First Principles In Islamic Economics

Brief on topics reviewed in “First Principles of Islamic Economics” by Sayyid Abul A’la Mawdudi(rh):

“The Muslim world was a global economic power for several centuries, and it was not until the Western Enlightenment that economic stagnation or decline began to occur; and this lasted for more than 300 years” – Foreword

This is when the decline of the Ummah and the Islamic state started to take place and this is when Muslims started to gather to question where exactly we went wrong.

Was it that Islam was no longer relevant to solve societal problems?

“The lowest point was the abolition of what was left of the symbolic Khilafah in 1924” – Foreword

This was the crucial point where many Muslim intellectuals and prominent thinkers came in with their work for the revival and reconstruction of a broken Ummah.

Amongst these names are Muhammad Iqbal, Hassan al Banna, Sayid Abul Ala Mawdudi and a host of other intellectuals and reformers who came up with positive responses in their work to steer this Ummah towards revival.

“In spite of not being a professional economist, Mawdudi’s contribution to Islamic Economics was significant. He will go down in history as one of the few great scholars who laid down the foundation for the development of this discipline in modern times. Nearly all these writings in this field in Indo-Pakistan sub-continent as well as other Muslim countries have been influenced by and owe a debt of gratitude to him” – Foreword

The author has emphasised that we have a problem where our analysis is delinked from our reality as human beings. Economics should not be treated as the exclusive study for the problems of man.

It is true that man needs to acquire the basic necessities to survive and he has a need to earn a living. However, he also has a psyche and an emotional aspect with the desire to procreate. He has a spiritual aspect that should also be satisfied and he cannot be oversimplified.

The psychologist wants to study human behaviour to solve the problem. The scientologist views human beings as mere animals with a mere instinct to survive, to have sex and to pass on the genes; this being the main focus of his study.

Rather, the entire human being must be taken as he is and we cannot take only the study of Economics as the sole basis to solve societal problems, just as we cannot take Psychology as the only study to resolve the problems of man.

With this, the author emphasises an extremely important point- i.e. the Islamic Economic System cannot work independently being an isolation of the entire Islamic system which acts as a framework and a structure of all the Islamic morals and laws that are to be upheld in a state.

With a clear and better understanding of the entirety of the Islamic Economic System, we can understand why Islam cannot merely replace Capitalism but it must also replace the entire ideology- i.e. Islam must replace Capitalism, Secularism and Liberalism in the Muslim world in order to function effectively.

In short, Islam is to be implemented fully including its comprehensive Economic System in order for it to flourish.

Part Two of the book is about the application of the Islamic Economic System and how this can be achieved. The author has emphasised that this is an area where we can acquire fresh guidance for Ijtihad, so that Islam can be applied to the current reality.

The Foreword highlights some prominent scholars who contributed their ideas and thoughts to the discussion of Islamic Economics. Imam Abu Hanifa(rh) documented his response to thousands of queries concerning issues of economic and fiscal significance in the light of Quran and Sunnah. The extremely famous student of Imam Abu Hanifa(rh) was Imam Abu Yusuf(rh) who wrote the monumental Kitab Al Kharaj about the laws relating to land revenue, public finance and fiscal policy.

A revolution is unfolding in this very era. Capitalism is dying and Communism is dead. There are only 3 Economic Systems that remain in the realm of discussion- the Capitalist system, the Socialist system and the Islamic System.

The topic of Islamic Economics is relevant and it is practical in a world where about two thirds of the world’s population are steeped in extreme poverty and the collapse of businesses and banks have become a trend.

Furthermore, the Islamic Economic System along with the entire framework of Islam has been tried and tested for over fourteen centuries and it has proved itself through practical application. It is a system that promotes distribution and circulation of wealth with true and practical solutions to dissolve poverty.

Africa was not known as the poverty hub of the globe when the Islamic State existed. It is no understatement that the imperialists and the colonialists would occupy lands, where they would oppress the people, enslave them and rob their natural resources.

Adam Smith is considered to be the founder of the ideas behind Capitalism with Karl Marx being the thinker and philosopher for the Socialist thoughts and ideas. Both have been included in the book “The 100 Most Influential Men” by Michael H Hart where he has placed Karl Marx in 11th position and Adam Smith in 37th position.

However, the Prophet Muhammad(saw) has been placed in number 1 position.

Michael H Hart justifies his choice insisting that the Prophet of Islam was the only man who was extremely successful in both the religious and secular platforms.

He elaborates and he also makes the point that most of the people included in his book were privileged being able to receive a quality education with an existing high ranking in society. The Prophet Muhammad(saw) was an orphan and the people did not notice any signs of an entire legacy to follow him.

He(saw) did not have this privilege yet he became supremely successful on all levels.

The author mentions how in Islam we aim to have equity but not necessarily equality.

Equity is that the people have the opportunity to pursue business, to have an education, to succeed and to earn a decent living. The opportunity should be open for all people regardless of their social background, ethnicity or tribal setting.

However, equality is a different concept and Islam does not view that we should aim to equalise people. This would have disastrous consequences and this would only act as an obstacle for society in its quest to progress forward.

Allah(swt) has blessed some people with better intellectual capacity, physical strength, eloquence in speech or family background and it is only natural that some would perform better at certain tasks than others. The economic setup should facilitate that individuals are able to reach their peak.

Any attempt to artificially control this would only halt progression and this would be suppression and oppression to the human self. A human being should be allowed to reach their full potential within the boundaries of the Shariah.

“No “ration” that is issued by the authorities for subsistence, however plentiful, can ever be pleasant and nourishing until the key to that “ration” is in the hands of the person himself. A bird in a cage, though adequately fed, may grow fat but will never be fit to fly unless it is set free” - Introduction

A person should be able to earn a living independently and he should be given the space in our economic social setup to have freedom of conscience with the ability to grow and prosper according to his skills, learning and experience. He should be able to compete and involve himself in business and it should not be that he is enslaved by the parties in power.

