Economic System in Islam

By Dr. Jamal Badawi

 

Host: We have never heard of an economic system for Christianity or Buddhism; how does this topic relate to religion?

Jamal Badawi:

To start with from a broad perspective what is religion?  It is a set of beliefs which organize or regulate the relationship between the individual and his Creator, God, and between the person and other human beings, between the person and the universe and between the person and himself.  In that sense religion organizes human behavior.  One aspect of human behavior is economic behavior.  As economists put it in economics one is talking about human behavior in the area of production, distribution and consumption of goods and services.

When we discuss human behavior in economics or other areas their behavior is not value free or neutral in other-words the question of values and principles is part of that behavior and is connected with the ideological foundation of each faith.  From an Islamic prospective, economics as a part of human behavior in religion has been mentioned to be part of the mission of all prophets and messengers of the past.  In the Quran in (21:73) it mentions Abraham as well as other Israelite Prophets and social justice and the economic distribution of wealth (economics).  In (7:85) it mentions Prophet Shuaib and how he was teaching his people not to deal in fraud and to be just and equitable in their financial dealings.  In chapter 83 it condemns people who deal in fraud and those who do not give people their due right.  Even though we find this to be a broad characteristics of the teachings of all prophets we find that the followers of those religions have interpreted these teachings in a variety of ways (going from one extreme or the other).  Most people are familiar with some interpretations which view the enjoyment of life as something that should not be focused on and that a person who wants to achieve phallically and righteousness would do best by keeping away from worldly affairs and that wealth in its self makes difficult for a person to enter Paradise.  The Islamic economic system is not just a matter of broad appeal to voluntary charity which is not enforceable.  Islam gives a more comprehensive approach of economic life in its ideology, teachings and tenants.

 

Host:  Is the phrase economic system of Islam the same as economics viewed from and Islamic prospective?

Jamal Badawi:

Economics is a scientific field of study which focuses on the study of economic phenomena and tries to derive principles and laws which regulate the economy.  For example the laws of supply and demand which are matters that cut across a variety of economic systems and a variety of ideologies because it is a basic law in economic life.  The same applies to efficiency and production whether eastern or western economy is discussed one is still focusing on the same concept of being efficient while using a minimum amount of resources while maximizing the output.  However when speak of an economic system there can be many varieties: we could have a communist economic system, a socialist economic system, a capitalist economic system and an Islamic economic system etc.  A system is based on certain goals, principals and philosophies which are quite unique to each particular ideology.  This economic system can extend beyond philosophical principles and goals into functions with processes and outcomes.  It looks at how a given economic system with its philosophy and ideology determines consumption, investment and savings, the market’s structure and how they attain a general equilibrium in the economy.  There is a difference between general universal principles verses a system based on ideology.

 

 

Host:  How early did Muslim scholars address the issue of economics and the economic system?  Is it a new development in Islam?

Jamal Badawi:

This is not new.  In fact, it is interesting to notice how some economists tend to think that the first systematic way of dealing with economics goes back to the 18th century and is connected to Adam Smith a Scottish economist who wrote a classic called “The Wealth of Nations.”  This notion which relates the study of economics to the 18th century is incorrect.  There were many Muslim scholars who wrote about economics in a systematic way from an Islamic point of view whose writings goes back as far as the 8th century in the Christian era which is more than a thousand years before Adam Smith.  Three examples of these writings are: first is a book called Alkharaj which deals mainly with what we now today as the macro economic system written by Abu Yusuf, in the tenth century a book with the same title was written by Yahya Bin Adam and there is also a book written in the 11th century by a famous writer Almawirdi who wrote Al Ahkam Alsultaniah which again deals with the basic aspects of macro economics.  In the 11th century another jurist Alfarak wrote a similar book.  In the 11th a great writer Al-Ghazali addressed some aspects of economics.  In the 12th century a very famous Muslim philosopher and scholar Ibn Rushed who is known in the West as Averroes also addressed the subject.  In the 13th century a scholar, IzuDeen Ibn Abu-Salam also addressed the subject.  In the 14th century Ibn Taymiyyah addressed the subject.  There are several contributions in the 15th century by Al Maqrizi and another by Ibn Khaldun.  Ibn Khaldun was described by the famous British historian Arnold Toynbee as the greatest sociologist who ever lived.  He was a sociologist and economist because dealt with aspects that pertain to economics in a systematic way.  With these examples we can see that more than a thousand years before Adam Smith the subject economics was addressed in Islam.

