GENERAL CHARACTERISTICS OF AN ISLAMIC ECONOMIC SYSTEM
Introduction
Although Islam has provided a blueprint of how a society is to be organised and how the affairs of its members are to be conducted in accordance with its prescriptions, the system itself has not been applied, with the exception of a brief period at the inception of Islam, in its entirety. Only in recent decades have the Muslims become interested in the society-wide implementation of Islamic teachings. Accordingly, theoretical research regarding the Islamic economic system and its application to present-day economies is in a stage of infancy. What differentiates Islam from other systems of thought is its unitary perspective, which refuses to distinguish between the sacred and the profane and which insists that all of its elements must constitute an organic whole. Consequently, one cannot study a particular aspect or part of an Islamic system, say its economic system, in isolation without a knowledge of the conceptual framework. Moreover, Islam postulates a unique relationship between Allah, man, the society and the Divine Law. This relationship directly affects the workings of the economic system. Therefore, to understand the way in which the economic affairs and institutions are to be organised in an Islamic system, it is first necessary to comprehend the nature of this relationship.
The Model of Man
Islam teaches that Allah is the One Creator and Sustainer of the Universe and of man. Man, however, is unique within the created order, as he is the objective and the synthetic fruit of the process of creation, and he possesses a dual dimension. His body constitutes his cosmic dimension, which is the essence of all that exists in the world of matter and through which he is connected to the material world. He also possesses a cosmic dimension through his soul, which is in a state of ceaseless journeying and Allah is the goal toward which it is oriented. This journey is a becoming process and an evolutionary process towards perfection, which for man contains the potentiality of entrance into all levels of intellectual and spiritual achievement leading to the final meeting with Allah.
For man, the recognition and constant remembrance that everything in the Universe is contingent upon Allah entails a simultaneous understanding that the proper relationship between man and Allah is the relationship of “the servant and the served”. The sole declared purpose of man is to “serve” Allah and to do so in accordance with His commands. This service is the implementation of the divine imperative for man and is for his own benefit. The notion of service, i.e., ibadat indicates the act of the removal of the barriers (material and otherwise) which exist on the path to Allah.
The unique position of man among all created order stems from the fact that he has been designated as Allah’s Vicegerent on earth. This designation is a Divine trust which bestows on man particular responsibilities which are composed of developing his own potentialities and, concomitantly struggling for the creation of a just and moral social order on earth.
To perform the responsibilities with which he is charged, man is provided with the material and extra-material means to assist him in discharging his duties. First, he has been endowed with a theomorphic nature composed of the powers of cognition, intellection, volition and speech to recognise and accept Allah as the Supreme Creator. Through his intelligence and will, man can discern and then choose between right and wrong, between just and unjust, between true and false, and between the real and the illusory. Although this power of discernment has been imprinted on his soul, to help man remember his purpose and his responsibilities, he is provided with guidance and remembrance in the form of Revelations and with reminders in the persons of the prophets, the Imams, and saints, as well as other human beings, to show him the “right path”. He is also provided with the criteria by which his actions will be judge d by his Creator; and he is reminded of the punishments which his transgressions will earn him, and rewards which his efforts, obedience and service to Allah will call forth in this life and in the hereafter. Through Revelations and the Reminders, man is told that there will come a day of reckoning, “the Hour,” and a moment when every human will be shaken into a unique self-awareness of facing his deeds and misdeeds and accepting judgement upon them. Through these means, he is constantly reminded of the transitory nature of this world and the permanence of the next, of what he must do to earn happiness in this life and felicity in the next, of his purpose and of his responsibilities. Finally, all created phenomena in the material world has been subjected to man’s use in order to provide him with the necessary material means to perform his responsibilities. Through his intelligence, man is charged with the power to discover the knowledge which is necessary to utilise the natural resources to the fullest possible extent in order to remove the material obstacles which may prevent him, and his kind, from actualising their full potential.
Thus, Allah creates, preserves, guides and finally judges man vis-a-vis the performance of his responsibilities. Hence, man’s purpose is defined, his responsibilities are designated, the necessary means of discharging these responsibilities are provided, guidance and reminders are constantly made available and the promise and criteria of final judgement, as well as the rewards and punishments commensurate with obedience and transgression, are made known; it is, then, man’s free will and choice which determine which path he, in fact, chooses.
Islam, then, models man as a being whose behaviour, including its economic dimension, is teleological in nature. Whatever he thinks or does is accomplished with his final purpose in mind. His behaviour is oriented toward his final destination. The things of this world, including material possessions, represent only the means by which he can come closer to his final goal. In his thought and behaviour, he is constantly aware of the presence of Allah, which is “closer to him than his jugular vein.” This awareness extends, not only to his own affairs, but also particularly to his day-to-day dealings with other men. This ever-present consciousness is a crucial concept in the Revelation and represents the “awe”, the “fear”, or “heeding” which a believer feels, when he is fully conscious of Allah’s presence in conducting himself in his daily life and in his dealings with other men. The concept carries with it the recognition by man that his actions will be judged in the Hereafter. It represents a defence mechanism, an “inner torch”, by which man can distinguish between right and wrong, seeming and real, immediate and lasting; and by which he can defend himself against the temptations of his lower instincts. The becoming process and the evolutionary process toward perfection takes place through the constant strengthening of this inner torch (i.e., taqwa). It is this defence mechanism which will assure man of his real and final success.
The Society
The central aim of Islam is to establish a just, moral and viable social order through the agency of man. Hence, the individual and the society are viewed as correlates. The position of vicegerency and its concomitant responsibilities belong to all of mankind. It is the whole of humanity which has the collective responsibility of ensuring that every human being has the opportunity to tap his dormant potentials and of removing all obstacles from the individual’s path to his ultimate goal. It is this collective view that evokes the matter of the unity of mankind, which leads to the equality (i.e., before the Law and with other men) of its members. Islam enunciates the principle that all mankind has been endowed with the same nature. It assumes, affirms and confirms the equality of the entire human race and equalises all men as creatures of Allah; all endowed with the same cosmic status and the same essential qualities of creaturely humanity. It obliterates all bases of distinction except goodness, virtue, and service to Allah. The principle of the unity (in face of apparent diversity) of mankind is derived from the central doctrine of the Unity and Oneness of Allah, around which every aspect of Islam rotates. This principle leads to the conclusion that the Islamic society is an open-ended community whose limit is the whole of humanity.
The Islamic community was brought into existence as a “community” of the “middle”, ‘justly balanced” a “witness” to all nations, whose chief characteristic is the belief in the certainty of the Absolute and His Oneness; whose central function is to “command good and forbid evil”; and whose members are fully conscious of their purpose and ultimate goals and possess the moral consciousness to fully realise their obligations to their fellow men and to society. This community is a “fraternity” of the faithful, which serves as a nucleus for the dissemination of its universal values.
Islam regards communities as having rights and responsibilities distinct from those of the aggregation of their individual members and which, like individuals, are accountable for their actions and suffer the consequences of disobedience. The Revelation asks the Muslims to consider the fate of communities and civilisations which went before them and to see how they, through the operations of immutable laws which govern the rise and fall of peoples, received what they deserved and to take lessons from it. The Islamic community, as well as each of its members, is charged with the responsibility of preserving, promoting and propagating Islamic values, norms and laws if it is to flourish and successfully accomplish its missions and objectives.
