulges or is made to indulge in any activity that is dangerous to their own health or the health of others or for the general level of peace and security of society; (3) To ensure that all the activities are duly rewarded in accordance with their benefices for society or punished in accordance with their hazards. (4) To ensure that while individuals are given adequate freedom to engage in economic activities of their liking, society acts proactively to reverse any large scale disparities and prevent all forms of exploitation; (5) To ensure that the disabled, the less privileged, the needy and the ones who sacrifice themselves for larger aims are duly protected, socially and economically; (6) To ensure that the diverse abilities of individuals are given societal and economic support.

Unfortunately, “Islamic Economics” has been reduced to Islamic finanaces meant for Muslims and has failed to address the needs of the world. An article, “ Islamic economic jurisprudence”, appearing on Wikipedia and “Islamic Economics” says:
“Islamic economics is economics in accordance with Islamic law. Islamic economics can refer to the application of Islamic law to economic activity either where Islamic rule is in force or where it is not; i.e. it can refer to the creation of an Islamic economic system, or to simply following Islamic law in regards to spending, saving, investing, giving, etc. where the state does not follow Islamic law.” The definition fails to capture the Quran’s philosophy of economics and does nor indicate the basic aims of the Islamic economics. In the following definition, I have tried to capture the true nature of Islamic Economics:

”Islamic Economics refers to the establishment of a world order where people, individuals or groups, are free to earn their livelihood through rightful use of the provisions of God and their abilities, natural or acquired, without the violations of the true goal of Comprehensive Peace that Quran envisages, that is within the boundaries of the three-dimensional system of Fundamental Rights, Fundamental Duties and Fundamental prohibitions, and the establishent of a system that ensures comfortable living for each and every human being including those who are in a disadvantageous position, temparily or permanently, due to some reason.”

It needs to be emphasised that economics is not just about the currency but isalso about the work and services; it is not just about the goods and services produced by the big idustry but also about the services of all kinds and goods of all kinds produced by all the individuals and all the groups, small or big; and it is not just about the calcualtion of Gross Domestic Product, Annual Growth and Per Capita Income but also about the effects produced on individual’s health, family peace, social order and mational and international peace. The position taken in the above statement is quite different from the current international definitions of economics as well as from the so-called Islamic Economics. The modern economic system dominated by market economics is not ready to accept anything that restricts its functioning, does not care about the adverse effects of economic activities and is not interested in helping the needy at the cost of the interests of the market; if it makes any concessions it is only for political reasons so that their position does not face any substantial challenge from society. “Islamic Economics” on the other hand is nothing but the continuation of the modern economic system with minor adjustments to suit the religious requirements so that the money of Muslims can be attracted and the clerics are kept in good humour. Islamic finnace simply involves legal tricks to make it look compatible with Shariah in finer details without changing in any substantial degree the economic philosophy behind the system, which continues to be nearly the same as that of the market economics. It is only a legal exercise, nothing better than the other famous Shariah tricks like Halala and Tamleek. The effects of such a financial system, especially in absence of a coexistent fiscal policy based on the spirit behind the Quranic directives, are only marginally if at all different from that of the modern finnacing systems. In addition, it is an abysmal failure in influencing in any way the direction of the globalisation, which revolves around the commercialisation of not only human strengths but also of human weaknesses.
(Note: Tamlik is a dubious method used by Islamic clerics and madrasas to use the collected funds in a way that their use is justified on the basis of Sharaiah. The collected amount is packed in a bag and the bag is gifted to a poor but loyal person who knows in advance what is expected from him. He is then asked to sell the bag to the madrasa for a paltry sum. Now as the madrasa has purchased the bag, it can use the money the way it likes. Halala is another method to take back a divorced wife to justify the Quran’s directive that after three divorces a woman cannot be taken back by her divorcing husband except if she happens to marry another man and he happens to divorce her. Now Halala is an exercise in which the divorced woman marries a man who knows what is expected from him. After some tine, often within days, he divorces her and thus makes her legally acceptable for her former husband. Similar legal tricks are used in Islamic Finances, which will be discussed later in this work. In short, all these are the legal tricks that follow the shariah in letter but kill the spirit behind the letter.)
We will return later to the full-fledged development of the Theory of Peace Economics based on the Quranic principles and its application in the current world. We will also see that the present day Islamic Economics is mainly related to microeconomics while macroeconomics is totally ignored; furthermore it is being presented for Muslims without any serious attempt to present an alternative Economic model for the world. First of all, we will focus on banking, stock market, tax system and the price mechanics. Rather than studying the technicalities, we will try to focus on the political aspects, hidden motives, ultimate aims and the effects of the systems. We will then try to develop the basic concepts of an alternative socio-economic system based on Quranic teachings.
Note of caution
I will like to clarify that I am not trying to undermine the positive developments taking in the field of Islamic Economics. However, if Quran’s philosophy has to dominate, much bigger and more revolutionary steps will have to be taken without which Islamic Economics will only remain an eywash aimed at getting the support of clerics.
To be continued…

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