In Islamic History numerous scholars wrote about certain aspects of economics viewed from an Islamic point of view.  Of course this subjects were scattered amongst different books addressing Islamic jurisprudence.  More recently we find that there are many scholars who started addressing the subject like Syed Qutb Maududi, Yusuf Qaradawi, Muhammad Baqir al-Sadr, Muhammad Al Mubrak Sibai, Suood, Isa Abdu, Muhammad Abu Zahra, Munthir That, Umar Chapra, Muhammad NajatuAllah Sidiqui and numerous individuals who belong to the traditional jurist stream as well as those who have studied economics in the modern sense.  These people have given lots of contribution to the effort of reestablishing the economic system in Islam which would be very relevant to the Muslim as an individual and to Muslim nations and societies which have in recent years been trying to imitate imported system from the East and the West but who are unable to solve their problems.  There is a call back to foundation of the heritage of Islamic economics in order to establish a system based on the basic guidance of Islam and in order to create an alternative to the present system.  This task is not necessarily an easy one.

 

Host:  Given that we have had sources about this subject for such a long time why is it that when we search this are it appears to be so difficult?

Jamal Badawi:

First of all, the way that previous scholars used to write is different from what we are used to today.  For example we can find books now with the title of “Economics” or a straight forward aspect of economics, however the way Muslim jurists wrote in the past did not strictly separate economics from all the other subjects because they viewed Islam as a complete way of life and most of the discussions of economics were interspersed with the other subjects.  In order to pick out the aspects dealing with economics one had to do allot of digging.  Most of these references (referring to the works from the 8th century) are all in Arabic.  There have been some attempts to translate some of these works but they are not all available in other languages.  The reason behind that is possibly that these works were written at a time when the Arabic language was that of civilization and culture the supreme and prominent language of the world just like English, French and German are the languages of learning.

In addition to this, an additional difficulty, is that any researcher in Islamic Economics today would have to make a clear distinction between the principles enunciated in the primary sources of Islam (Quran and Prophetic Tradition) and the various interpretations that have manifested in different points of history. The basic principles of the system are binding for all times, but specific applications of those principles are not necessarily binding today.  I am not talking about principles just specific details or applications.  For that matter it would be important to sift through the literature in order to find out which applications are subject to adaptations and which applications need to be reconsidered without violating the basic roles of Islamic Law.  Despite these difficulties we find that Islamic economics has its own general methodology and its own distinct ideological foundation and given enough time and effort reconstructing it will not be too difficult.

 

 

Host:  What is meant by the general methodology of Islam?

Jamal Badawi:

The Islamic economic system has its own principles and philosophy.  The only way to grip these principles and philosophies is to refer back to the primary sources which are the Quran, word of God, and the Prophetic Traditions which elaborates the application of those principles.  This means that a contemporary scholar who tries to study Islamic economics would have to learn how to consult these sources directly which requires certain methodologies.  There are certain methodologies for how to interpret and understand the different principles.  The person would have to learn the basic methodology used in Islam for finding solutions to new problems which may come up.  We must make sure that the solutions of contemporary economic problems doesn’t contradict the text or the spirit of Shari’a or Islamic Law.  It is very important in this kind of study is based on those principles and that there is consistency in their application.  It should not however be that hard because aside from certain aspects of inheritance the rest of the rules are broad and applicable in a variety of situations.

 

 

Host:  Can you outline the ideological basis of Islamic economics?

Jamal Badawi:

I can summarize it with six basic principles.  The first one is the corner stone and whether we are dealing with the economic arena, any other aspect of life, any other system of Islam be it social, economic, political and so on everything has to start with the belief in Allah, God, as the soul Creator, Lord and Sovereign of the universe.  This means that the belief is not just lip service but being prepared to submit to His will, accept his guidance with complete and unconditional servitude to God.

The human as an individual or at a collective level will be better off when God is taken as the source of belief, source of values and is obeyed in whatever He ordained and to avoid things that he forbade.