Recognising that all individuals exist in a cultural and sociological environment and owe much of their perception of the world and many of their reactions to its phenomena, to this environment and to other individuals who share it, Islam considers the existence of an Islamic community indispensable for the achievement of the Divine purpose. Much of the significance of this community relates to the need for acculturation, inculcation, and acquisition of the basic Islamic values which, ipso facto, represent the growth of a Muslim personality. The well-knit way of life in the Islamic community moulds individual behaviour in its own design. The Islamic principles which deal with the formation, preservation and continuation of the Islamic community reflect the dialectic interaction of the psycho-physiological requirements of individuals on the one hand, and the necessary socio-economic order envisioned by Islam on the other It is this interaction which shapes the wants of the members of the community and the pattern of their preferences. This interaction, patterned in accordance with the teachings of Islam, is absolutely crucial to the development of the behaviour, including its economic dimension, of the individual and the collective envisioned by Islam.
The Law
Islam legislates for man according to his real nature and the possibilities inherent in the human state. Without, in any way, overlooking the limited and the weak aspects of human nature, Islam envisages man in the light of his primordial nature as a theomorphic being, the vicegerent of the Creator on earth and a theophany of Allah’s attributes, with all the possibilities which this implies. It considers man as having the possibility of being perfect, but with a tendency to neglect his potentialities by remaining only at the level of sense perception. It asks, therefore, that in return for all the blessings with which man is provided, he remembers his real nature, keeps in mind his terrestrial journey, seek to realise the full potential of his being, and remove all the obstacles which bar the correct functioning of his intelligence. To order human life into the pattern intended for it by its Creator, man is provided with a network of injunctions, attitudes and rules which represent the concrete embodiment of the Divine Will in terms of specific codes of behaviour, by virtue of the acceptance – through the exercise of his free choice – of which a person becomes a Muslim and according to which he lives his private and social life. This network of rules, called the Shairah which is etymologically derived from a root meaning “the road”, leads man to a harmonious life here and felicity hereafter.
The emphasis on the axiological principle of Unity forms the basis for the fundamental belief that Islam knows no distinction between the spiritual and the temporal, between the sacred and the profane, or between the religious and secular realms. Islam seeks to integrate all of man’s needs, inclinations and desires through the all-embracing authority of the Sharia. Life is considered as one and indivisible. Therefore, the rules of the Sharia hold sway over economic life no less than over social, political, and cultural life; they persuade, determine and order the whole of life. It is through acceptance of, and compliance with, the rules of the Sharia that the individual not only integrates himself into the community but also into a higher order of reality and the spiritual centre. Any violation of these rules will have a disintegrative effect upon the life of the individual and that of the community.
As an integral part of the Revelation, the Sharia is the guide for human action which encompasses every aspect of human life and, hence, sanctifies and gives religious significance to activities which may appear the most mundane. This blueprint for an ideal life operationalizes the understanding of the Divine Will in terms of human action by providing a scale by which actions can be measured in accordance with their correspondence with the Will of Allah. Hence, all human actions are valued in terms of the weight of their merits and demerits through their classification into the five categories of obligatory, recommended, indifferent, reprehensible and forbidden. Through this scale of valuation, the worth of, and return to, human acts are defined, so that man can distinguish between the ‘straight path’ and those which will lead him astray. It is then through the exercise of his free will that man chooses which path to follow.
The Sharia consists of constitutive and regulative rules according to which individual Muslims, and their collectivity, must conduct their affairs. The basic source of the Law, in Islam, is the Qur’an, whose central reality in the life of Islam and its influence upon the life of the Muslims cannot be overemphasised. Its chapters constitute the tissues out of which the life of a Muslim is tailored and its sentences are the threads from which the essence of his soul is woven. It includes all the necessary constitutive rules of the Law as a ‘guidance for mankind.’ It, however, contains many universal statements which needed further explanation before they could become specific guides for human action. This explanation and codification were provided, for the most part, by the Prophet (SA), whose lifetime marks the first and the most important period in the process of codification of the Sharia. He was the spiritual guide and the organiser of the Islamic social order. The Revelation which came to him and of which he was the first embodiment left nothing without guidance and direction. The principles enunciated in the Qur’an were explained, amplified, practised and exemplified by the Prophet (SA), who is considered a symbol of the perfection of the human person; the best prototype and the “best model.” The Prophet (SA) participated in social life in its fullest possible sense and demonstrated how life, in all its dimensions, can be integrated into a spiritual centre. His career, so intently devoted to the construction of the Islamic community, exemplifies the Qur’anic concepts of Allah’s Will and man’s duties. His personality, actions and sayings, which carry with them the perfume of the Revelation and are closely bound to it, leave an indelible mark on the consciousness of the individual Muslim. Hence, after the Qur’an, the Prophet’s sayings and his actions are the most important sources of the Law and the fountainhead of Islamic life and thought.
The expansion of the regulative rules of Law and their extensions to new situations, resulting from the growth and progress of the Islamic community, were accomplished with the aid of the consensus of the community, analogical reasoning – which derived rules by discerning an analogy between new problems and those existent in the primary sources – and finally through the independent human reasoning of those specialised in the Law. These five sources, then, constitute the components of the Islamic Sharia.
Being based on the first principle of Unity, and the fact that no claim to eminence except the force of virtue and good character is recognised, Islam extends the principle of equality before the Law, equal protection of the Law, and equal opportunity under the Law to every member of society. The underlying idea is to ensure the maximum freedom of action, for each individual within the framework of the Sharia. Every person is given the right of liberty of action subject to the limitation that the individual’s actions do not violate the rights of other individuals or those of society.
The compliance with the rules of the Sharia is essential to the preservation of the community and is assured by the fact that the behaviour of the individual is constrained by adherence to the binding norms of the socio-economic order and through coercion by the collective. The rules themselves are composed of those which deal with the individual’s body and his state of consciousness, those which govern his relationships with other members of the society, those which guide his relationship with the collective and finally those which constitute the code of conduct necessary for the community as a whole. The rules concerning economic matters are covered by all five components of the Shairah.
The Polity
The Islamic polity is first and foremost a community of believers who are fully conscious of their membership in the community, and that of their fellow believers, in which reciprocity is enjoined, and in which each member understands his responsibility to the community and to Allah. Concomitant with his acceptance of Islam, the individual agrees to observe the rules of the Sharia in his private and public affairs. This acceptance and agreement represent a contract between the individual and his Creator which symbolises the primordial covenant between Allah and man, according to which man agreed to serve and worship no one but Allah. When a sufficient number of individuals similarly committed are organised into a community, their common belief and their commitment to comply with the Sharia constitutes the social contract according to which the Islamic polity is organised.
The original Islamic polity was formed under such arrangements. To its temporal and spiritual head (who not only possessed excellence of character and human perfection, but also had Divine appointment and the responsibility to organise the community), political legitimacy was extended by his followers; whose acceptance of his authority was an explicit corollary of their acceptance of Islam itself. Both the teachings of the Revelation and the paradigm of the Prophet (SA) made it clear that Muslims were to have a corporate identity.
All Muslims share a common view of the ideal political authority, whose most important qualification is its commitment to adhere to the rules of the Sharia and apply it to the affairs of the community. It is recognised, however, that all sovereignty and all power ultimately belong to Allah. No authority has the right to arrogate to itself a claim to absolute, permanent, inalienable and indivisible sovereignty. Hence, in an Islamic society, the political authority is subjected to the rule of the Sharia.
The need for authority exists in an Islamic community because in its absence, preservation, cohesion and well being of the society cannot be guaranteed. Therefore, a legitimate authority, i.e., one which has a contract with Allah to assure compliance with the Sharia, is necessarily assured for the preservation of the community. Whatever the form of the political authority -divinely inspired or temporal – it is guided and limited by the Sharia, which also prescribes consultation for the authority as the means of reaching decisions. In making policy, the faithful are enjoined to consult with one another The Revelation makes it clear that the polity is to build and develop the community to carry on its Divine imperative in the world.
