Economics

Economic Livelihood

The debate with non-Muslims over mudarabah is essentially a debate over the operational efficiency of various banking procedures, and not a discussion on Islam's fundamental views on the economic livelihood of human society. Mudarabah can only find spiritual meaning if it is placed within the context of an overall Islamic outlook on economics. This point becomes more apparent when the objective of mudarabah itself is looked upon care fully. The use of mudarabah owes more to the fact that it achieves a Muslim goal, namely avoiding usury in economic transactions, than to it's operational efficiency. In fact, it is conceivable that a fully operational Islamic economic system may be based on centralized control mechanisms, and therefore have no use for market operations or mudarabah. Hence, Muslims stand to gain little by seeking to prove the virtues of mudarabah in western economic terms; rather, they should define a philosophy of Islamic economics and the loci of efficiency in it wherein mudarabah would find new meaning, independent of the trappings of western economic criteria. Only then will Islamic economics be freed from the task of operationalizing mudarabah and verifying its viability, and find a concrete intellectual reality which mechanisms such as mudarabah could serve.

Therefore, while interest-free financial institutions constitute an important aspect of Islamic economics, they should never be mistaken for Islamic economics itself, nor be ascribed the role of the harbinger of Islamic economics. In fact, interest-free financial institutions would stand to gain immensely if they were to follow in the footsteps of a philosophy of Islamic economics.⁵ Such an order of events would free interest-free banking from any obligation to live by western economic criteria of judgement, and the otherwise unnecessary need to serve as the flag-bearer of Muslim apologia in the face of western criticism.

It is important to reassert the fact that the foregoing criticism of the current state of affairs in Islamic economics is neither meant to suggest that Islamic economics is an inoperable concept a contradiction in terms, as the western observer would argue nor that interest-free banks are unviable as financial institutions. In fact, it is the fundamental contention of this essay that Islamic economics and the institutions would emanate from it have tremendous unfulfilled potentials yet to be realized. The notable progress already achieved by thinkers and financiers in various Islamic banking institutions attests to this fact. Moreover, the arrested progress of Islamic economics, whether due to theoretical problems or operational impediments can, by and large, be remedied, to accomplish such a feat, however, Muslim thinkers will have first to pin-point the root of these problems. It is safe to assert at this juncture that, the purely operational dilemmas aside, the most fundamental predicament facing Islam economics, apparent in western criticism of the discipline and imprinted on the subconscious of Muslims, is the seeming idiosyncratic appearance of the concept of religious economics. Western criticism and Muslim apologia tend to reaffirm this belief, and the oft-quoted observation that faith compels Muslims to prefer Islamic economics over other economic regimes does little to convince Muslims and westerners alike of its 'scientific' soundness. Yet, Islamic economics need not be bound by the shackles of this anachronism. For the intellectual dilemma confronting Islamic economics is neither as fundamental nor as permanent as the critics or the charge of intellectual idiosyncracy may suggest. The antinomy associated with Islamic economics is rather the consequence of the eschewed process of intellectual and institutional development to which this field of study has been subjected.

Succinctly put, excessive emphasis placed upon institutional developments, and at times, even viewing this process as synonymous with Islamic economics, combined with the atrophied state of the philosophy of Islamic economics, has impeded the natural and healthy growth of this field of study and mode of social organization. This development has made Muslims susceptible to unnecessary and even impertinent criticism from non-Muslims, which in turn acts to prompt even more hasty responses from the Muslims with the effect of further distorting the development of Islamic economics.

The point of the discussion here is not to belittle the importance of interest-free banks, but to warn of the dangers which the unbalanced attention devoted to them, shrouded in apologetic casuistry in relation to the West, could harbor for Islamic economics. It should be kept in mind that dabbling in micro-level procedural concerns or ideas will never produce a discipline, a field of study, or a system of thought. History is replete with examples which bear witness to this observation.

Wherever in history one looks for the origins of a system of thought or for institutions associated with particular world-views, in Islamic as well as in non-Islamic social settings, it will become apparent that the constructive impetus always begins with the elaboration of a philosophy and a weltanschauung, and eventually culminates in institutions which capture the spirit and the message of the original philosophy. Modern capitalist financial institutions appeared in Europe in pursuance of what Weber has termed 'capitalist ethics. It was not the financial institutions that brought about capitalism, rather it was capitalism that produced institutions which represented and operationalized capitalist views on social and economic activities. By the same token it will not be institutional change, but novel economic world-views which will initiate change in the capitalist economic structure.

