Articles on Islamic Economics

Questions in Islamic Economics: Connecting Spiritual Growth to Economic Theory

Saif Ali

I recently read a status update on LinkedIn by a disappointed man who found himself in a shared taxi with two professional managers. He heard one of them complain to the other about the loss of productivity due to employees taking religious holidays. When he could not take it anymore, he turned around and said: “Be human before being manager.”

Many professionals today experience a dilemma where they must make a choice between being good humans and being good at their job. They are left to wonder how the principles of love, generosity, fairness, reciprocity, and trust that they know to be true about life in general, do not apply at work. Some resort to the unfortunate conclusion that cold selfish behaviour is “natural” for human beings in economic situations. This is false. One of the prime reasons for moral listlessness at the workplace lies buried in mainstream economic theory.

Economists, managers, consultants and the ilk go through a program of indoctrination where they are taught that when it comes to business, it is war, not love. They learn to “let the numbers talk.” This has resulted in a cultural movement of “hard” economics in which people who are believers, empathetic, dreamers, and hopeful are brushed under the rug as being “touchy-feely.” The Graduate School of Business at Stanford University runs a course that is informally known as “touchy-feely” in which management students are taught the value of interpersonal dynamics in business. It has been voted the top elective course for 45 years running. Unfortunately, statistics of this sort have not really shaken the economists out of the delirium of utility-maximization. The curriculum of the overwhelming majority of economics programs across the world remains unmoved by facts. Is it possible that there is really no need to separate love and business – those two momentous human ventures? In this article, I want to ask the following question: Can Islamic economic theory provide the critical missing link between spiritual growth and economics and what are the obstacles in this path?

Have you ever performed an act of kindness even though it meant incurring a personal loss? If your answer is yes, your behaviour is not explainable by modern mainstream economic theory and you are considered a deviant from the norm of rational behaviour. Modern economic theory is founded on the neutrality of the marketplace from higher ideals like altruism, compassion, love and cooperation. The way economic theory is taught and professed, it is subtly fed to the minds of students that these higher ideals do not operate or are relevant in the market. The name given by the theory to a human being in the market is homo economicus – economic man, a behavioural specie that is entirely self-interested with no regard for spiritual growth.

How did this theoretical schism between markets and morality arise? Is it true that one simply cannot mix matters of the heart with business? These questions are critically important for Islamic economists because it is incumbent upon anyone who chooses to connect morality with markets to define how the two are related. I explore four questions that shed light on this subject.

Is spiritual growth relevant to economic theory? Why or why not?

If we ask this question with mainstream economic theory in mind, the answer is no. To see why, we have to turn to a period in European history that witnessed the politico-religious movement called the ‘Reformation’. It was a time of violent fighting between the Catholics and the Protestants. The relentless sectarian conflict led to disillusionment with the idea of religion altogether. The philosophical movement which is known as the ‘Enlightenment’ followed. Through this movement, Western Europe ideologically eliminated religion and the associated concepts of God and the spirit from public life. The separation of Church and State was founded on the division of human life into two spheres, the socio-economic sphere on the one hand and the spiritual sphere on the other. Under such a system, the economic realm is outside the confines of religion and is governed entirely by market concerns. Economic theory therefore needed to only be concerned with the totally self-interested man, homo-economicus, because the altruistic, generous, compassionate and spiritual man never enters the market.

Surprisingly, all economic theory is based on the assumption of selfish self-interested human behavior, even though it has been manifestly proven false by huge amounts of empirical evidence.

Does Islamic economics offer a way to link spiritual growth to economic theory?

The spiritual development of the individual and the society are central to economics from the Islamic perspective. Islamic economists have thus far shown a deferential attitude towards all ideas proposed by Western economists on account of the awesome scientific achievements of modern Western civilization. This has led to a situation where instead of rebuilding ideological foundations from scratch, they have taken Western ideas as given and tried to reconcile them ex-post with Islamic principles. A good example is the idea of the “free” market. Technically, Islam allows free markets but the free markets of Islam strike a balance between profit and purpose in contrast to the free market of modern economic theory where profit reigns supreme. In the free market of Islam, acquiring wealth at the expense of others is not allowed and destroying the environment to make profits is not allowed. In contrast, there are no such stipulations in Western economics. The central difference is that Islam puts social responsibilities above individual freedom, while Western economic theories do the opposite. What is needed is not the Islamization of economic knowledge but a complete ideological reversion in which social responsibility and individual liberty occupy their correct places.

The effects of unchecked profit maximization on the society and the environment are obvious to everyone except for some economists who are applying the same theory that is the cause of the problems to come up with the solutions.

Why then does modern economic theory continue to be accepted and taught?

While the advancements in science and technology are undeniable, the failure of modern economic theory is obvious to all. During the global financial crisis, the Queen visited the London School of Economics to ask them why they were not able to anticipate the collapse of the economic system. Yet, the very same theory that failed completely during the financial crisis continues to enjoy great prestige and what is more puzzling is that governments continue to run their programs based on it! Why is this so? The reason is that it is in the interest of power and against the interest of the disempowered.

The fundamental theorem of welfare economics implies that self-interested behaviour and free markets are actually good for society and therefore should not be regulated. It is easy to see how this serves the interest of the powerful. It gives them a license to continue their quests for domination while maintaining a narrative of the greater common good. Modern economic theory is an instrument of gaining the consent of the weak and powerless to opt into their own exploitation. Michel Foucault talked about “power knowledge,” the idea that the most lethal weapon of the powerful is not guns but the shaping of minds.

Why do some Islamic economists continue to justify modern economic theory using the Quran and Sunnah?

The answer again is the perceived infallibility of the West. People who send rockets to the moon cannot make mistakes. Take the example of scarcity – a central idea in modern economics. The first generation of Islamic economists, the likes of Maulana Mawdudi, completely rejected the notion because they had only been trained in the Islamic tradition and they knew from the Quran that the rizq (provision) of every human being is promised by Allah. The second generation of Islamic economists received Western education and succumbed to the indoctrination. They tried to figure out ways in which the Western notion of scarcity could be fitted into the traditional Islamic framework. As it stands, the field of Islamic economics is largely (i.e. not wholly) dominated by ideas that are really the accommodation of Islam to Western perspectives. As Islamic economists, we must work to develop consensus that there is a principal conflict between Islam and the modern economic theory in that Islam orients man towards spiritual growth at the expense of material wealth whereas modern economic theory, as embodied in homo economicus, does precisely the opposite. There is no way to reconcile exact ideological opposites and Islamic economics can only proceed from here on by rebuilding ideological foundations ab initio. Modern economics idealizes worship of nafs as the epitome of rational behavior, and to construct a genuine Islamic Economics, this must be rejected.

This article is based on a Radio Islam interview with eminent economist Dr. Asad Zaman.

Questions, Feedback or Comments

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.