The legitimate political authority is the vicegerent of the Prophet (SA), and the defender of the faith. It is charged with the implementation of the Law by safeguarding the welfare of the believers in this world, and by enforcing obedience to it, ensuring their salvation in the world to come. All believers are equal before the Law and they owe obedience to the political authority inasmuch as it is instrumental in applying the Law. So long as the decisions of the temporal authority conform to the principles of the Sharia, and have bearing on the public interest, they must be obeyed. However, the extent of the interference of the authority in everyday life of the society is elastic and depends on the extent to which the members comply with rules of the Sharia. The power of the political authority, on the other hand, is conditional upon the faithful discharge of his duty: to guard the Law and enforce its application in the life of the community of the faithful. Consequently, the political authority is viewed primarily as a vehicle for implementing the Sharia and therefore legitimacy is derived from enforcing the ways of Islam. It stands as a symbol of the rule of the Sharia over the society and no contradiction is possible, therefore, between the political authority and the community governed by that authority since the community is a society of the believers politically organised under the authority of Allah.
In as much as Islam’s greatest emphasis is directed towards the development of the individual’s active moral consciousness in all his social interactions, the existence of a political authority in the society does not absolve the individual from the performance of the duties with which he is charged. Adherence to moral principles and the doctrinal antecedence logically predisposes a Muslim to an active and assertive political role in the society. It is the active moral consciousness of the individual and the duty of “commanding the good” and “forbidding of evil”, along with the divine exhortation of consultation, which gives the individual Muslim the right and the obligation of participating in the affairs of the community. The more active the individual’s role in assuring that not only his own behaviour but also those of his fellow Muslims complies with the requirements of Sharia the more limited is the extent of interference of the authority in the socio-economic life of the community.
Concept of Justice
As was earlier mentioned, the central aim of Islam is to establish a just and moral social order through the agency of man. This all embracing desideratum of the Islamic system is the ruling principle from which man’s thought and behaviour, the substantive and regulative rules of the Sharia, the formation of the community and the behaviour of polity and of political authority derive their meaning and legitimacy. It can be claimed that it is the emphasis on justice which distinguishes the Islamic system from all other systems. It is via justice that the raison d’etre of the rules governing the economic behaviour of the individual and economic institutions in Islam can be understood. It is acting with the knowledge that justice evokes Allah’s pleasure and injustice His displeasure that gives the behaviour of a Muslim its orientation, meaning and effectiveness. Whereas justice in Western thought is a quality of behaviour of one man to another and actions can be perceived as unjust only in relation to the “other”, in Islam it has an implication for the person himself That is, even when one does injustice to someone else, there is always reciprocity, in that through injustice to others one, ultimately, does injustice to oneself.
Justice in Islam is a multifaceted concept, for each aspect of which there exist several words that describe it. The most common word in usage which refers to the overall concept of justice is the word ‘Adl. This word and its many synonyms imply the concepts of ‘right’, as an equivalent to fairness, ‘putting things in their right place’, ‘equality’ ‘ ‘equalising’, ‘balance’, ‘temperance’ and ‘moderation’. These last few concepts are more precisely expressed as the principle of the ‘golden mean’ according to which the believers are not only individually urged to act in conformity with this principle, but also the community is called upon, by the Revelation, to be a ‘nation in the middle.’ Thus, justice in Islam is the conceptualisation of an aggregation of moral and social values which denotes fairness, balance and temperance. Its implication for individual behaviour is, first of all, that one should not transgress one’s bounds and, secondly, that one should give others, as well as oneself, what is due.
In practice, justice is operationally defined as acting in accordance with the Law, which in turn contains both substantive and procedural justice. Substantive justice consists of those elements of justice as contained in the substance of the Law, while procedural justice consists of rules of procedure assuring the attainment of justice contained in the substance of the Law. The underlying principles which govern the distinction between just and unjust acts determine the ultimate purpose of the Sharia which includes: the establishment of the “general good” of the society (considered to be the intent of the Revelation and the Sharia is the path by which it is achieved), building the moral character of individual Muslims, and finally the promotion of freedom, equality and tolerance, which are often stated as important goals of the Sharia. Of these, the most important principle is considered to be the protection of the interest of the society. Although there can be no contradiction between justice for the community as a whole and that for the individual, the interest of the individual is protected so long as such interests do not come into conflict with the general interest of the society.
Islam considers justice as the very foundation of the polity. The Unity of Religion and the Law which exists in principle must be carried out in practice. Without an organised political authority, the existence of both the Religion and the Law may be endangered; without the constraints of the Sharia, the polity will degenerate into an unjust and tyrannical political order. Only in pursuit of justice can the polity be expected to fulfil the ends for which it was established. The pursuit of justice results in convergence between the interests of the ruler and the ruled, leads to the improvement of social and economic conditions and enhances the power of Islam in society. For this purpose, two factors are necessary: the moral consciousness of the individual in not transgressing the limits set on his behaviour by the Sharia, and the faithfulness of the political authority to the terms of its contract in ensuring that the rules of the Sharia are implemented.
As an aspect of justice, social justice in Islam consists of the creation and provision of equal opportunities and the removal of obstacles equally for every member of the society. Legal justice, too, can be interpreted as meaning that all members of the society have equal status before the Law, equal protection by the Law and equal opportunity under the Law. The notion of economic justice, and its attendant concept of distributive justice, as an aspect of the overall principle of justice in Islam, is particularly important as an identifying characteristic of the Islamic economic system, because rules governing permissible and forbidden economic behaviour on the part of the consumers, producers and government, as well as questions of property rights and of the production and distribution of wealth are all based on the Islamic concept of justice.
The Economic System
At the core of the Islamic economic system lies a collection of immutable rules and institutions which affect economic behaviour and outcomes and which are both time and place invariant. This immutable core is defined by the Sharia. On the periphery of the system there are institutions and rules, which impact economic behaviour but which are subject to change, depending on the circumstances. These latter are results of decisions taken by legitimate authorities in an Islamic society in pursuit of policies, i.e., deliberate interventions in economic affairs, to further their aims. These policies, actions taken in pursuit of specific objectives, must, nonetheless, be Sharia compatible. Whereas, Islamic economic systems adopted in various localities may vary with respect to the periphery economic rules and institutions, they cannot differ with respect to their core. For example, while one Islamic country may differ from another with respect to its foreign trade policies, the institution of inheritance cannot be totally different from one Islamic society to another. To understand the economic system of Islam, some of its key characteristics will be briefly discussed here. Before that, however, a general statement regarding the Islamic economy is in order It can be categorically stated that Islam requires, as one of its specific objectives, a “healthy”, dynamic and growth-oriented economy, without which the higher aims of Islam can – not be accomplished. That dynamic and growing economy is considered “healthy,” however, whose rules, institutions, organisations and their operations, as well as the behaviour of the individual and the collectivity, is in conformity with the Sharia.
A. Individual Obligations, Rights and Self-interests
In Islam, human freedom is envisaged as a personal surrender to the Divine Will rather than an innate personal right. Man is ontologically dependent on Allah and can only receive what is given to him by the Source of his being. Human rights are a consequence of human obligations and not an antecedent to them. Man is charged with certain obligations toward his Creator, nature, himself and other humans, all of which are outlined by the Sharia. When these obligations are fulfilled, certain rights and freedoms, which are also delineated by the Sharia, are gained. Limitations which are imposed by the Sharia on the rights and freedom of the individual are in the direction of removing certain negative possibilities from human life. The obligations, rights and limitations defined by the Sharia must be observed if the individual and the system are to have an Islamic identity.
