31 June 2008

B1.20

STRATEGIC VISION AND PLAN FOR FUTURE RESEARCH IN ISLAMIC ECONOMICS

Comments on the Paper of Dr. M. Nejatulllah Siddiqi by Dr. M. Umer Chapra Presented at the 7th International Islamic Economics Conference organized by the Islamic Economics Research Centre, King Abdul University, on 1-3 April 2008

Dr. Nejatullah Siddiqi needs to be complimented for pointing out the direction that research in Islamic economics should take in the future and the goals that it should try to achieve. Although a number of writers have expressed similar views1 in the past, writings by individuals do not produce the kind of results that a paper presented in a Conference of this nature is expected to produce. The first part of his paper relates to the strategic vision while the second part relates to the plan for the future. Both of these parts are crucially important for setting Islamic economics on the right course. Without a clear understanding of the vision, it may not be possible to lay down an enabling strategy for the future, and without an effective plan for the future, the vision may always remain a dream and never be able to see the light of day. My purpose here is to add strength to his paper by trying to fill some of the gaps. The Strategic Vision The vision of Islamic economics cannot be different from that of Islam itself. The vision of Islam is, according to the Quran, to be a blessing (rahmah) for mankind (21:107). The word used by the Quran in this particular verse is al-alamin, which stands for everything other than the Creator of this universe Himself. It, thus, includes not only all human beings but also the environment, including animals, birds, and insects. Muslims can be a blessing for mankind if they can help raise the well-being (falah) of all human beings without hurting in any way the health of the environment. All the teachings of Islam are directed towards the realization of this objective. Dr. Siddiqi is, therefore, right in emphasizing that Islamic economics should not concentrate primarily on Muslims. It should rather focus on the whole of humanity so as to be a blessing for everyone. Muslims in relation to mankind are just like a nuclear family living in the midst of an extended family. The environment around them is also naturally very important because, if the environment deteriorates, the well-being of mankind will also decline. Within this context, striving for the wellbeing of the nuclear family alone and not being concerned about the well-being of the extended family as well as the environment will not be in harmony with the spirit of
1

See, for example, Chapra, 2000a and 2000b; Mirakhor, 2007.

Islam. More so because all of these three are interdependent and may not be able to move forward except in unison. Any effort to move alone will fail to produce the desired results. He is, therefore, right in saying that all of us should combine our efforts for generating the well-being for all. Although there is no harm in giving greater attention to the nuclear family, it should be within the framework of the wellbeing of the whole of mankind. What kind of Globalization fits into this Vision? The globalization movement is, therefore, a reflection of the Islamic vision. According to Islam, mankind is a single entity (al-Quran, 10:19) and all human beings are expected to live like a single family. This is an important aspect of the universality of the Islamic message and it would not be becoming of Muslims to ignore it. The Prophet, peace and blessings of God be on him, also conveyed the same message by emphasizing that Mankind is the family of God and the most beloved of them before Him is one who is good to His family2. The family here stands for the whole of mankind and includes all human beings irrespective of whether they are Muslims or non-Muslims, white or black, rich or poor, and male or female. This raises the crucial question of why has mankind become divided when it has been created as a single family and why has globalization not succeeded. The reason given by the Quran itself is the dissensions among the people (10:19) as a result of their baghyan baynahum 42:14) (( and 45:17), which stands for all kinds of transgression, injustice, exploitation, effort to extort more than what one deserves, and non-fulfillment of mutual obligations. The present-day globalization movement has been unable to make a significant headway because it is not based on justice. Unless the movement for globalization gets its roots from the imperative of justice it will not succeed.3 It is, therefore, the duty of Muslims to reunite mankind. All Islamic social sciences have to try to do this and economics cannot be an exception. This is, of course, not possible without removing injustice and exploitation. This will, in turn, not be possible without injecting a moral dimension into economics. Conventional economics has not been able to do this because of its secularist overtones and the
2 3

Tabrizi, Mishkat, Vol.2, p. 613, No. 4998, on the authority of al-Bayhaqis Shuab al-Iman. See Khurshid Ahmed, 2004; and Chapra, 2006.

well-entrenched concepts of self-interest, economic man, value neutrality and Pareto optimality. Islamic economics has been trying to inject a moral dimension into
economics and to get rid of all those concepts which are clearly in conflict with the goal of globalization.

