Islamic economics, politics and
There are many practices and teachings of Islam that
inhibit economic development. The nature of Islamic education, the
prohibition on interest and the efficiency of capital markets limit
motivation and investment. Conflicts between secular and sharia law, lack
of freedom of speech, democracy, political transparency and vulnerability
to financial mal-practice limit to some degree the effectiveness of
institutions in Islamic society. In addition, the time devoted to daily
religious observances and annual festivals such as Ramadan detract from
time available for economically productive activities to a greater extent
than other religions. For all these reasons it is relevant to consider in
greater detail the nature of Islamic thought and its impact on society and
For Muslims, Islam is not merely a religion but a way
of life in which it is necessary to know and apply the Quran. As Muslims
regard the Quran is the infallible word of God, it is a determining factor
in Islamic behavior and society. Its verses are not considered to be mere
teachings but directives to believers. Of these, perhaps one of the most
defining appears on the first line, which is "This book is not to be
doubted" (1:1). References to the power of God in the Quran reinforce
the need to obey His commands. Many of these commands apply to religious
customs, social behavior, and other areas including those of relevance to
commerce and economics.
Economics is a social science devoted to studying the
production, distribution, and consumption of wealth. It is the study of
the nature of factors which determine production and consumption of goods
and services and the relevance of this to human welfare. In what may seem
surprising to economists elsewhere, Islamic scholars have developed a
whole literature of economic discussion with reference to Islam. In this
school of thought known as "Islamic economics", economic issues
are evaluated in relation to Quranic principles, and mainstream economics
is referred to as "materialist economics". The motivation for
this formulation is the belief that capitalism has failed humanity because
it is inequitable.
In the Islamic economic school of thought, the
distribution of wealth, rather than the production of wealth, is
considered to be the primary concern. To determine this distribution, is
necessary to consider divine guidance. It is said that while Islam
approves of economic progress, this is only a secondary consideration. The
production of wealth is considered to arise necessarily from the
production of the necessities of life. Whereas materialist economics is
concerned with welfare, Islamic economics is concerned with proper conduct
in preparation for the afterlife. Each of the following tenets used in
Islamic economics are derived from quotations from the Quran. All wealth
is created by God. It is therefore his property. Property and wealth can
only be used for Godís purpose. The poor and the needy are entitled to
wealth by right. Wealth should be shared not concentrated. Islam prohibits
the lending of money for interest. Risk should not be born by the borrower
but by the lender. The borrower may enter an agreement of partnership or
co-operation with the lender. The lender can share the profits. However if
there is no interest the borrower may bear the risk of loss. This will
have a beneficial effect on the distribution of wealth. Employers must
treat employees well and employees must perform their duties.
In addition to these economic directives, there are
rules of taxation and inheritance that are defined in some detail. In many
cases some reason or explanation is provided in the Quran for these
injunctions. It the case of the prohibition on interest, this is stated
but without any clarifying explanation. The lack of any explanation is
held as further evidence of Godís wisdom. The rules as decreed in the
Quran are not moral codes but legal injunctions, enforced by fear of God
and anxiety about the afterlife. Depending on the country, these rules may
also be enshrined in legislation.
Muslims are motivated by the "call of Islam",
where they believe it is their duty to bring Islam to the entire world.
They see the rest of the world as sick, immoral, tired of materialism and
in need of salvation. They recognize that Islam has fallen behind in
education, administration, commerce, scientific knowledge, industry and
social services. However they see the application of religious life, not
as the cause of this problem but as the solution. This leads to the desire
to adopt Islam more thoroughly. By bringing a message that Islam stands
for social justice and human values, they hope to convince the world of
the righteousness of this path.