Within the framework of the Sharia, and as a result of the Islamic conception of justice, individuals have natural rights which are guaranteed, among which is the right of the individual to pursue his economic interests. Islam considers that the natural rights of the individual are the rights granted to him by Allah. Pursuing one’s economic interests within the framework of the Sharia, is first an obligation and a duty, then a right which no one can abrogate. So long as the individual has the ability, the obligation and the right of pursuing his economic interests are, concomitantly, extended to him. What is, however, significant is the fact that if the power and ability to pursue one’s economic interests is lacking, the responsibility is no longer incumbent upon the person, while his rights are still preserved. The right to economic benefits is never negated as a result of the lack of ability of the individual to undertake his duty of pursuing his economic interests. The potential right remains even if a person is unable to actualise it. Conversely, if the person is able but does not perform his obligations, then his rights are also negated.
In Islam, contrary to popular opinion, self-interest is not negated. Islam, in fact, considers it as a primary factor in its incentive-motivation system; a necessity in any organised society if the individual is to find it utility maximising to follow behavioural rules prescribed by the system. Provided that self-interest is defined to cover spiritual and temporal or temporary and eternal interests, there is not one rule in the Sharia which does not carry with it its own justification in terms of individual self-interest. It is for his own benefit, material and spiritual, in this world and for his ultimate salvation and felicity in the next that the individual is invited to follow the rules of the Sharia. This is made amply clear by the Qur’an, in which all injunctions are generally coupled with the assertion that compliance with them by the individual is for his own benefit. Often the incentives and the rewards, both here and in the hereafter, for compliance and the retributions for non-compliance are enumerated. It is in the pursuit of self-interest that individual obligations and rights, as well as the limits to these rights, are specified by the Sharia.
B. Property Rights
The conventional definition of the word property is that it is a bundle of rights, duties, powers, and liabilities with respect to some asset. In most societies the content of this bundle buttresses the shape of the economy.
Private property, in the Western conception, is the right of the individual to use, enjoy and dispose of material things and exclude others from their use or enjoyment. There is a dichotomous notion of property which suggests that the private property right is the right of the individual to exclude others, while the common property right is the right of the individual not to be excluded by others from the use and enjoyment of an asset.
Perhaps the most significant characteristic of the Western conception of private property is that it is interpreted to mean the exclusive and inalienable right of disposition of the property. This notion is taken so much as a matter of course that it may be surprising to realise that this narrow conception of private property right is a relatively recent development, only a few centuries old. Before the full market society came to prevail in the West, a great deal of property rights in land and other assets was a right to use and enjoy the asset but not a right to dispose of it. For example, the right to use or enjoy the revenue from a parcel of land, a corporate charter or a monopoly granted by the state did not carry with it the right of disposition of the property. The development of the full market society required a revision of this notion of property, since it was considered that the right not to be excluded from the use or enjoyment of something is not marketable. It was deemed impossible to reconcile this particular right with a full market economy. Hence, of the two earlier kinds of property rights – the right to exclude others and the right not to be excluded by others – the second was all but abandoned and the conception of property rights was narrowed to cover only the right to exclude others. In Islam, however, this right is retained without in any way diminishing the role of the market as resource allocative and an impulse-transmitting mechanism.
The first basic principle of property in Islam is that Allah is the ultimate owner of all property. In order that man become materially able to perform his duties and obligations, he has been given the right of possession. The second principle of property, therefore, establishes the right of collectivity to the resources at man’s disposal. Based on the principle of justice, and the recognition of man’s natural tendencies, rights, and obligations, individuals are allowed to appropriate to themselves the products resulting from the combination of their labour and certain of these resources – without the collectivity losing its original rights either in the resources or the products resulting from the individual’s creative labour applied to these resources – in accordance with the rules, specified by the Sharia. The Sharia, as well, determines which natural resources will be retained as the exclusive property of the collectivity and which resources – and in what amounts – will be at the disposal of individual members of the society.
The relationship between labouring and owning is central in Islam, which recognises two ways in which an individual can obtain rights to property: (I) through his own creative labour and/or (2) through transfer – via exchange, contract, grants or inheritance – of property rights from another individual who has gained title to the property or asset through his own labour. Work, therefore, is the basis of acquisition of right to property. Work, however, is not only performed for the purpose of satisfaction of needs and wants, but it is considered a duty and an obligation required from every member of the society. Similarly, the use of natural resources in production of goods and services for the society is also everyone’s right and obligation. So long as the person has the ability, he has both the right and the obligation to apply his creative labour to resources. But if he lacks the ability, he no longer has an obligation to work and produce, but his right to resources is retained. This constitutes the third principle and is referred to as the principle of “invariances of ownership.” Before any work is performed on natural resources, all members of the society have equal rights to these resources. However, when an individual applies his creative labour to these resources, he gains a right of priority in the use and enjoyment of the resulting product, without the rights of others being nullified. The right of collectivity to the property is protected by the Sharia through the limitations imposed on the right of disposition of the property by the person who has gained priority in the use and enjoyment of that property. Hence, while the right of use and enjoyment of the property is affirmed by the Sharia, the exclusive and absolute right of disposition of the property is rejected.
The Sharia outlines private property obligations concomitant with property rights. Among the obligations are the responsibility of sharing (the proceeds in monetary terms if the product is sold and an income is earned, the use otherwise) and the obligation, severely incumbent upon the individual, not to waste, destroy, squander, or to use the property for purposes not permitted by the Sharia. To do so would be to transgress the limits set on one’s right and an encroachment on the rights of the collectivity. This position of the Sharia is in conformity with the Islamic conception of justice and the rights and responsibilities of the individual and the community.
Islam recognises that the Divine Providence has endowed individuals with unique and unequal abilities and that some individuals have greater mental and/or physical capacities and consequently are capable of obtaining title to a larger amount of property and assets. But this only means that such individual responsibilities and obligations are greater than those of others. However, once these individuals have discharged their duties of sharing, in accordance with the prescribed manner and amount, and are not in violation of the rules of the Sharia, their right to their possessions is held inviolate and no one has a right to force appropriation (or expropriation) of that person’s property to anyone else. This right is held so sacred that even when rules had to be developed for emergency cases of expropriation for projects of public utility, it was called “legitimate violation” (ikrah hukmi). Even in this case, such actions could be taken only after adequate compensation was paid to the property owner. To violate the legitimate property rights of a person is considered as “oppression” and “exploitation”, just as there is “discord” and “corruption on earth” when individuals do not discharge their private property obligations.
While the right of the individual to property affirms the natural tendency in man for possessing – particularly that resulting from his own creative labour – the concomitant private property obligations, from the point of view of justice, are designed to give effect to the interdependence of the members of the community and to recognise explicitly that they cannot live in isolation. The private property obligations, therefore, reject the notion that a person does no harm to members of his group if, as a result of his effort, he is better off and others are no worse off than they would otherwise be. These obligations write the principle of sharing into the delineation of interests in property and consider private ownership subject to a trust, or a duty, in order to effect sharing. Hence, private initiative, choice and desert are recognised in Islam in its conception of property rights, but such recognition is not allowed to subvert the principle of sharing or lead to violations of the rights of the community. If, as a result of the growth of the society, division of labour, or increasing complexities of markets, either the obligation to share is shirked or the rights of the society and the cohesion of the community are undermined, the justification is created for the intervention of the legitimate authority to take corrective measures.
C. Importance of Contracts
Development of exchange on the basis of the legal institution of ‘contractus’ rather than “status” is considered an essential antecedent of the development of markets. Islam forcefully places all economic relations, including exchange, on the firm footing of ‘contractus.’ It recognises only one status, i.e., moral consciousness and virtue all other; status is obliterated. This type of status, however, is one which economic power cannot buy nor can it buy economic power.
The freedom to enter into contracts and the obligation to remain faithful to their stipulations has been so emphasised in Islam that one characteristic which distinguishes a Muslim is considered to be his faithfulness to the terms of his contracts. The maxim that “Muslims are bound by their stipulations” is a traditional rule whose eminence is recognised by all schools of Islamic thought.