The Need for Injecting a Moral Dimension. To be fair, I must acknowledge that the need for injecting a moral dimension into economics is also now being emphasized by a number of conventional economists. The innate goodness of the human self as well as the teachings of Messengers of God sent to all different people at different times has led to a realization in the Western world that the anti-religious stance of the Enlightenment Movement was a great mistake. Accordingly, religious belief is gradually gaining strength, making the editors of Religion in Contemporary Europe admit that they are seeing the beginning of the end of 200 years of hostility towards religion.4 The role of justice, altruism, cooperation, moral values, and a host of social, economic and political institutions in furthering human well-being is being emphasized by a number of schools in conventional economics, including grant economics, humanistic economics, social economics, welfare economics and institutional economics. It is being gradually realized that any discipline committed to value neutrality cannot succeed in evaluating policies and giving recommendations for enhancing public well-being. Such an evaluation necessarily involves value judgments. Hence, according to Sen, the distancing of economics from ethics has impoverished Welfare economics and also weakened the basis of a good deal of descriptive and predictive economics. His conclusion is that economics can be made more productive by paying greater and more explicit attention to ethical considerations that shaped human behavour and judgment.5 Hausman and McPherson have also concluded in their survey article in the Journal of Economic Literature on Economics and Contemporary Moral Philosophy that : An economy that is engaged actively and self-critically with the moral aspects of its subject matter cannot help but be more interesting, more illuminating and ultimately more useful than one that tries not to be.6
4 5

Fulton and Gee, 1994. Sen, 1987, pp. 78 and 79. 6 Hausman and McPherson, 1993, p. 723.

If moral values are to be injected into economics, then we get exposed to the crucial question of how to derive values which command wide acceptance and which are observed with a sense of moral obligation such that anyone who violates them gets censured. Can conventional economics help bring about such a consensus? Probably not. "Social morality," as Schadwick has aptly observed, "depends on agreed standards, upon a consensus which is received as so axiomatic that it hardly ought to be discussed", and that, "except in the case of a small number of exceptional groups of people, morality never had been separated from religion in the entire history of the human race. 7 Utilitarianism and social contract theories do not carry the potential of providing values which everyone accepts as given and which no one challenges. Even social economics cannot be helpful because, in spite of its recognition of values, it is a "highly pluralistic discipline inspired and enriched by several often radically different worldviews, Schumpeterian visions, and at times even quite antagonistic social doctrines." 8 Conflict of views and interests may lead to differences of opinion which may be difficult to resolve. No wonder Minsky remarked: "There is no consensus on what we ought to do."9 Therefore, unless economics sheds its secularist attitude, it may .find it difficult to inject a moral dimension into economics Nevertheless, decline in the undue emphasis on self-interest' and the 'economic man' and recognition of the importance of need fulfillment, value judgments, and the fulfillment of all human needs are certainly welcome developments in conventioanl eocnomics. However, what is not so easy is the remedy. It does not lie in a patchwork of cosmetic changes. It rather lies in reorganization of the whole society and the economic system in such a way that there is a transformation of the individual from the economic man to a morally conscious human being who is willing to live up to the demands of brotherhood, socio-economic justice and family solidarity. This may not take place without a full-fledged religious revival which, though it is in the process of taking place in the West, is still relatively feeble. This is where Islamic economics has an important role to play.

7 8 9

Schadwick, 1975, pp. 229 and 234. Lutz, 1990, p. ix. Minsky, 1986, p. 290.

