Everybody has been talking about the financial crisis lately. Many Muslims have expressed the idea that “Islamic economics” might be an alternative to the alternative system of global finance, and that it wouldn’t be vulnerable to the same sort of problems that we are seeing everyday in the news. Whatever the case may be, in order to begin to answer these sorts of complex questions, we have to have an understanding of the recent history of Islamic economic thought. I wrote something about this recently, and I would like to share it with you:
From my research on the subject, there are basically two approaches to the issue of “Islamic economics.” (I put this in quotes not in order to question the islamic-ness of this discourse, but rather to put into question that things not explicitly called “islamic” are in fact un-islamic.. .more on this later insha’Allah) . The first approach presupposes an Islamist state that can implement Islamic policies across the board. The second presupposes the currently exisiting state structures of Muslim countries, and their corresponding legal regimes, which means that reform has to come in piecemeal fashion primarily from the private sector (and as such, has to play by the rules of the game in the global capitalist order).
The former approach (top-down statist reform) has not really been tried, because of the lack of successful Islamist movements. Iran is an exception, but one state, or even a few of them, cannot fundamentally change the game. The only viable way this could happen would be if Islamist parties took control of enough countries to create an Islamic economic bloc wherein trade between them would be facilitated in order to offset each state’s comparative disadvantage.
The latter approach (piecemeal efforts from the private sector, in recognition of the ubiquitous institutions and networks of global capitalism) has been the dominant discourse of Islamic finance. It has adopted a pragmatic approach wherein workable institutions and products have been created and thrived (and often failed as well) under the supervision of ‘ulama.
Now, what needs to be recognized is that both of these approaches assume the nation-state structure, a novelty in the Muslim world only slowly approaching it’s 100 year anniversary. When we talk about the economic practices of the Muslims we admire (whether it be the Prophet (may the peace and blessings of God be upon him), Imam Ja’far al-Sadiq (may Allah have mercy on him), Khalifa ‘Umar b. ‘Abdul-Aziz, Imam al-Ghazal, Salahuddin al-Ayyubi, etc.) then we must recognize that such a pre-industrial economic order governed by political arrangements and legal regimes significantly different from those that we so often PRESUPPPOSE in our conversations, that such an arrangement is gone and very unlikely to return. The industrial and post-industrial economies governed by nation states and international institutions that are fundamentally linked to our experience of the world and understanding of it are already a far remove from the conditions in which a shari’a discourse was articulated and sometimes applied in the economic sphere.
As such, economic thought that is inspired by Islamic revealed sources and the tradition that stems therefrom, and more importantly economic PRACTICE that is explicitly connected to such shari’a discourses, is the exception rather than the norm. But that does not necessarily mean that current status quo thought and practice on economic matters is inherently “un-islamic. ” Rather, the only way of knowing the shar’i status of currently existing practices is through a review of such practices. And that is precisely what the latter form of Islamic economics is doing (the piecemeal approach).
The former approach (the Islamist top-down approach) is problematic from a whole host of reasons. I’ll just name a few. The modern nation-state is already WAY too intrusive (a big change from pre-modern Muslim political structures) and a wholescale top-down approach would only increase the hegemony of Muslim governments over their populations. Secondly, the only significant difference on a fundamental level between economic systems is the stance they take on private property, with capitalism and communism on the two ends of the spectrum. Islamic law safeguards private property, and so is closer to the capitalism end of the spectrum. As such, the only real difference is a matter of legal regimes, and the resulting differences that come therefrom. Given that the fostering of a discourse on real economic practices in light of shar’ia is already underway, and without the social unrest of a revolution and statist hegemony, what exactly would an Islamist statist approach bring?
In the end, there are only a few real players: intellectuals, firms, and governments. The intellectuals have been doing their work for decades now. Originally, you found the Islamist element a stronger trend (think early Monzer Kahf for example), but now the piecemeal, contract oriented approach has gained favor (think current Mufti Taqi). Firms, obviously, could only use the intellectual work of the latter approach to create viable products, and that is what they have done. Governments of current Muslim nation-states, also, have little wiggle room. To function as a nation-state, you need a central bank and fiat money. How the heck would you get around those two lynchpins of the system, assuming you think they are not in tune with shar’ia??!!! Thus, the only logical alternative would be revolution, based on the theories of those who have never tried them in practice, and which have only tangential similarity to the economies of the Muslim world before European hegemony utterly transformed them. From any logical standpoint, and more importantly from a religious one, that would be a highly risky endeavor that would contravene a number areas of maqasid al-shari’a (eg. the preservation of property) and qawa’id fiqhiyya (eg. custom rules).
As such, I don’t see any real alternative to what is currently being done. The pace at which it is being done, and the direction in which it might go, will most likely be effected by the current crisis, but I don’t think we will see anything close to the aforementioned creation of an Islamic economic bloc ruled by Islamist parties trying to implement Islamic economics from a top-down approach.
Lastly, I’ll end with this. The more one learns about law and economics, whether Islamic, American, or whatever, the more one realizes how much one doesn’t know. There are very few, if any of us, on this list, who would be able to evaluate contracts as to their shar’ia worthiness, or analyze state economic policies in their fullness and comment on how they may or may not align with the letter or spirit of the shari’a. As such, we realize this is primarily a problem of knowledge. And when we look at contemporary Islamic economics, we realize it is the only area where scholars of shari’a can hope to really be involved in society other than minbar (or satellite TV) moralizing, or marital counseling. If Islam is truly to be an integral part of society, then it will only do so through the creation of people of specialized knowledge (that is how the division of labor works in the post-industrial economy). As such, I am glad to see people like Mahmoud El-Gamal and Mufti Taqi and Shaykh Nizam and others doing their thing (however much they might disagree), because it is the one area where shari’a discourse is at least living and breathing on a macro-level. As this field grows, it will require more and more people learned in the letter and spirit of the shari’a, whether they be lawyers, accountants, institutional investors, economists, CFOs, or whatever. And perhaps, one day, this knowledge may even be more relevant for judges handling commercial disputes, central bankers, and prime ministers.
For these things to happen, there needs to be a shift in the educational practices of Muslims, who see shari’a scholarship as a worthy profession and necessary to being a memeber of the educated power-brokers in society. This seems to be already happening, with the creation of degree programs in Islamic Finance, but it will depend on whether or not these programs attract more talented students than regular shari’a student, and graduate professionals who are competent to deal with the complexity of these questions from a legal (right brain) approach and a financial (left brain) approach.
For those who want to begin the lifelong journey into these waters of complexity, I suggest the following books:
Any standard college economics 101, Macroeconomics, Finance, or Accounting textbook
“The Naked Economist” by Charles Wheelan [accessible intro to econ]
“The Age of Uncertainty” by John Kenneth Galbraith [interesting history of different forms of economic organization]
“Manias, Panics, and Crashes” by Charles Kinderberger [a history of financial crises]
“An Introduction to Islamic Finance” by Mufti Taqi Usmani [lays out the standard understanding of contemporary Islamic finance from the piecemeal private sector approach]
“The Fiqh of Zakat” by Yusuf al-Qaradawi [massive tome on the application of zakah in an modern nation-state system]
“Islamic Finance: Law Economics and Practice” by Mahmoud El-Gamal [intelligent critique of dominant discourse in Islamic finance]
May Allah guides us to sincere hearts devoted to Him and trusting of His Lordship over everything, enlightened minds that understand the way of living the shari’a in our time and place, and vigorous bodies which work and work despite hardship. Our Lord, give us good in this world, good in the next, and save us from the punishment of the Fire, ameen.