The concept of contracts in Islam is not only important as the legal aspect of exchange, as an institution necessary for the satisfaction of legitimate human needs, but it is a concept upon which the whole of Sharia is based. The whole fabric of the Divine Law is contractual in its conceptualisation, content and application. The very foundation of the Sharia is a covenant between Allah and man which imposes on man the duty of being faithful to his word. On Allah’s side, the Qur’an often states that “Allah will not fail in His Promise”.
In the Sharia, the concept of justice, faithfulness (called amana whose antonym is kiyana, meaning betrayal, faithlessness, and treachery), reward and punishment are linked with the fulfilment of obligations incurred under the stipulations of the contract. Justice links man to Allah and to his fellow men. It is this bond that forms the contractual foundation of the Sharia which judges the virtue of justice in man not only by his material performance, but also by the essential attribute of his forthright intention (niyya), with which he enters into every contract. This intention consists of sincerity, truthfulness, and insistence on rigorous and loyal fulfilment of what he has consented to do (or not to do). This faithfulness to one’s contractual obligations is so central to Islamic belief that when the Prophet was asked “who is a believer?” He replied that “a believer is a person to whom the people can trust their person and possessions.” He is also reported as having said that “a person without trustworthiness is a person without religion.” In a very terse direct and forceful verse, the Qur’an exhorts “0 you who believe, fulfil your contracts. The Qur’an directs Muslims to reduce their contracts to writing and have witnesses to the conclusions of their agreements. So basic is the notion of contracts in Islam that every public office is regarded, primarily, as a contract and an agreement which defines the rights and obligations of the parties. The highest temporal office, that of khalifa, is inaugurated by mubayab, which is a contract between the ruler and the Muslim community that he will be faithful in discharging his duties.
Throughout the legal and intellectual history of Islam, a body of rules constituting a general theory of contracts – with explicit emphasis on specific contracts, such as sales, lease, hire and partnerships – were formulated based on the Sharia. Contracts are considered binding and their terms are protected by the Sharia, no less securely than the institution of property. This body of rules established the principle that, in matters of civil and economic dealings, any agreement not specifically prohibited by the Sharia was valid and binding on parties and could be enforced by the courts, which were to treat the parties to a contract as complete equals.
D. Work and Wealth
The Western instrumental tradition regards work and labour as a cost incurred by those who want to consume the goods thus made available to them. The natural condition of mankind is considered to be one in which the earth will not satisfy human needs save when human beings expend labour to make it do so. It is neither a logical nor an inevitable corollary of this view that men must always prefer less work to more. Even in this tradition, it is logically possible to hold that some work is much more agreeable than the rest, and perhaps so much so that some work ceases to be a cost incurred in satisfying wants. It is, however, usual for this point to be ignored, particularly since an assumption common to economists from the nineteenth century onwards and most explicit in the ideas of utilitarianism is that efficiency and disagreeableness increase together, and that paid labour can not be expected to offer much intrinsic satisfaction.
The concept of work in Islam (called al- ‘amal) is far broader and has different characteristics and objectives from that understood in the Western economic tradition. In Islam, work ethic is defined by the Qur’an itself, which mentions the word al- ‘amal (narrowly translated as work) in over 360 verses. A closely related concept of al-fil (also translated as work) is mentioned in an additional 109 verses. All these verses stress the need for work and action by human beings. It is because of this emphasis on work that Islam is considered as “the ideology of practice and the practice of ideology” and “a religion of action.” The Qur’an exalts work and raises it to the level of worship, and considers it as an inseparable dimension of faith itself. Conversely, it considers idleness – or squandering of time in pursuit of unproductive and non-beneficial work – as the manifestation of lack of faith and of unbelief Man is called upon to utilise “time” in pursuit of work by declaring that Allah has made the day as a means of seeking sustenance. A person who through hard work seeks Allah’s “bounty” – which includes all the appropriate means of earning one’s livelihood – is most highly praised. All able-bodied persons are exhorted to work in order to earn their living. No one who is physically and mentally able is allowed to become a liability on his family or the state through idleness and voluntary unemployment. The work which everyone is required to perform must be “good” or “beneficial” (al-‘amal as-salih), but no work is considered as inconsequential in terms of its rewards or punishments in this world and in the next. One will have to reap whatever rewards or retributions are due as a result of one’s work.
Work, therefore, is regarded not only as a right but a duty and an obligation. Hence, based on its notion of individual rights and responsibilities, Islam extends to the individual the right to choose the type of work he desires, but along with this freedom comes the obligation to consider the needs of the society as well as the selection of the type of work permitted by the Sharia.
Since all class distinctions are negated by Islam, no line of work permissible by the Sharia, is considered demeaning by Islam, which countenances diversification only on the basis of natural talents, skills and technology – which are considered as a grace or blessing (fadl) from Allah and which all Muslims are urged to acquire – or personal inclinations. Based on its concepts of justice and contracts, Islam makes it an obligation for the worker to perform the tasks which he has contracted to the best of his ability. But since individuals are endowed with different abilities and talents, this productivity will differ Justice, however, demands that the return for the work of every individual must be commensurate with his productivity.
While Islam, in no uncertain terms, has negated laziness, idleness and socially unproductive work, it maintains that those who are physically or mentally unable to work still maintain a right to what the society, individually and collectively, produces. This conclusion is based on the principle of invariant claim to ownership, which means that all human beings have a right to the resources which Allah has provided for mankind, and since the source of physical and mental abilities in human beings is also Allah, due to which some members of the society are able to possess more than others, the right of ownership of those less able to the original resources remains valid; just as Allah’s original right of ownership of resources is not negated when they, by the creative labour of individuals, are transformed into products, property and wealth.
Earlier, it was mentioned that labouring and owning are central to the Islamic concept of property rights. Islam encourages man to utilise, to the fullest possible sense, all the resources that Allah has created and entrusted to man for his use. Non-utilisation of these resources for his benefit, and for that of the society, is tantamount to ungratefulness to Allah’s for his provision of these resources. Wealth is considered as an important means by which man can pave the way for the attainment of his ultimate objective. Islam refers to wealth as “good”, an object of delight and pleasure and a support for the community. Conversely, involuntary poverty is considered as undesirable and a basis of unbelief. This particular conception of wealth, however, is qualified in terms of its means (ways) of earning, possession and disposition.
Earning is qualified through the emphasis on the fact that wealth is only a means for the achievement of man’s ultimate objective and not an end in itself. It must be earned through “good,” “productive” and “beneficial” work. This type of work is specified by the Sharia which defines the methods of lawfully earning wealth. Not only lawful methods of earning wealth are specified, but also types of economic activity which are prohibited are outlined as well. The Sharia specifies nonpermissible professions, trade and economic activity which may lead to unlawfully acquired wealth. Even within each profession, the Sharia specifies proper and improper practices. Just as wealth, rightfully earned and purposefully disposed of, is considered a blessing, unlawfully acquired or accumulated wealth for its own sake is condemned as “corruption” and a retrogression to the basest of all human negative qualities, i.e., greed.
Islam considers wealth as the life-blood of the community, which must be constantly in circulation, therefore, its possession excludes the right of hoarding. The implication is that wealth, lawfully earned, must be invested within the community to improve its economic well being. Investing the wealth is not only measured by the monetary gain associated with it, but also by the benefits which accrue to the society. The needs of the society, therefore, must be a consideration for the owner of wealth.
Disposition of wealth is subjected to the rules of the Sharia as well. The first and foremost among these rules is the recognition of the rights of others in this wealth, resulting from the principle of invariant claim to ownership. Among these are levies whose amounts are specified and those levies whose amounts are left to the determination of the wealth owner. All these levies fall due when wealth exceeds a specific minimum amount (called nisab). After these obligations are met, the remainder of the wealth belongs to the owner, but must be used in accordance with the rules of the Sharia. Among these are rules which forbid extravagance, opulence, waste or general abuse of wealth. It cannot be used to harm others or to acquire political powers to corrupt the polity.