Hard on Fiqh Dr. Siddiqis paper is, therefore, most welcome. However, even though it gives a very important message, it is a little too hard on the classical fiqh. The fact that they were concerned about the problems of their own societies does not mean that we should ignore them and not take into account what they wrote. Everything that they have written, even though related to their own times, is not irrelevant for our times. A great deal of what they have written can be useful because it was intended to realize the maqasid al-Shariah. Their stress on justice and the integration of the moral with the material must continue. It is our task to push the frontiers of knowledge further, not by ignoring them, but by rather developing fiqh as well as economics in the light of the maqasid al-Shariah. The Tasks before Islamic Economics The vision of helping realize the maqasid al-Shariah makes the task of Islamic economics harder than that of conventional economics. To realize its vision, Islamic economics should set before itself at least four indispensable tasks. The first of these should be to study the actual behaviour of individuals and groups, firms, markets, and governments. This is one of the tasks that conventional economics was also expected to do, but has been unable to do adequately because of the self-imposed restriction of studying primarily self-interested behaviour, defining self-interest in its peculiar this-worldly sense of maximizing material wealth and want satisfaction. However, human behaviour is not necessarily always self-interested. It is also altruistic. People do not always serve their self-interest. They also sacrifice. Islamic economics cannot avoid studying human behaviour as it actually is, without restricting itself to only a specific aspect of it through an unrealistic assumption. Since actual behaviour may or may not be conducive to goal realization, the second task of Islamic economics has to be to indicate the kind of behaviour that is needed for goal realization. Since moral values are oriented towards the realization of humanitarian goals, Islamic economics needs to take Islamic values and institutions into consideration and scientifically analyze their impact on individual tastes, preferences and behaviour. This task seems to have been performed quite adequately by Islamic economics so far.

Moreover, since there is a significant divergence between the ideal and the actual behaviour in human societies, the third task of Islamic economics should be to explain why the different economic agents behave in the way they do, and not necessarily in the way they ought to. In addition, since one of the primary purpose of seeking knowledge is to help raise the well-being of mankind, the fourth task of Islamic economics should be to suggest a workable strategy for socio-economic and political change - a strategy that could help bring the behaviour of all market players that influence allocation and distribution of resources as close as possible to what is ideally needed for actualizing the vision that Islam has set before us. It is, however, not possible to force individuals to behave in the desired manner. Force has never succeeded and may never succeed. It only creates resentment and stiffens attitudes. The best strategy for bringing about change is to follow the example of all the Messengers of God, peace and blessings of God be on them all. They tried to bring about social change by means of education, proper motivation, reform of socio-economic and political institutions that influence their behaviour, and creating a proper environment for curbing vice or deviant behaviour and promoting virtue. An important part of the fourth task of Islamic economics should also be to analyze the causes of the major problems faced by mankind, particularly Muslim countries. Since the vision cannot be realized without solving these problem, it is indispensable to show how these problems may be solved. There is a glaring omission in Islamic economics of a scientific analysis of some of the crucial problems that are plaguing Muslim countries. These include: corruption, extravagance and wastefulness, budgetary and balance of payments deficits, high debt-servicing burden, low levels of saving and investment, relatively high rates of inflation and unemployment, extreme inequalities of income and wealth, and miserable socioeconomic condition of the poor. The lack of a serious discussion of these problems and their effective solutions makes Islamic economics appear unrealistic to its critics as well as to policy makers. It is, therefore, high time now that Islamic economics starts concentrating on the existing problems of Muslim countries and proposing remedies which are