The author has emphasised that the limits of how a person is able to earn a living is set by those limits that we can take from Quran and Sunnah.

Many of the means that men have used to make millions in the Capitalist system are simply declared Haram in Islam as they are damaging to the society as well as the economy. Such practices might involve hoarding of wealth and resources to artificially increase market value, speculation, obscenity and the promoting of immoral practices, gambling, lottery and so on.

Islam affirms ownership rights of man over his wealth but this is not unlimited. He is only allowed to spend in that which is Halal.

The author makes the point very early on that the “ways and means” should be seen as the catalyst for production of wealth. Islam is more focussed around strict observance of its core principles on a permanent basis irrespective of the shape that the economic affairs of mankind may take. The ways and means will change over time with the needs of human beings as civilisations march on.

“The common man has become so overawed by the high sounding jargon and terminologies of this social science and the scholarly hair-splitting by economic wizards that he seems to lose all hope of any prospect of improving his lot, in the same way that a patient thinks his condition is hopeless on hearing some quaint Latin synonym for his disease from the physician’s mouth” – Page 3

The economic problem according to Capitalism is that there are unlimited wants and needs of human beings but there are only a limited number of resources available in this world.

There is a deep problem with this Capitalist economic problem. Through its rather passive approach, it seems to almost encourage greed promoting our modern day “economic animals” to exploit the people, their wealth and resources from a global perspective. It seems to say nothing but “this is just the way it is” and “survival of the fittest”.

The Capitalist economic problem seems to completely ignore that these wants and desires that are classified as “needs” must have limits set upon them to remove exploitation and modern day economic slavery.

When we classify material obsession as “needs” we only promote greed, unfair competition, exploitation and an economic structure that is no different than beasts competing against each other in the animal kingdom.

Before any Adam Smith or Karl Marx or any Enlightenment phase had taken place the Prophet Muhammad(saw) had said the following about the basic needs of a human being:

"The Son of Adam has no better right than that he would have a house wherein he may live, a piece of clothing whereby he may hide his nakedness and a piece of bread and some water." [Tirmidhi]

The Prophet Muhammad(saw) defined the basic necessities of the human being fourteen centuries ago while the Capitalist way of thinking continues to define everything as a “need” with consumption being the sole purpose of survival.

“Mankind’s economic problem, viewed simplistically and keeping aside linguistic and technical nuances, would appear to be no more than a question of how best to acquire the basic necessities of life, while at the same time trying to maintain the pace of socio-economic progress and ensuring that every member of society has the opportunity to make the best use of his qualifications and potential” – Page 7

The rest of the Capitalist economic problem claims that there are a finite number of resources, which are unable to meet the infinite needs of human beings.

This is flawed in the sense that the Prophet Muhammad(saw) has already taught us that the needs of human beings are not infinite but rather they are limited. As for the world, there are plenty of resources to fulfil these needs. Part of the bigger problem is distribution – the aspect that Capitalism has left to the free market and price mechanism.

“The world already produces more than 1 ½ times enough food to feed everyone on the planet. That's enough to feed 10 billion people, the population peak we expect by 2050” – Huffington Post (http://www.huffingtonpost.com/eric-holt-gimenez/world-hunger_b_1463429.html)

The author emphasises the point that Capitalism makes no arrangements to distribute surplus produce to the poor and needy and he describes this as a “satanic economic order”. He continues and he explains that we live in a world where wheat and other foods are dumped into the ocean while people die hungry in third world countries.

It seems that Capitalism only assumes that we must increase production and produce more capital or consumption goods. The author terms this as “capital worship”. From the Capitalist perspective the economic problem is that there are unlimited needs of human beings so increased production is the only way to solve poverty enabling a greater supply of resources. This is also why there is a great emphasis on GDP figures.

The author makes the point that the root cause of economic mismanagement is due to the selfishness and corruption that is encouraged and is allowed to exist as part of a corrupt social economic environment. The intrinsic goodness in human character isn’t given the opportunity to play a role and this would not be the case if there were a system in place that would establish justice with the rule of law. Rather, we have a few rich individuals who are only devoted to grabbing more economic resources for their own personal comfort, luxuries and enjoyment.

This is explained telling what seems to be a story of how the rich refused to share or invest their wealth back into society but rather they used their wealth only to pursue their own desires and those luxuries they wished to enjoy.

“The human capital that very well could have been used in the service of civilisation and culture was instead utilised to satisfy their personal lust and egos. They saw fornication as a need for which they recruited a class of professionals, like pimps and prostitutes. They believed they needed music, and thus came into being a whole host of groups and bands of dancers, singers, vocalists…” - Page 10

He continues and he explains that they were so deluded that they could not see that their own corruption and greed with their refusal to help the poor and the rest of society only left a large segment of the society morally, spiritually and physically bankrupt. They felt the need for large mansions, villas and impressive structures just to be buried in and so it was also a waste of capital and labour, which could have been used to benefit society by perhaps investing this to build homes for the homeless.

It is also quite important to point out that no matter how much wealth one is able to obtain this is meaningless if a person is not able to enjoy safety and protection. When there is such a large difference between the poor and the rich we can expect crime to increase with thefts, robberies and kidnappings becoming more of a regular occurrence.

So, the refusal of the rich to help the less fortunate actually affects their economic and social well-being. A rich person who cannot sleep at night is mentally bankrupt and there is no price for safety and wellbeing.

It would be interesting to compare works on Islamic Economics between the Islamic thinkers and movers across the last century.