While Muslims to some extent reject the objectives of
economic development, they also commonly see their relative poverty as
being caused by Western failure or malevolence. They see international
financiers as effectively defrauding developing countries. They see the
failure of development efforts and widening gaps between rich and poor as
evidence of this. They also see development as an attempt to transplant
Western values and to undermine Islamic values, and as a form of cultural
imperialism, which is divisive and inappropriate. They seek an alternative
development strategy. To the Muslim, it must seem incongruous that as God
is the source and owner of all wealth, that he should apparently bestow
more of it upon non-Muslims.
To the non-Islamic economist, the Islamic view is
horribly misguided and its implementation a tragic betrayal of welfare.
There is no alternate development path. The barriers to entry imposed on
agricultural goods imposed by developed countries may constitute a form of
conspiracy against poor countries, but this is not specifically directed
against Islamic countries. Numerous reasons for the relative poverty of
Islamic countries could be suggested, mostly associated with the
directives of Islam itself.
Some of the economic effects of Islam, as conceived by
conventional economic thought, may be enumerated as follows. The
constraints and costs imposed on financial institutions by the nominal
prohibition on interest payments may preclude a free market in financial
capital, causing inefficiency, moral hazard in banking, limiting the
availability of funds for investment. Islamic tax regimes may have a
negative effect on resource allocation, productivity and innovation. A
conflict between secular and sharia law may contribute to an ineffective
rule of law, a lack of trust in judicial institutions, moral hazard in
judiciary, limitation on property rights and contract law, all of which
have negative economic consequences. Religious constraints on the freedom
of speech may impinge on democratic rights, institutions, political
freedom and the ability to expose and eradicate corruption, again with
negative economic impacts. The limitation on the labor force participation
of women may reduce potential production and income. Finally the role of
women in Islamic society, with its focus on domestic responsibilities, may
lead to a high birth rate and population growth rate, a correspondingly
lower per-capita income growth rate, further contributing to relative
The interference of religion into matters of economic
policy is neither appropriate, desirable nor justified. The gap between
rich and poor countries is not always increasing. Some poor countries are
developing and catching up. Others are not. The reasons for this vary.
Sometimes it is lack of effective development policy. The distribution of
income in many countries may be inequitable but this is not inevitably so.
Taxation and welfare payments redistribute income. Economic growth and
development does not necessarily make the distribution of income more
unequal or more inequitable. Generally, it makes everyone better off. So
the general view of the Islamic economist cannot be empirically justified.
Islamic economists view their objective as being the identification and
recommendation of policies theat implement morality as defined in the
Quran. In doing so they breach the normal moral obligation of the
economist, which is the identification, and recommendation of policies
that are in the best interest of the community.
Islam and democracy
A continuing source of conflict in many Muslim
countries is the extent to which Islamic laws, the sharia, should be
enacted in legislation. In many countries, there has been a general
tendency towards a more Islamic implementation. Where conflicts occur,
people are often warned by religious leaders not to question the authority
of the Quran. Political debates are limited by the difficulty or inability
to question any Islamic doctrine, In some Islamic countries democracy has
been established but in most, governments are undemocratic or there are
certain limitations to democracy. Is there something in the nature of
Islam that inhibits democracy?
Democracy relies on freedom of speech. In Islam,
freedom of speech is possible, but the Quran cannot be questioned. So it
is possible for democracy to operate, but within these limitations. All
democracies operate within certain constraints, either voluntary or legal.
They generally operate for example, within the bounds of religious
tolerance. However Muslim countries differ to some extent because there,
Islam itself is often a political issue. There may be a balance between a
popular secular view of the role of government and a traditional Islamic
view. This may cause a conflict between religious leaders and secular
leaders, imposing some constraint on the exercise of power by secular
governments. In some Islamic countries, undemocratic secular governments
hold monopoly power, partly motivated by a desire to prevent undemocratic
Islamic parties from gaining power.