While Islam considers lawfully acquired, possessed and disposed of wealth as sacred and subject to the protection of the Sharia, it regards the wealth owner as a trustee who holds his wealth as a trust on behalf of Allah and the community. Hence, his inability to use his wealth properly provides the basis for the forfeiture of his right to his wealth. Extravagance, waste and general abuse of wealth is the basis upon which the community can consider him a safih, a person of weak understanding, and one in possession of “weak intellect”; a person who, along with his own financial and a moral loss, is damaging the interest of the community. There is a principle, according to which such a person’s wealth is made the ward of the community, or its legitimate representatives, which may limit his right to using only a part of his property to meet his basic needs. That wealth, therefore, is considered “good” and a “support” for the community in attainment, possession and disposition of which all rules of the Sharia are observed.
E. The concept of Barakah
An important aspect of analysis of an economic system relates to the incentive motivation structure which the system embodies. The purpose in consideration of this aspect is to determine whether or not an individual within the system will find it useful – maximising to follow behaviour rules prescribed by the system. If the answer is in the affirmative, then the system as a whole will operate according to its rules. If the rules are not incentive-compatible, then deviations from system rules will occur. The above presentation has described some of the key characteristics of the Islamic system as well as rules of behaviour, along with their accompanying incentive-motivation considerations which Islam, has provided for its followers. The incentive-motivation aspects of the system have their origin in the very basis of belief in Islam which considers adherence to its rules of behaviour as primarily serving the best interests of the individual, both in this world and the next, as well as those of the society as a whole. Islam has provided these rules without negating either the drives or the self-interests of the individual. At the same time, its law has provided methods and procedures whereby the interests of the community can be protected should the individual feel it utility – maximising to violate the rules and thereby damage the interests of the society.
An important factor in the incentive system of Islam is the concept of barakah, which serves as a material inducement to the individual to follow proper conduct. This notion refers to an invisible but material blessing whose results are observable by any believer who engages in righteous conduct. It encompasses the whole spectrum of man’s conduct, including, and most importantly, his economic behaviour. The concept maintains that righteous conduct, i.e., the behaviour whose motivation and objective is to please Allah, will have returns at an increasing rate. And the more righteous the conduct, the greater is the presence of barakah. This concept asserts that expanding one’s wealth in the “cause of Allah” (without expecting a return manifold from the receiver directly) will not lead to its diminution but to its expansion. Such actions will, in fact, return to the giver his original expenditure. The concept establishes a positive correlation between the system’s conduct and its prosperity. It encourages Muslims to go beyond the minimum requirements of the Sharia in “pleasing” Allah. The converse of the concept holds as well. That is, unrighteous conduct, in earning, possessing or disposing of wealth, will rob the wealth of the holder of its barakah. This not only applies to individual behaviour but it also holds true for the community as a whole: a society prospers if it preserves a keen perception of the Message (and acts according to its rules); its prosperity departs if it declines morality (and acts against the rules of the Sharia). Because the results of the operation of barakah are observable, it serves as an incentive for rule compliance.
F. Economic Justice
A just economy is part and parcel of a just, healthy and moral society, which is the central objective of Islam for the human collectivity. The foundation of all rules of behaviour in Islam is its conception of justice, which maintains that all behaviour, irrespective of its content and context, must, in conception and commission, be based on just standards as defined by the Sharia. Islam considers an economy in which the behaviour of its actors is so conceived, as an enterprising, purposeful, prosperous and sharing economy, in which all members of the society receive their just deserts. Such an economy is envisioned as one in which gross economic disparities that lead to social segmentation and divisiveness are marked by their absence.
The components of economic justice in an Islamic society are (a) equality of liberty and opportunity for all members of the society with respect to utilisation of natural resources, (b) catallactic (exchange) justice, and (c) distributive justice; all accomplished within the framework of the Sharia. In this conception, liberty means that a person is not prevented by others from combining his creative labour with resources which are designated by the Sharia for the use of the individual members of the society. Opportunity, on the other hand, represents a favourable conjunction of circumstances which gives the individual the chance to try it. Whether he succeeds or not depends on his efforts and abilities. This quality of opportunity must be secured deliberately by collectivity. The equality of opportunity not only covers all free and equal access to resources but also generally extends to technology, education and environmental influences. The basis for equality of liberty of access to resources and equality of opportunity in their use is Islam’s position that natural resources are not of human creation but are provided by Allah for all members of the society, therefore, liberty and opportunity to use these resources must be distributed equally to all. If the opportunity to use these resources is not, either naturally or owing to some other circumstances, available to some members of the society, their original claims to resources remain intact and are not nullified. They must be remunerated, at some point in time, for their right to these resources, by other members with greater opportunity to use them.
Catallactic justice refers to justice in exchange. The idea is that by mixing their creative labour with resources individuals create a claim of equity to the possession of the assets thus produced, by virtue of which they can participate in exchange. To allow exchange to take place on the basis of just standards, Islam places a great deal of emphasis on the market and its moral and efficient operation. To assure justice in exchange, the Sharia has provided a network of ethical and moral rules of behaviour which cover, in the minutest detail, the behaviour of all participants in the market. It requires that these norms and rules be internalised and adhered to by all participants before their entrance into the market. A market which operates on the basis of these rules, which are intended to remove all factors inimical to catallactic justice, yields prices for factors and products which are considered “fair” and ‘just”. Unlike the scholastic notion of ‘just prices,” which lacked an operational definition, the Islamic concept of just price refers to the price prevailing as a result of the interaction of economic forces operating in a market in which all rules of behaviour specified by the Sharia are observed and adhered to by all participants.
The rules governing exchange in the market cover Sharia-compatible sources of supply and demand for factors and products before they enter the market, Sharia-based behaviour on the part of the buyers and sellers and a price-bargaining process free of factors prohibited by the Sharia. Hence, market imperfection refers to the existence of any factor considered non-permissible by the Sharia. Rules regarding supply and demand not only govern the permissibility of products demanded and supplied, but also look beyond these phenomena to their very origin. Not all demands for products are considered legitimate nor all acts of supplying the market permissible. The means by which the purchasing power, which gives effect to demand, is obtained and the manner in which the production of commodities for the provision of their supply takes place must have their origin based on just standards.
Rules governing the behaviour of participants in the market are designed to ensure a just exchange. The freedom to make contracts and the obligation to fulfil them, consent of the parties to a transaction, noninterference with supplies before entrance into the market, full access to the market by all buyers and sellers, honesty in transactions, provision of full information regarding the quantity, quality and the prices of factors and products to buyers and sellers before the start of negotiation and bargaining, and provision of full weights and measures, are prescribed. On the other hand, behaviour such as fraud, cheating, monopoly practices, coalitions and combinations of all types among buyers and sellers, underselling products, dumping actions, speculative hoarding, and bidding-up of prices without the intention to purchase, are forbidden. All in all, any form of behaviour leading to the creation of instantaneous property rights without commensurate equity created by work is forbidden. The type of market in which all conditions are fulfilled produces fair and just prices for factors and products, which are just or equitable not on any independent criterion of justice but because they are the result of the bargaining of equal, informed, free and responsible men.
Islam’s emphasis on moral and just conduct in the market place is remarkable in its vigour. A producer or a businessman whose behaviour complies with Islamic rules is said to be like the prophets, the martyrs and the truthful friends of Allah. He is with the prophets because he, like the prophets, follows the path of justice; like the martyrs because they both fight with heavy odds in the path of honesty and virtue; and like the truthful because both are steadfast in their resolutions.