Islamically preferable as well as politically and economically feasible. 10 Such an approach may not only help enhance its popularity and general acceptance but also create a better environment for the introduction of measures that are compatible with the Shariah. A change of this nature in its approach would, however, require individual country analysis. The intensity of the problems is different in different countries. In addition, the historical backgrounds, institutional frameworks, and prevailing social mores are also different. Each country may, therefore, need a specifically tailored reform programme. The blanket approach of considering all Muslim countries together may perhaps not be suitable except for a general discussion of the Islamic economic system to elucidate its objectives, principles, rationale and operation. Islamic economics should also compile reliable data on a number of important economic variables. Without knowing the actual position and the reasons for it, it may not be possible to prepare a well-conceived program for social, economic and political change. Data create transparency and reveal the true picture, which some governments do not welcome because of the adverse impact this would have on their vested interests. Hence one of the essential pre-requisites for realizing the vision is transparency through the compilation and publication of all necessary data and their scientific analysis. Missing in particular are data on distribution of income and wealth, extent of need-fulfillment, and nature and quality of life, particularly of the downtrodden people. Without such data, it is not possible to know the degree of equity prevailing in the allocation and distribution of resources, which is the most crucial criterion for judging the Islamization of a Muslim economy. There are also inadequate data about government revenues and expenditures, consumption, saving and investment behaviour of individuals and different sectors of the population, employment and unemployment, bonded, female and child labour, wages and salaries, working conditions, work habits, and productivity, along with a rational explanation for the deviation from Islamic norms. Once this is done, it may be possible for Islamic economics to do a more meaningful job of analyzing the impact that the introduction

10

Homa Katouzian has rightly pointed out that "the economists and other social scientists would be able to make much more useful contributions if they concentrated their efforts on the real social and economic problems these countries face." (Katouzian, 1985, p. 391).

of Islamic values and institutions may have on aggregate consumption, saving and investment, economic growth and stability, and income distribution. The task is undoubtedly difficult, but fortunately Islamic economics does not have to start from scratch. A great deal of data has now become available.11 It is also possible to benefit from the increasing volume of literature made available by normative, grants, humanistic, social, and institutional economics, and other social sciences. There should be no qualms about benefiting from useful knowledge wherever it is available.12 Islamic economics will have to show its deftness at filling the gaps and pushing the frontiers of knowledge in the same way as Muslims did in the first few centuries - taking available knowledge from Greece, Persia, India, and China, and developing it further. Some non-Muslim countries have admirably solved a number of such problems by adopting certain standard remedies, which are easier to adopt and more effective in the short-run. The discussion of these remedies does not seem to get its fair share in Islamic economics. A complete package of reforms, some of the elements of which may be common to both Islamic and other moral or even secular systems, has yet to be discussed by Islamic economics. The practical wisdom of Islamic economics has been unable to come anywhere near this goal so far. It has not been able to come to a grip with the task of explaining the rise and fall of Muslim economies in the past, the gap between Islamic norms and the actual behaviour of economic agents, and the causes of problems faced by Muslim countries. It has been unable to suggest a balanced package of policy proposals in the light of Islamic teachings to enable Muslim countries to perform the difficult task of reducing their imbalances and simultaneously actualizing the maqasid, particularly justice and general well-being. Moreover, its theoretical core has also thus far been unable to come out of the straitjacket of conventional economics, which takes into account primarily the economic variables which are measurable, and generally avoids a discussion of the complex historical interplay of
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A great deal of data are now made available by the United Nations, the World Bank, the International Monetary Fund, Islamic Development Bank, www.electioinworld.org, Transparency International, and many other institutions. 12 The Prophet, peace and blessings of God be on him, said: "Seek knowledge even though it may be in China, because the seeking of knowledge is the duty of a Muslim." (Reported from Anas ibn Malik by al-Bayhaqi in his Shuab al-Iman, vol. 2, p. 254:1663). This is a weak hadith. However, it is widely quoted because it is in harmony with the ethos of Islam and indicates the importance of acquiring knowledge, irrespective of where it is available. This was in fact the practice of Muslims during their period of ascendance in the early centuries.