In some cases, like Iran, Islamic theocracies hold
power and disallow real democracy, by assuming divine authority. In other
cases there is a political balance of power between secular and Islamic
political parties. It may be a policy of the Islamic party to implement an
"Islamic state". By this it is usually meant that the sharia
should become the paramount law. Such an implementation may well mean the
end of democracy, because the sharia does not define the role of
elections, at least as is currently understood. If the election of the
Islamic party may foreshadow the end of democracy, the choice between
secular and Islamic parties may not offer a real long term democratic
choice. For this reason some countries seek to limit the power of parties,
or simply limit democracy.
Any religion that seeks to have its sacred texts form
the basis of secular law is in essence undemocratic. Democracy means that
the popular will is expressed in the formulation of legislation. It
entails the election of legislators. Where legislation is based on an
ancient text, no expression of popular will is necessary. No amendments
are necessary because the ancient texts do not change. The role of
government is limited to just administration. In many Islamic countries
there is increasing pressure for more rigorous implementation of Islamic
law, partly in response to a perceived secular political failure and to
perceived Westernization. This may further inhibit the development of
democracy in Islamic countries and further worsen the prospect of economic
development, prosperity and welfare.
Democracy relies of a belief in individual human
rights, which are limited only to the extent necessary to ensure community
welfare. In Islam, individual rights are surrendered to God, as the nature
of Islam requires submission. The word "Islam" means
"submission". As well as a sense of individual powerlessness,
this submission to God may lead to a reduced respect for the authority and
role of government. For Muslims, there is no escape from this as it is not
possible to renounce or change your religion (3:85). This crime of
apostasy in many countries is a capital offence. It is difficult to
reconcile this absence of freedom with democracy.
Democracy may not be entirely necessary to achieve
economic development, as the recent achievements of China show. However
there can be no doubt that a lack of democracy often leads to corruption
and a usurpation of state resources by the leadership group. A lack of
freedom of political expression can lead to social and economic
disruption. It is likely that China will eventually find its growth
limited for these reasons.
There is a more pervasive reason that strict adherence
to a religious doctrine such as Islam is not conducive or even permissive
of democracy. The restriction on the ability to doubt, in the way that the
words of the Quran cannot be doubted, spills over into the political
arena. Statements that reflect badly on Islam are not always permitted,
even if they are true or based on quotations from the Quran or Hadiths.
For example referring to the number of wives of Muhammad, or stating that
Muhammadís father was not a Muslim, may lead to imprisonment or worse.
It is not just the speaking of the truth that may be suppressed but the
ability to recognize the truth and even the ability to seek it.
In a society where one must not doubt, the education
system tends to favour basic memorizing rather than investigative
learning. It favors rote learning rather than learning to think and to
reason. An emphasis on study of the Quran precludes to some extent the
study of other subjects. A habitual reluctance to use scientific method in
order to establish the truth can have implications on societyís
progress, the administration of justice and the political process. In such
an education system, people may become readily accustomed to simply
believing what they are told. Evaluating the competing claims of political
parties may seem confusing even distasteful. Such societies may be neither
conducive to democracy, nor the rule of law, nor the achievement of
prosperity. It has been said that a lack of freedom may be a cause of the
relative poverty of Islamic countries. More realistic analysis may show
that Islam may be a cause of the lack of freedom.
Islam is not the only religion in the world that causes
problems and hardship. It is hard to understand the behavior of certain
Christian world leaders, and their desire to impose their views and will
upon the world, without resorting to some notion that they must be
motivated by a religious belief that what they do is good. This is even
though the consequences of their actions quite obviously are not good.
Their religious sense of morality appears to result in self-deception.
If religion contributes to the order of society and a
feeling of well being amongst citizens, its benefits may be considerable.
When it contributes to ignorance, violence and poverty it may become a
cost to society and a liability. Religion has always had this negative
effect. Islam has a particularly adverse effect on economic welfare and
social organization. The effect of religious illusions and delusions,
combined with the danger, power and proliferation of modern weapons, has
made religion not only deleterious to human welfare, but a serious threat
to the safety and security of humanity.
(C) Copyright 2003 John