วันอาทิตย์ที่ 17 มิถุนายน พ.ศ. 2550
Volker Nienhaus, Marburg
The economic backwardness of the Muslim world since the beginning of the industrial revolution in the West in the 18th/19th century can hardly be disputed. There basically two groups of explanations for this phenomenon:
The first group emphasizes mentality factors and a mindset originating from the Islamic worldview which induces behavioural patters impeding economic development.
The second group stresses institutional factors and deficits originating from a particular historic constellation responsible for the lack of institutions necessary for economic development.
Mentality and institutional deficits may explain the economic backwardness of the Muslim world, by neither mindsets nor institutions are immune to change, and the present shape of both cannot mainly be attributed to Islam. On the contrary, an economic policy based on Islamic principles may be more conducive to economic development than the socialist experiments, nepotism and state interventionism of past decades.
1. ‘Islamic mindset’ as an obstacle to economic development?
It is often argued that the Islamic worldview supports a mentality and value system which attributes little importance to individual performance and responsibility, effectiveness and efficiency or material wellbeing. Muslims are more concerned with the life in the hereafter. They belief in a kind of predetermination, and all these components lead, in total, to a fatalistic attitude which seriously obstructs economic development.
It is doubtful whether this is an accurate description of the value orientation and behaviour of the vast majority of Muslims. But even if it could be observed in today’s Muslim societies, it is very doubtful whether it can be ascribed to the teachings of Islam. An alternative explanation is that seclusive attitudes are a reflex and response to the experience of many generations that individual efforts and endeavours do not pay in repressive systems. Fatalism stands in a strange contrast to the economic teachings and ideology of Islam. The literature on Islamic economic teachings (ranging from business ethics to systemic issues) explicates and propagates attitudes and concepts which come close to what we would call a social market economy. Major elements are the following:
- Everybody is obliged to cater for subsistence by his/her own labour.
- The final owner of everything is Allah. Man has only the right of use but no right to waste or destroy it. Private property of means of production is permissible but must not be misused. Wealth can be acquired legitimately through work and inheritance. It should not be used for lavish or luxury consumption, and the use for social purposes is encouraged (and rewarded in the hereafter).
- The poor and needy have a claim to be sustained by the society. This claim is institutionalized in the system of zakat (sometimes translated as poor due or alms tax), a compulsory levy of 2.5% on assets and 5% or 10% on agricultural produce and earmarked for a list of purposes initially outlined by the Prophet Muhammad and further specified by the early caliphs.
- Prices should be just - which means that they should be formed on competitive markets. Monopolization and hoarding lead to exploitation and must be combated.
- The monetary policy must ensure the stability of the price level.
The fiscal policy should balance tax income and public expenditures in such a way that the overall budget will be balanced (no deficit spending).
- The state shall provide a basic infrastructure (including a legal system) and specific public goods but must not intervene into competitive markets.
2. Institutional deficits in the ‘Islamic heartlands’
Islamic economics emerged only since the mid-1970s as a new academic discipline (a mixture of positive and normative economics with a strong ideological dimension), and seemingly teachings such as those quoted above do not adequately reflect the realities of the economic systems of Muslim countries. In particular, they cannot explain the institutional deficits. It is often assumed that the traditional Islamic law could neither provide an adequate protection of individual property rights nor could it accommodate to institutional innovations and structural changes in particular from the 18th century onwards when the industrial revolution changed the economic and social systems in Europe and initiated an unprecedented economic development there.
Obviously, the Ottoman Empire - which ruled most of the Islamic heartlands in the Middle East and North Africa (MENA) - did not create adequate institutions during this crucial historical period. But this failure must not be attributed to an alleged rigidity of the traditional Islamic law. There are other - probably much more important - explanatory factors:
When the territorial expansion of the Ottoman Empire came to a halt and the disintegration of the periphery began (in the 17th/18th century), the Ottoman rulers could no longer buy the loyalty of their governors and military leaders by the distribution of newly conquered land. Instead, they had to extract rewards from the own territory, and they adopted on a large scale a system of tax farming. In a period of retreat and decline, tax-farmers tried to maximize their income in the short term and often set tax rates to confiscatory levels. This undermined private property and made it irrational to build-up immobile real assets (including production facilities) exposed to the access of the tax-farmers. It was much better to keep capital as liquid and invisible as possible.
This explains a strong preference of the entrepreneurs of that period for trade ventures and a strong aversion against factories and industrial plants. The military and economic decay of the Ottoman Empire in the 19th century was in sharp contrast to the industrial revolution, which spread throughout Europe. It was driven by private entrepreneurship and private capital, and crucial institutions such as joint stock companies and capital markets developed during that period. Nothing comparable took place in the MENA region - neither in the Ottoman heartland nor in the Arab periphery which came under European colonial control in the 1800s. When countries in the MENA region gained independence in the 20th century, either nepotism in autocratic regimes or state bureaucracies in socialist systems dominated the economies and suppressed entrepreneurial potentials (outside established elites) and hindered the emergence of institutions essential for the functioning of competitive markets which, in turn, are the driving force behind economic development. This changed only in the last decade when the recognition of entrepreneurship and private property and the market paradigm became guiding principles for economic reforms all over the world, including the MENA region.