The second basic principal is that Islam does not accept the definition of religion as something that is confined or restricted to the spiritual aspect of human life or the moral ethical aspect but as a complete way of life.  This is something that guides one’s life in the moral, social, ethical, economic and political aspects which are all one in one basic confine that follows the guidance of God.  This is why the Quran in (2:208) “O ye who believe! Enter into Islam whole-heartedly.”  Its not a question of accepting God’s teachings in the matter of worship or Ill accept it in terms of broad ethical or moral factors but as far as my social or economic life I know better.  This is not the case.  Everything has to be within the basic guidance of Islam.

The third principle is that God created the human being on earth as His trustee.  All of us are created to fulfill certain jobs and responsibilities on this earth.  God has entrusted us to establish a civilization which is based on the moral, ethical, spiritual values that He provided us but it also gives us ample opportunity for material progress.  This combines moral, social, material progress in a harmonious connection.  We discussed these points in details in Moral Teachings in Islam.  This specific point is covered in the Quran in (2:30), (6:165), (42:52), (57:7) and other verses it is clearly laid out that we are not here for punishment but because God wants us to fulfill certain noble duties in our life here on earth.

The fourth principle is that in order for God to help humankind to fulfill this responsibility of trusteeship has made everything on earth subservient to the human.  There is a moving verse in the Quran (45:12-13) “It is Allah Who has subjected the sea to you, that ships may sail through it by His command, that ye may seek of his Bounty, and that ye may be grateful.  And He has subjected to you, as from Him, all that is in the heavens and on earth: Behold, in that are Signs indeed for those who reflect.”  This doesn’t restrict the human from utilizing everything in nature.  This is found in the Quran in (22:65), (31:20) and (67:15) which all urge humankind to harness the resources that God made available on this earth.  It follows that enjoyment of the good things that God has created within the boundaries that God has given is not regarded as sin so long as it follows his path and doesn’t deviate from his limits.  This is found in the Quran in (7:31-33) “O Children of Adam! wear your beautiful apparel at every time and place of prayer: eat and drink: But waste not by excess, for Allah loveth not the wasters.  Say: Who hath forbidden the beautiful (gifts) of Allah, which He hath produced for His servants, and the things, clean and pure, (which He hath provided) for sustenance? Say: They are, in the life of this world, for those who believe, (and) purely for them on the Day of Judgment. Thus do We explain the signs in detail for those who understand.  Say: the things that my Lord hath indeed forbidden are: shameful deeds, whether open or secret; sins and trespasses against truth or reason; assigning of partners to Allah, for which He hath given no authority; and saying things about Allah of which ye have no knowledge.”  This is something that God has given to us provided that the person doesn’t go to the extreme where his soul concern is getting the maximum enjoyment from this life.  It is not an objective in itself but it is not condemned.

The fifth principle is that of accountability.  There is life hereafter and as as God has given us this trusteeship and resources He is also going to hold us accountable on the Day of Judgement for our behavior during our earthly life.  This also includes our economic behavior, and how we behave when we try to satisfy our needs.

The sixth principle is that the variations in wealth do not give a person inferiority nor superiority.  God does not look into our property or our faces but in our hearts.  Wealth should not be a source of social distinction.

 

 

Host:  How can these principles influence day to day activity?

Jamal Badawi:

Let us start with the first one; that God is the ultimate authority.  This means for Muslims as individuals or collectively should not emulate any system that differs from their principals such as usury or interest.

Second, the implication of Islam as a complete way of life means that there is an organic connection between economic activities and social and political activities.  We can not separate them and say business is business; we have to look at everything within the context of society and Islamic ethics as a whole.

Third, the implication of the trusteeship of human beings on earth means that God is the soul owner of this universe and that we are only trustees.  This means there is a different concept of wealth and right of property all together.  We do own certain things but the ultimate owner is God himself and we have to behave in a way that is consistent with his will.

The fourth principle that deals with the universe being subservient to us means again that poverty is not a virtue in Islam and that productivity so long as it is within the boundaries that God has ordained is praise worthy.

The fifth principle in terms of responsibility for behavior means that there is no total dependance on law enforcement because there is individual enforcement found within one’s self which makes the conciseness a part of everything.  This makes Islam unique to any other secular system.

In the sixth principle variations in wealth means that in a truly Islamic society it should not be tolerated that some people because of their wealth have more control over the affairs of the rest of the people.  There should be some degree of equality.  Everyone of these have more specific applications which we will deal with as move on to more specific subjects.

2017-12-19T19:24:45+00:00 January 31st, 2015|Uncategorized|