Similarly the evolution of an Islamic political system during the time of Prophet Muhammad in Medina did not begin with institutional or procedural developments, but rather with the emergence of the Islamic world-view, whose spirit was then captured in both novel and centuries-old institutions. While these institutions guaranteed and represented Islamic temporal rule and adhere to the injunctions of the Shariah, at no time aid they act as either the harbinger or the actual message of Islam. That message was vested in the essence of Islam itself, from which all institutional and organizational activities followed. The injunctions of the Shariah meanwhile determined the manner in which the Islamic world-view was translated into praxis, and governed the activities of the subordinate institutions. Therefore, the hierarchic flow of spiritual and authoritative constructive impulses from the Islamic world-view to various institutional structures, mediated and governed by the injunctions of the Shariah, acted to delineate and form the Islamic political order. Similar processes also formed the bases of the evolution of Islamic science and Islamic art.

In all these examples, the elaboration and in certain instances construction of the omnipotent philosophy, Weltanschauung, or more generally the spiritual content of a belief system preceded the emergence of the institutions or organizational expressions which were the bearers of the message and implementers of the objectives of those original ideas. Religious law, meanwhile, has always acted as the guiding criterion for the explication of the original ideas and the delineation of the activities of the institutions which emanated from those ideas.

In the case of Islamic economics, it seems that the aforementioned process has been reversed. Muslim thinkers have devoted the Iion's share of their attention to issues which pertain solely to the management of Islamic economic institutions. The philosophy of Islamic economics, instead, suffers from neglect and atrophy. The conspicuous absence of a philosophical outlook, from the prolegomenon to Islamic economics, in practice, translates into an intellectual lacuna which could seriously impede the operational viability and the developmental capacity of Islamic economics.

In the absence of the guiding light of comprehensive philosophical exposition, Islamic economics has often been viewed as either a conglomorization of assorted injunctions of the Shariah or the creation and management of interest-free banks. Seldom has Islamic economics been viewed as an extension of Islam's very views on terrestial life, and the subjugation of social livelihood to man's spiritual yearnings.

As a consequence of the importance which has been accorded to the more limited definitions of Islamic economics, this field of study has failed to become a science of economics, bun has rather evolved into procedural guidelines for practicing western economics with the least amount of violations of Shariah injunctions. For, while Islamic financial institutions have shown operational success, they continue to operate within tha western economic milieu, as components of an overall western economic system. Therefore, the success of interest-free banks in their market operations by itself will not usher in an Islamic economic order, nor will it evince, in the science of economics, the merits of the Islamic system.

The path out of the intellectual quagmire which today threatens to reduce Islamic economics to either a simple manifestation of Muslim 'idealism', or a 'quaint' variation of western economics, seasoned with disparate Islamic ethical and procedural guidelines, is for Muslim thinker to pay greater attention to the philosophical underpinnings of economic thought and praxis in Islam. In this regard they must first identify the fundamental tenets of the Islamic world-view and the manner in which these pertain to economics. In accomplishing this task they can look to the way in which traditional Islamic sciences in general, and those pertaining to man's livelihood in particular, have drawn their directives from the Islamic revelation, and examine how these directives evolved through Islamic history.

Secondly, Muslims must discern the basic premises of the modern science of economics, identifying the key assumptions upon which that science rests. Having completed this task, Muslim thinkers must identify those tenets which are compatible with the Islamic world-view and separate them from the theoretical assumptions which, would have to be 'Islamized' before an Islamic science of economics could be elaborated and operationalized. Once a general Islamic outlook on economics is developed and the theoretical underpinnings of the science of economics are interpreter according to Islamic dicta, injunctions of the Shariah pertaining to economics can be used as the guiding lights for developing procedures and mechanisms for the implementation, operation and management of Islamic economics in practice. Yet, here also the- teachings of Shariah have to be studied and examined with a view to the functions which they will monitor and govern. For instance, as yet there exist no satisfactory understanding of the Shariah's view's on riba' whether the term refers only to the real rate of interest, or to any interest income.