Articles on Islamic Economics

Islamic Alternatives to the Secular Morality Embedded in Modern Economics

Paper Title: Islamic Alternatives to the Secular Morality Embedded in Modern Economics

Author:        Prof. Asad Zaman

Publisher:    Journal of King Abdul Aziz University, Islamic Economics, 34(2), 83-100

This paper presents the ideas of transformative school in Islamic economics. For a mainstream economist, formulating the objective function is an attempt to make a model that can help in predicting market outcomes. But, upon reading terms, such as ‘goal’, ‘objective’ and ‘choice bundles’ available to agents, many of the Muslim economists tend to compare them against the ‘ultimate goal’ and ‘ultimate objective’ in the Islamic worldview.

Many Muslim economists think that there is an incompatibility between the worldview of Islam and the axioms on which the foundation of mathematical analysis in mainstream economics are built.

However, critics argue that both Homo-economicus and Homo-Islamicus based theories of the economic agent are unrealistic and there is a need for realism. The ethically focused Homo-Islamicus, like its neoclassical counterpart of Homo-economicus, turned out to be a fiction that has no empirical counterpart.

Transformative school of thought in the methodology of Islamic economics is not that much interested in descriptive studies and improving the predictive capability of models to analyze market outcomes and to design policies accordingly. It believes in the transformation of choices through education. Therefore, the new researches in behavioral economics are only consulted to make criticism of mainstream economics rather than developing an alternate path for economic analysis.

It almost disregards the need for descriptive and positive analysis and lays complete focus on transformation. For making its case, it suggests discarding all theoretical edifices of mainstream neoclassical economics and adopts a rather ‘preaching style’ way of transforming of behavior through Islamic-founded education. Many other authors emphasize transformation, but this school of thought focuses entirely on transformation.

This school believes that transformation can create a revolutionary change as happened fourteen hundred years ago when Muslims received and followed divine knowledge and which alone made them successful in both politics and sciences.

For presenting the case of transformative school, the respected scholar did not cite other scholars in Islamic economics. There are 14 citations to his works, but there is no reference to any single author from the Islamic economics literature.   

One of the propositions in the paper is that Western social science based on Secular worldview is entirely useless as it only gives value to the historical experience in the West. 

It seems that the author does not give much weight to the fact that there is a strong imprint of Greek and Muslim civilization on the philosophy, laws and physical sciences which developed in West and such knowledge was embedded and integrated rather than completely disregarded and discarded. This has been acknowledged and recognized by Briffault, Campbell, Ghiles, Sarton and many others.

This imprint of Muslim civilization is now well recognized and most books and well-constructed documentaries on that had all been mostly made in the West. In contemporary research itself, more credence is given to cross-country studies.

Many Western scientists also travel to Africa and Asia to conduct development studies involving randomized control trials and ethnographic studies. Therefore, Science is universal and to disregard any work based on origins alone is not a fruitful exercise, no matter who does it.

Another proposition in the paper is that only Islamic knowledge is enough for revolutionary change to become world leaders. It must be noted that in economic and other matters of life, Qur’anic and Islamic guidance is focused on morality and ethics rather than on identifying strategies, tactics and technological ways of doing things.

Even during the time of Prophet Muhammad (pbuh) and pious companions (may Allah be pleased with them), military strategies, tools and articles of trade from other nations were used without any hesitation. The prisoners of war in Badar were asked to teach Muslims and those non-Muslims surely would not have been teaching Muslims Qur’an. Mudarabah and Musharakah based contracts were prevalent among Arabs and they were used by Muslims as well.

If there have been people with views similar to that of Max Weber, there are also others like Benedict Koehler who have even credited Islam with giving birth to some of the institutions in Capitalism. Such institutions had evolved and improved over time. Mudarabah and Musharakah based equity partnerships have evolved into joint-stock companies. Waqf-based Madrasas have evolved into trust and endowment-based colleges and universities. On the other hand, in recent times, Muslims have embraced and assimilated banking and insurance into their economies after certain ‘Shari’ah compliance’ modifications have been made. Therefore, it is possible to assimilate knowledge in matters other than faith and as long as such knowledge does not compromise faith.

Another proposition in the paper is that morality is rooted in Islamic economics and Western social sciences undermine morality and favour individualism, selfishness and greediness. It must be understood that the intellect and moral conscience both are given by Allah. Even without reading the Qur’an, non-Muslims also know morality and often act morally.

Furthermore, by using intellect, if something useful is made, then one must not forget that intellect as well as matter is not our creation. Therefore, there is no reason to claim hegemony over moral conscience since moral consciousness is an innate part of every human’s personality. That is why, Qur’an urges us to act on Maruf and avoid Munkar without actually giving a comprehensive list since we acknowledge them through Allah-given moral conscience.

Sometimes, we fall into a comparison trap, especially comparing the theory of Islamic economics with particular practices of capitalism where the comparison can show the former in a more positive light regarding equity, justice, fairness, responsibility and morality. It will be fair to only compare reality with reality and ideals with ideals.

Where we err is in comparing the ideals of Islam with only the cherry-picked reality in the West.

In the recent past, several conferences were organized for developing a human development index inspired by Islamic values and Maqasid-e-Shari’ah. All such studies found that when it came to the rule of law, governance, civil rights and women’s rights, many of the developed countries in Western Europe performed well and many of the even middle-income and high-income Muslim majority countries did not.    

There are other misunderstandings about economic theory and instances of incorrect analogical comparisons in the paper. For instance, choice under scarcity is presented as necessarily selfish or based on greed. Relative scarcity is assumed to be absent. Cooperation is compared with competition while ignoring that consumer surplus is at a maximum under competitive markets and much less if there are ‘cooperative cartels’ which work like monopolists.

Takaful companies are incorporated as business corporations, but they are compared with insurance in the paper and the former are claimed to be working on the principle of generosity. Law of large numbers is presented as an evil while ignoring and misunderstanding its role in broad-based risk sharing. Debt based Islamic modes of financing which result in even more expensive cost of financing are conveniently ignored.

Surprisingly, the author compares banking with Waqf. The traditional understanding in Waqf jurisprudence makes it very hard to use this institution flexibly with restrictive understanding regarding exchange, substitution and investment of Waqf assets.  

Disregarding the shortcoming of later generation Muslims to not end slavery despite Qur’anic guidance, the noted author claims that Islamic system has better labour-employer relations in a service oriented culture.  

Economic role of patents and property rights is ignored and is criticized without any substantive arguments. West is criticized for not having public display of charity on streets while ignoring the need to evaluate whether progressive taxes and social insurance based approach to tackle poverty, hunger and homelessness is better than a haphazard unorganized ugly display of begging and impulsive but minimal charity in public.

In criticizing Western societies, the author surprisingly becomes oblivious to the institutions and mechanisms in place in Western societies to handle crisis and deprivation institutionally, systematically and impersonally.

Thus, we need to show whether private to private donations by appealing to hearts through transformative education can indeed provide the required funds and achieve efficient and consistent resource allocation as compared to funding public goods and services via progressive taxation in an impersonal, but systematic way.

If private voluntary donations are uncommon in the West, it could mean there is not much of a need for that in the presence of mandatory progressive taxation and wide access to public health and services. Therefore, for transformation, we need introspection. Pointing fingers at others with a self-righteous mindset will only encourage inaction, apathy and lack of resolve. Apparently, such diatribe is more popular among us as it gives a reason to feel content, self-righteous and do not be bothered about resolve, efforts and self-correction.

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