Islam asks the participants to go beyond the rules of the Sharia in the market place and extend beneficence to one another as a safeguard against injustice. Beneficence implies helping others in ways not required by justice. It is thus different from justice, which prescribes just limits to selfishness. While justice regulates and limits selfishness, beneficence rises above it. Moreover, participants in the market are not only responsible for their own just behaviour but, owing to the obligation of “enjoining the good and forbidding evil”, they are also made responsible for the behaviour of their fellow participants. Islam maintains that when a man sees another committing an injustice towards a third and fails to attempt to remove that injustice, by reason of this failure he becomes a party to that injustice. If the person failing to help is himself a beneficiary of this injustice, then his failure is considered tantamount to supporting it. Although provisions are made for coercive and corrective action by legitimate authorities, the clear preference is for self-management of the market. Any interference with the operations of such a market, e.g., through price controls, is considered unjust, a transgression and a sin.
It was in response to the rules of market behaviour imposed by the Sharia the Muslims early in their history that structured their markets in the form of bazaars which looked almost the same all over the Muslim world and possessed characteristics which promoted the observance of and compliance with the rules ordained by the Sharia. Physically, bazaars were structured to guarantee maximum compliance with these rules. Each physical segment of the market was specialised with respect to products and prices and showed little variation from one part of the market to the next. The institution of guilds made the self-regulation of each profession and trade possible. Additionally, markets were inspected for compliance to the rules of the Sharia by supervisors (called muhtasibs) who were appointed by local judges. Unfortunately, the institution of the bazaar did not have the opportunity to evolve in order to meet the requirements of an expanding economy or the growing complexity of economic relations. Th e presently existing bazaars in many parts of the Muslim world, with their underdeveloped physical and infrastructural nature – are centuries old and have not been expanded – do not possess many Islamic characteristics and requirements in their operations.
The last component of Islamic economic justice, i.e., distributive justice, is the mechanism by which equal liberty and equity are reconciled without the least possible infringement of either. In so far as the pattern of distribution of resources is just and equal access to these resources, as well as opportunity in their use, is guaranteed, the claim to equity on the basis of reward and effort is just. Primacy in the moral basis of property is given to equity and is derived directly from human efforts and achievements. The bases of private property in Islam are: (a) property which is derived from personal ability and effort, which includes: material property made or obtained from natural resources by combining them with personal skills, ability and technology, income from self-made capital, assets acquired in exchange for the product of the owner’s labour, (b) property acquired by transfers from the producer, and (c) property acquired through inheritance from the producer. Rules regarding distributive justice operate through (b) and (c).
Assuming equal liberty and opportunity, whenever work has to be performed for production of wealth, the output of different people may vary greatly both in quality and quantity. Equity then demands that, commensurate with their productivity, different people receive different rewards.
Hence, starting from the equality of liberty and opportunity of access to resources, equity may lead to inequality. Moreover, the allocation of resources arising from the operation of the market will reflect the initial distribution of wealth as well as the structure of the market. Assuming that both the operation and the structure of the market are just, there is no logical reason to assume that market outcome, by and of itself, will lead to equal wealth distribution. Consequently, the results may be (and often are) inequalities equitably created which will have inter – as well as intra-generational implications. It is here that the distributive mechanisms of Islamic economic justice attempt to modify inequalities equitably created. Contrasted with claims to equity, Islam recognises claims based on equality of liberty and opportunity, which are reflected in the degree of access to resources, degree and extent of the ability of persons to actualise their potential liberty and opportunity, and finally the right of prior ownership, i.e., the principle of invariance of ownership rights.
Thus, Islam recognises a right for the less able in the wealth of those who have greater ability and opportunity to produce greater wealth. This right has the first claim on the surplus wealth produced by individuals. Various levies (such as zakat, khums, ‘urr, kharaj, sadaqa, nafaqa, etc.) are ordained in order that such rights are redeemed. The payment of these levies cannot be considered as beneficence, because beneficence is giving others some product, service, benefit or benefaction from the motive of helping them and it is radically different from justice. The payment of the levies ordained by Islam is considered the payment of a right due to others in one’s wealth; it is a contractual obligation which must be met. To be sure, Islam also encourages beneficence over and above these obligatory dues, but the nature of these levies is the returning to others of what rightfully belongs to them. Shirking this obligation causes maldistribution of wealth, which Islam considers as the major source of poverty.
Islam asserts unambiguously that poverty is neither caused by scarcity and paucity of natural resources nor is it due to lack of proper synchronisation between the mode of production and the relation of distribution, but is a result of waste, opulence, extravagance, and non-payment of what rightfully belongs to the less able segment of the society. This position is illustrated by the Prophetic saying that: “Nothing makes a poor man starve except that which a rich person uses as a luxury”. This is why waste, abuse of wealth, extravagance and expensive consumption is condemned as unjust, particularly when they occur in conjunction with the poverty which they can help to relieve. In the morality of property, Islam unequivocally considers all individuals entitled to a certain standard of life; and it is this entitlement which requires the satisfaction of their claim as a matter of equity and justice and not of beneficence.
To modify patterns of distribution in transition to the next generation, Islam has instituted its rules of inheritance, which break up and distribute the accumulated wealth of its owner. This institution is based on the principle that the right of the owner to his wealth ceases at his death. Before his death the power of the person to bequeath his wealth as he wishes is recognised, but is basically restricted to a maximum of one-third of his net assets. The central core of the system is formed by compulsory rules of inheritance, which, according to the Sharia, are regarded as the consideration for duties of protection and support owed to the deceased during his life-time, that in turn reflects another rule that the duty of a person to maintain his needy collateral relatives is dependent upon, and proportionate to, his right to inherit from those relatives.
The basis of the Law of inheritance is the Qur’an, which clearly specifies the exact manner in which the share of heirs are to be determined in the inheritance. Among the same category of heirs there is neither preferential treatment nor discrimination. Men and women are all heirs, though a woman’s share is generally one-half of a man’s share in the same category of heirs. The reason for this seemingly discriminatory rule is the fact that under the rules of the Sharia, the whole responsibility for the maintenance of the family rests upon the husband and not upon the wife. Even should it happen, as is sometimes the case, that the wife has a larger income and greater wealth (due to her own work and inheritance from father, brother and other relatives), she is not required to share that wealth or income with her husband – and the husband has no claim on her property or income – and still the legal responsibility for the maintenance of the family rests with the husband; the wife is under no legal obligation to make any contribution towards her family. Considering the nature of the (extended) family ties and mutual responsibilities exhorted by Islam, its institution of inheritance breaks up the wealth of each generation and redistributes it to the next. The object is that a large number should receive a modest portion rather than that a single heir, or a small number, should receive wealth in large blocks.
G. Competition and Cooperation
In the Islamic conceptualisation of man’s ultimate end, economic life occupies a purely instrumental role. Even in this role, economic affairs are to provide institutions and mechanisms necessary to satisfy man’s economic needs, while allowing man’s essence as the supreme creature of Allah (swt) to be manifested in this world. Thus, the economic system designed in accordance with the fundamental principles of Islam ensures that man can exercise his eminent dignity, freedom, responsibilities and rights in the conduct of economic affairs. The economic system must be ordered such that it does not assign to man a purely instrumental role in achieving the goals of the economy or the state. Islam seeks to guide man to direct individual action and responsible participation in economic affairs in a manner which commits him to community solidarity and co-operation, resulting in a dynamic and growing economy. Thus, the individual is made accountable for the moral effects of his social actions, including those in economic affairs, such that his own inner personal spiritual transformation and growth is bound to the progress of the community.
