Articles on Islamic Economics

Economics of Wasteful or Excessive Consumption


Salman Ahmed Shaikh

 

In consumption, wasteful or excessive spending is discouraged in Islam. Qur’an says: “… Eat and drink, but do not waste …” (Al-A’raf: 7). Qur’an also says: “… Spend not wastefully (your wealth) in the manner of a spendthrift” (Al-Isra: 26).

We know that quantity produced and supply along with prices of goods and services vary across regions. Oil may be cheaper in Middle East and expensive in regions where it is imported. Likewise, automobiles may be cheaper in Japan and expensive in countries which import these Japanese automobiles and want to protect their local industry. Likewise, technology induced creative destruction results in decline in prices of electronic products which were produced in past. Market skimming pricing strategy looks to charge higher price when the product is launched and decrease the price later on. So, the goods can be cheaper or expensive across time and space based on different factors.

From the product marketing perspective, Philip Kotler, in his 1967 book ‘Marketing Management: Analysis, Planning and Control’ defined three levels of product, i.e. core product, actual product and augmented product. The core product is defined as the benefit that the product brings to the customer. The actual product refers to the tangible object and relates to the physical quality and the design. The augmented product consists of the measures taken to help the consumer put the actual product to use.

From Islamic perspective, the choice set for consumer should only include Halal products. Secondly, Islamic principles allow fulfillment of needs where not only the basic needs are taken in consideration (Dharuriyat), but also conveniences (Hajiyat) and embellishments (Tahsiniyat) in a hierarchical order. Nonetheless, Qur’an also informs about excellence in spending, which is to give in charity whatever is in excess of needs (Al-Baqarah: 219).  

Instead of defining actual limit on spending, Islam has made it necessary for Muslims to pay compulsory charity from their wealth at the rate of 2.5%. After the payment of Zakat, they can use wealth on self-consumption and investment, but need to restrict themselves to Halal products and avoid wasteful spending.     

Some people argue that why Muslims go for Hajj and offer animal sacrifice even though, they could use the money for charity and social causes.

First, Hajj is a compulsory Ibadah once in life on those who are physically fit to travel and who have the resources to make that journey from their own funds rather than the borrowed funds. Major expenses include airline ticket, accommodation, food and travel within the cities. All of these services are provided by firms. The revenues they get from providing these services provide an income source to the labourers and other factors of production. In national income accounting, income and expenditure are two sides of the same coin. Someone’s expenditure is someone else’s income. When people spend on buying shoes and garments, it enables the workers to get wage, outlet owner to get rent, investors to get return and entrepreneur to get profit which he would either spend or reinvest.

Secondly, animal sacrifice is performed in remembrance of the tremendous spirit of sacrifice shown by Prophet Ibrahim (pbuh). He was asked to devote His son for Allah in a dream. The message in the dream meant to devote His son for the propagation and work of Islam. A direct and literal interpretation could mean to sacrifice His son. Since this was not required by Allah, Prophet Ibrahim (pbuh) was asked to sacrifice a sheep instead. In remembrance of Prophet Ibrahim’s (pbuh) steadfastness, devotion and spirit of sacrifice, Muslims perform animal sacrifice annually. However, this does not mean that the meat of animal cannot be used. In fact, it is encouraged in Ahadith to distribute the meat to relatives and other people in need. Therefore, not only the meat is not wasted, rather, most of it is distributed to relatives and people in need. The skin of the animal cannot be used to earn revenues, but, it can be given to charity. Those who receive this charity in kind can use and sell the skin. Usually, charitable organizations collect the skins and use the proceeds from selling the skins in their charitable works. The options for animal sacrifice include cattles like sheep, goats, cows and camels. In cows and camels, up to 7 people can share in sacrifice. The reproduction rate of these animals does not pose any issue in terms of loss of bio-diversity.

One may argue that if income equals expenditure in national accounting, there is no waste in an economic exchange no matter whether a luxury car is bought or a normal car. To answer this, it is important to understand that wasteful spending is discouraged as a personality evil rather than only as an economic evil. Often, this wasteful spending is done to show economic status, pride and get fame. With this mind-set, Islam even does not approve Ibadat. Only the acts with pure intentions and sincerity are acceptable. Wasteful spending is also against the spirit of stewardship. The resources that we own, possess and use are bestowed by Allah. The concept of stewardship urges us to use these resources responsibly. Also, Huquq-ul-Ibaad requires that we remain cognizant of the needs of other living beings.

Besides being a negative habit and personality trait, wasteful spending is economically undesirable as well from the point of view of allocation of resources. If dollar votes determine allocation of resources, then people in our economies today do not have equal amount of dollars. There is high income inequality even in developed countries. If rich people with resources demand luxurious resorts, then the resorts will be built even if millions of poor people remain homeless and hungry. If our spending provides greater income to the rich class only, then the benefits of that economic exchange would not be distributed equitably. Islamic economics principles discourage excessive spending and encourage sharing resources with wider community through Sadqa, Waqf and Riba-free Qard. This can provide more resources at the disposal of poor and needy and for the social causes which are working for the educational and health related needs of poor and needy. Therefore, this can help in tackling poverty, hunger, low levels of schooling and under-provision of health services.

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