Abdul Azim Islahi

In this book, IDB Laureate Prof. Abdul Azim Islahi explores the state of Arab Muslim economic thinking in the 19th century. He investigates the works of nine distinguished Arab writers from various fields including economics, Islamic jurisprudence, political leadership and literati. The covered authors hail from Yemen, Egypt, Tunisia and Syria. Prof. Islahi shows that the intellectual, economic and Islamic awakening seen in the 19th century paved the way for the development of Islamic economics in the 20th century.

Prof. Islahi puts an effort to contextualize the views of these personalities with references to the political and economic conditions surrounding them. The noted thinkers reviewed in the book were moved by the poverty, underdevelopment of the Muslim world vis-à-vis Europe. They identified the positive causes of European growth which Muslims can also learn from. However, they appraise the institutions on the critical lens as well to avoid the take-all or leave-all approach.

The authors highlight the negative effect of colonialism and double standards of Europe to keep the Muslim lands under colonial and imperial rule. They awakened the Muslims to avoid becoming laggards, isolated and mere consumers. Rather, they should also advance knowledge and sciences and do not feel shy in learning from the Western development experience. However, in doing that, they should not be uncritical to take everything European as acceptable, especially when it comes to interest based banking.

Given that, there is much to take from socio-economic innovations such as the joint stock companies, mutual insurance, bank-based payment systems. The authors provided positivist explanations of how these institutions and structure avoid the problem of moral hazard, information asymmetry and achieve pooling of funds, risk diversification and efficiency.

 All the authors highlight the importance of strong social infrastructure that hinges upon rule of law, good governance, merit and upholding justice. It promotes not only investment in human capital, but also investment in capital goods.

The authors understood the role of economic organization by using structures which minimize cost of intermediation, search, contract enforcement and which help in achieving scale, efficiency and economies of scale.

Some authors like Al-Shawkani provide basis for credit transactions by incorporating time value of goods in trade contracts. Some authors also mention the application of Salam and Istisna in modern industries. The authors are keen for reforms and application.    

Ibn Abidin criticized oppressive taxes and inflation indexation on the pretext of change in the value of money. He discussed the application of Bai Istisna and conditions under which compensation for guarantee in mutual insurance would be admissible in Islamic economic framework. He argues that insurer in mutual insurance can take compensation for providing the service of protection. 

Al-Tahtawi discusses the difference between productive and unproductive labour. It indirectly points towards the concept of productivity and human capital. It is also consistent with the discussion of wage determination on the basis of marginal product revenue from hiring additional labour.

He explains why competition is good for the market and economy. He exhibits clear understanding of the forces of demand and supply in the determination of wage. On distribution of income, he favours equality of opportunity as the basis of equity and equitable distribution rather than forcing equality in final outcome of distribution arbitrarily. He shows apprehension about taking interest-based banking as it is, but he is appreciative of some functions of banks, such as facilitating payments and financing of large-scale projects.

He emphasized on attempting to provide these functions using Islamic ways of business such as Bai Salam. He also sees no conceptual problem with the general idea behind mutual co-insurance.

Muhammad Abduh in his writings emphasize on the resource curse. Natural resources are important, but not a sufficient condition for sustainable growth. He emphasizes on technically and technologically equipped productive labour. He urges the rich people to contribute in employment creation, educational initiatives and poverty alleviation. He favours wealth circulation and emphasizes the role of organized charities vis-à-vis piecemeal charity for maximum and sustainable effect on livelihoods.

Muhammad Abduh stresses on the importance of entrepreneurship. He urges people to learn from Western experience and focus on industry and innovation rather than copying them in only maintaining a lavish lifestyle. Prof. Islahi thinks that there is unconfirmed opinion attributed to Muhammad Abduh that he was uncritical of interest. There is no direct and written evidence in support of the view that Muhammad Abduh had a different opinion than the consensus view of Riba.

Khayr al-Din al-Tunisi stressed on learning from the West where there is scope and not having shyness because of ideological or nationalistic differences. He thinks that Maslaha is an important yardstick to decide about the contemporary issues. He is impressed by the benefits of joint stocks companies in achieving scale and pooling of funds for large-scale capital intensive businesses with risk sharing. He favours no barriers to entry and conducive business environment for the promotion of commerce and industry.

Bayram al-Khamis stressed on the importance of stability, peace, security and the existence of conducive environment in the form of institutions as organizations and institutions as rules to promote efficient intermediation, investment pooling, funds transfer, risk sharing and to safeguard private property.

Prof. Islahi tried to remove a misconception that there is any gap between the classical Islamic economic thought and the on-going development in the field of Islamic economics and finance. However, it seems that some authors are awed by the Western story of development and they focused more on catch up than treading our own path to development with indigenous institutions.

Finally, Prof. Islahi discusses the economic thinking of three other Arab literati, Ali Mubarak (1823-1893), Abd-Allah al-Nadim (1845-1896) and al-Sayyid Abd al-Rahman al-Kawakibi (1848-1902). Ali Mubarak, an engineer of irrigation and farming by profession in Egypt, identified the causes of Arab backwardness due to the decline in the role of education and human resource development.

He emphasized the role of learning sciences and advancing technologically. He criticized idleness and unproductive use of available resources in lavish consumption. He also raised voice for labour rights and looking after their human capital development rather than treating them under exploitative relationship as in bonded labour structures. His views on the government’s role in the development of agriculture and banking system show how clear he was in understanding the exploitative aspects of interest based money lending and borrowing. In this context, he was also critical of speculative stock market activities that had been started by the Europeans in these Arab countries.

Al-Nadim identified the primary and secondary factors for economic development. He criticized that colonial powers maintained authoritative rule in the colonial lands without sharing power. He mentions that while Western countries promoted human capital development, technological advancements and education, the rulers in Muslim lands engaged in conspicuous consumption and exploitation of general public.

Western countries did not challenge or correct the hegemonic power and instead they painted the people in East as primitive and regarded them as consumers for Western products and unskilled labour to be used in production to sow, to farm and labour in industries.   

Al-Kawakibi, an honorary member of the Education and Finance Committee during Ottoman rule in 1879, played an important role in the establishment of the Chambers of Commerce. He was very critical of the colonial capitalistic model prevailing in the region with its unjust and inequitable distribution and usurious exploitation of the poor. He criticized unfair distribution and irrational expenditures adding to the fiscal woes of the government. He opposed the interest-based financial institutions while on the other hand, he emphasized the economic significance of Zakat and Kaffarat Maliyyah (financial penalties).

All in all, the book is a good attempt to showcase the economic thinking of the intelligentsia in the Arab region in the nineteenth century. While many of the ideas are concurrently developed in West, the Muslim scholarship was not ignorant or laggard.

Their underdevelopment and subjugation under the colonial and imperial rule may have delayed the reforms, but the ideas were not coming suddenly after the independence of several Muslim nation states in mid-twentieth century.