Hence, Islam utilises co-operation and competition in structuring the ideal society through harmonisation and reconciliation between these two opposed, but equally primeval and useful forces, at every level of social organisation. From this perspective, one can argue that one of the greatest distinguishing characteristics of Islam is its forceful emphasis upon the integration of human society, as a necessary consequence of the unity of Allah. To this end, the personality of the Prophet (SA) is absolutely inseparable from what the Qur’an considers as the optimal approach necessary for the emergence of solidarity in human society. Every dimension of the personality of the Prophet (SA), manifested in his various social roles in the community, was directed towards maximum integration and harmony in the society. Moreover, every rule of behaviour, including those in the economic area, is designed to aid the process of integration. Conversely, all prohibited practices are those which, in one way or another, lead to social disintegration.
The Qur’an and the traditions of the Prophet (SA) make clear references to the dual nature of competition and cooperation, that is, human beings can cooperate and compete for good or evil, which leads to integration or disintegration of human society. The fundamental sources, however, emphasise that competition and co-operation must be utilised in probity and piety rather than for evil and enmity. Thus, in verse 2, chapter 5, the Qur’an declares “cooperate with one another unto righteousness and piety. Do not cooperate with one another unto sin and enmity.” Similarly, Muslims are urged to compete with one another in beneficial and righteous deeds. There is no evidence in these sources that would allow the suppression of one of these forces in favour of the other when they are used within the framework of the rules specified by the Sharia. Rather, all of the regulatory and, supervisory authority invested in the legitimate political authority is directed towards a balanced and constructive utilisation of these forces. An example of such balance is the Sharia rules regarding market structure and the behaviour of market participants. Although the rules of Sharia regarding economic affairs demarcate, limits and boundaries of desirable competitive and cooperative behaviour necessary for the provision and preservation of solidarity in the society, the individual always remains the identifiable agent through whose action (and on whose behalf) economic activities take place.
H. Role of the State
Islam considers economic relations and behaviour as the means of integration of the society and the integration of man into a higher order of reality. For this purpose, man is asked to consider his economic agents as means and not as ends in themselves. All the rules of behaviour regarding economic matters are addressed to individuals and their collectivity. This collectivity is considered to be organised into a polity which is represented by the state. The state is considered as a basic institution, indispensable for the orderly organisation of social life, the achievement of legitimate objectives, the creation of material and spiritual prosperity and the defence and propagation of faith. Hence, all responsibilities directed at the collectivity are assumed by the Sharia to be incumbent upon the state, which is primarily a vehicle for implementing the Sharia; its legitimacy being derived from enforcing its rules. The state is assumed to be empowered to use, within the limits of the law, all available means at its disposal to achieve the objectives and duties prescribed for the collectivity, including the synchronisation of individual and public interests. Foremost among the collective duties is to ensure that justice prevails in all facets of social life.
Thus, the existence of a judiciary system, with all the apparatus necessary to carry out the verdict of the courts free of charge and available to all is regarded as an indispensable duty of the state. The guarantee of equal liberty and opportunity in terms of access to and use of resources, identified by the Sharia for the use of individuals, is another duty specified for the state. This requires the provision of education, skills and technology to be available to all. Once both equal liberty and equal opportunity are provided, then production of wealth, its possession and exchange become matters of equity. All infrastructure necessary for the existence of markets has also been traditionally a responsibility of the state. The first market for the Muslim community was built in Medina at the direction of the Prophet (SA), who required that trade be allowed to take place in that market freely, without any charges or fees imposed on market participants, and appointed supervisors for the market. On this basis, jurists have market supervision, and its control only, when necessary, as a duty of the state.
As was stated earlier, while Islam recognises equity on the basis of effort and rewards, it declares an inviolable right for those unable to actualise their potential equal liberties and opportunities in the wealth of those more able. Thus Islam, as a praxis for the believer, requires a balance between libertarian and egalitarian values. The libertarian principle of the inviolability of the right of individuals to their property and wealth is respected so long as the individuals remit the claim specified earlier. This is the concession of libertarianism to egalitarianism, and of enterprise to distributive justice. Islam leaves no doubt that the preference is for voluntary actions of individuals in payment of levies incumbent upon them. The larger the extent of shirking on the part of the individual the heavier becomes the duty of the state to correct the resulting maldistribution. The more the individuals conform their behaviour in production, exchange and distribution to the rules of the Sharia, the weaker is the state’s justification to interfere. When these rules are violated, interference becomes the duty of the state.
Eradication of poverty is undoubtedly one of the most important of all duties made incumbent upon the state, second only to the preservation and propagation of faith, whose very existence is considered threatened by poverty. Islam regards poverty primarily as a result of shirking on the part of the more able and wealthy members of the society to perform their prescribed duties. Hence, commitment to distributive justice, which normally constitutes a large portion of government budgets in other systems, is placed squarely on the shoulders of the individuals with the financial and economic capability to meet it. Not only does the Sharia specify who must pay, it also designates explicit categories of the recipients. To summarise, the role of the state in an Islamic economy relates first to ensuring that everyone has equal liberty of access to natural resources and means of livelihood. Second, to ensure that each individual has equal opportunity including education, skills and technology – to utilise these resources. Third, to ensure that markets are supervised such that catallactic justice can be attained. Fourth, to ensure that transfer takes place from those more able to those less able in accordance with the rules of the Sharia. And, finally, that distributive justice is ensured for the next generation through the implementation of the laws of inheritance. The state is then empowered to design any specific economic policy that is required in order to guarantee the attainment of these objectives. To meet the necessary expenditures associated with the performance of its duties, the Sharia has given the control, utilisation and management of a portion of the natural resource endowment of the society, e.g., underground mineral resources, to the state. It has also empowered the state, according to a consensus of opinion among jurists, to impose taxes whenever there is a gap existing between the resources it can command and its expenditures. Borrowing by the state, when it does not involve paying interest, is permitted when and if necessary.
I. Economic Development and Growth
Islam’s position on economic progress is that only the belief in Allah (swt) and having taqwa assures a society of real economic development and growth. The Qur’an, in no uncertain terms, asserts that if the people “had only believed and had taqwa, we would have surely opened for them blessings from the sky and from the earth”. It is unbelief and not acting in accordance with the mandated behavioural rules that earns societies material and spiritual misery. The Qur’an is also equally clear on this latter point by declaring “But they lied, and so we seized them on account of what they used to earn.”
One possible rationale for this position is to consider the economic consequences of a strong belief in Allah (swt) and, as a result, of adherence to the rules specified by the Sharia. To believe in Allah (swt) means to constantly remember his omnipresence in all social interactions. This, in turn, results in a strong work ethic, honest business dealings, efficient production, extravagant consumption, distributive justice, productive circulation of accumulated surplus with full participation in risks and rewards, full compliance with the terms of contracts, and maximum cooperation in economic activities with full freedom of contract within the bounds of the Sharia. In short, once the members of the society fully internalise Islamic values and act accordingly, a strong, dynamic and growing economy will emerge in which all possible sources of maldistribution of income and wealth are blocked and all possible ways in which the structure of the economy can generate endogenous shocks are eliminated. The only sources of instability in such an economy are exogenous. In that case, the structure of the Islamic economy ensures that the burden of adjustment is shared throughout the society so that no particular segment of the economy can gain at the expense of the rest.
Over the past centuries, Muslims have adopted other systems, from monarchy to communism, none of which has been capable of producing the kind of society which the Prophet (SA) implemented in Medina. The brief sketch presented here should make it clear that Islam proposes a viable system for the creation of a just and efficient society. Most certainly the Muslims have the resources and the expertise to implement the dictates of Islam. What is required is an abiding faith in the word of Allah (swt) and the tradition of the holy Prophet (SA) to implement such a system.
Edited By Asma Siddiqi
Institute Of Islamic Banking And Insurance London
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