moral, economic, social and political factors. Islamic economics has thus "failed to escape the centripetal pull of Western economic thought, and has in many regards been caught in the intellectual web of the very system it set out to replace." 13 It is thus unable to explain the difference in the performance of various societies with respect to development and justice which, according to Ibn Khaldun, play a crucial role in the rise and fall of civilizations.14 Even though the task before Islamic economics is challenging, it would not be becoming of Muslim economists to shy away from accepting the challenge they face. Their success in responding to the challenge may enable them to make a more effective contribution towards the realization of human well-being by helping solve a number of the socio-economic problems that mankind is now faced with. The expectations for the near future should not, however, be pitched at a very high level. It may not be possible to raise Muslim societies, at least in the near future, to the high spiritual level that Islam demands and that Muslim economists assume in their analyses. Moreover, the performance of all the functions that are expected from Islamic economics may not be immediately feasible because of the lack of resources and political support, the non-availability of data, and the difficulty of measuring a number of the socio-economic and political variables that need to be incorporated into the models. Hence, while it should not lose sight of its ultimate goal, it should be realistic about the immediate possibilities. It is possible that even after a great deal of effort, its achievements may not be significantly great in the immediate future. The effort should, however, continue, because, as Nasr has put it, "Islamic economics and the institutions which are predicated upon it have tremendous unfulfilled potential yet to be realized".15 Islamic economics has fortunately the advantage of drawing strength from the renaissance which is steadily gaining momentum in the Muslim world after centuries of decline and disintegration. It has also the advantage of getting support from the foundation of multidisciplinary dynamics laid down by Ibn Khaldun (d. 808/1406) and of the tools of analysis developed by conventional, social, humanitarian, and institutional economics as well as other social sciences. It is hoped that the
13 14

S.V.R. Nasr, 1991, p. 388. See Chapra, 2008. 15 S. V. R. Nasr, 1991, p. 392.

development of this new discipline with its explicit commitment to the satisfaction of material as well as spiritual needs of the human personality, and to moral values, socio-economic justice, and family and social solidarity, will not only help the Muslim world but also provide a new flair to economics in general.

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REFERENCES
Ahmed, Porf. Khurshid (2004), The Challenge of Global Capitalism: An Islamic Perspective, Policy Perspectives (Islamambad), April, Vol.1, No. 1, pp. 1-29. Bayhaqi, Imam Abu Bakr al- (1990) (d. 458/1065), Shuab al-Iman, ed., Muhammad alSaid Bisyuni Zaghlul (Beyrut: Dar al-Kutub al-Ilmiyyah). Chapra, M. Umer (2000a), The Future of Economics: An Islamic Perspective (Leicester, UK: The Islamic Foundation). Chapra, M. Umer (2000b), Is It Necessary to Have Islamic Economics? Journal of SocioEconomics, Vol. 29, pp. 21-37. Chapra, M. Umer (2006), Global Eocnomic Challenges and Islam Policy Perspectives (Islamabad), July-December, Vol. 3, No. 2, pp. 19-41. Chapra (2008), Ibn Khaludns Theory of Development: Does it Help Explain the Low Performance of the Present-Day Muslim World, The Journal of Socio-Economics, April,, pp. 836-863. Fulton, John, and Peter Gee, eds. (1994), Religion in Contemporary Europe (Lampeter, Wales, U.K). Hausman, Daniel, and Michael McPherson (1993), Taking Ethics Seriously: Economics and Contemporary Moral Philosophy, Journal of Economic Literature, June, pp. 671731. Katouzian, Homa (1985), Book Reviews on Taleghani, 1982; and M. N. Siddiqi, 1983; International Journal of Middle East Studies, pp. 383-416. Lutz, Mark (ed.) (1990), Social Economics: Retrospect and Prospect (London: Kluwer Academic). Minsky, Hyman (1986), Stabilizing an Unstable Economy (New Haven: Yale University Press). Mirakhor, Abbas (2007), A Note on Islamic Economics (Jeddah, IRTI, IDB Prize Winners Lecture Series No. 20). Nasr, Seyyed Vali Reza (1991), Islamisation of Knowledge: A Critical Overview, Islamic Studies, Autumn, pp. 387-400. Schadwick, Owen (1975), The Secularization of the European Mind in the Nineteenth Century (Cambridge, Cambridge University Press). Sen, Amartya (1987), On Ethics and Economics (Oxford: Basil Blackwell). Tabrz, Wal al-Dn al- (1381/1966), Mishkt al-Masbh, ed. M. Nsir al-Dn al-Albn (Damascus: al-Maktab al-Islm).

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