3. The riba problem
Even if the Islamic mentality and the basic institutional setup of an Islamic economy is supportive to development, one must not ignore one distinctive element in the Islamic economic teachings with institutional implications which may turn out as a fundamental obstacle for development, namely the prohibition of riba - which means all kinds of interest (and not just usury) related to a loan. It must be noted that riba is prohibited for loan transactions only, i.e. it is limited to purely financial transactions. A trade transaction, where one party transfers an asset (good or non-financial service) and the other party transfers money, does not create interest but profit. This is true even if the financial transfer happens at a later date and the seller adds a mark-up on the spot price for the deferred payment. In this respect rent is similar to trade. Interest is created only if both transactions are financial in nature. While interest is prohibited, profit from trade is allowed, and even in an interest-free economy capital has a price.
The sector which needed - for centuries in Islamic history - the most sophisticated forms of finance was trade. Islamic jurists developed a comprehensive and sophisticated corpus of contracts for the financing of various types of trade transactions. All these contracts avoided interest. The more entrepreneurial and venturous transactions (such as long distance trade expeditions) were financed on the basis of profit and loss sharing. In more standard transactions (especially local trade) financing was not done by interest-bearing loans but by mark-ups on the spot price for the deferred payment of the purchased items.
When trade ventures and their financial needs became more complex, double trade techniques were introduced. In its extreme form, two reverse trade contracts are combined in such a way that they made interest-bearing loans commercially possible without recourse to the legally prohibited loan contracts. In principle, in the first contract party A sells to party B an object at a price P, and B pays the price on spot to A. In the second contract, party A immediately (re-) purchases the same object from party B at a price of P + X, payable after a certain period of time. Factually, party A never gave up the possession of the traded object, and party A received a loan from B amounting to P at a fixed cost X which is interest in economic terms (but profit from trade and deferred payment in legal terms). Seemingly such financing techniques facilitated flourishing trade, crafts and agriculture in the ‘Golden Age’ of Islam - even without banks in the modern sense. However, sceptical observers fear that a more complex modern economy without interest would be an economy without financial intermediation and without capital markets. This, in turn, would seriously jeopardize an economic system based on private property, entrepreneurship, and competition. The emergence of Islamic banks and interest-free financial markets over the last 30 years cannot dispel the reservations in total, but there are clearly recent trends towards a more sophisticated and efficient Islamic financial system with links to conventional national and global financial markets.
When Islamic banking emerged in the 1970s/1980s, its proponents strongly emphasized the profit and loss sharing techniques and portrayed an ideal economy based on equity and partnership. This economy was deemed more efficient, just and stable than the conventional capitalist and interest-based system, and it was expected that it would boost the economic development of the Muslim world after its introduction and spreading. The reality of Islamic banking did not meet the high expectations: Instead of providing capital on the basis of profit and loss sharing, Islamic banks acted as traders on behalf of their clients and bought and sold objects with mark-ups and mark-downs and rented or leased objects against fixed rental charges or leasing rates. It is debatable whether and to what extent Islamic banks applied double trade techniques. Profit and loss sharing was only applied in relation to depositors:
Money paid into so-called savings or investment accounts does not receive a fixed interest but a share of the profit (or loss) of the bank. Although Islamic banks were able to meet the basic financial needs of their customers, the early system as such was incomplete, more complicated, less efficient and inferior to conventional banks due to high transaction costs. But the number of Islamic financial institutions and their funds under management increased rapidly since the 1990s, and more and more conventional global players such as HSBC or Citibank and recently even Deutsche Bank joined the Islamic segment with new financial products, separate departments (’windows’) or subsidiaries. The new actors no longer restrict themselves to the traditional financing techniques of previous centuries but have engaged massively in financial engineering. They developed not only new interest-free banking techniques but also instruments for interest-free capital markets (such as sukuks as alternative to conventional bonds).
Today’s Islamic bankers are not worried about systemic superiority (as were the Islamic economists in the 1970s/1980s) but are content with the legal Shariah compliance of their new techniques and products. Their prime objective is no longer ideology but market performance. New interest-free tools as such hardly promote development, but efficient techniques are by all means a necessary precondition. The replacement of outdated techniques removes some impediments to the progress of Islamic finance and thus enhances he chances for an integration of an Islamic economic subsystem into secular market oriented economic systems in Muslim countries. This tendency is supported by authorities for supervision and regulation of financial institutions and markets (= central banks, monetary authorities, etc.) in many Muslim countries: They observe with great interest the formulation of accounting and auditing standards issued by organizations of the Islamic finance industry (such as the Accounting and Auditing Organization for Islamic Financial Institutions), and many of them actively participate in the design of regulatory standards (primarily in the framework of Islamic Financial Services Board). Both types of standards have only the legal quality of recommendations, but these recommendations are translated into authoritative standards by governments and central banks of an increasing number of Muslim countries.
The improvement of techniques, the refinement of accounting standards, and the regulatory integration into existing financial systems clearly remove possible obstacles which might originate from the prohibition of interest. It remains to be seen whether the modernized Shariah compliant financial toolbox will be used by ideologically motivated bankers in order to address the financial needs of new entrepreneurs, self-employed people, local communities etc. who so far are widely neglected by conventional banks. If this happens, Islamic finance could make a distinctive contribution towards the development of a Muslim country - even if the overall economic system remains mainly secular.
Source : http://shaukani.wordpress.com/2007/05/25/islamic-economic-system-%e2%80%93-a-threat-to-development/#more-428
By Irfan Ul Haq. Herndon Introduction:
Dr. Haq's book belongs to the same group of issue-oriented studies in Islamic economics that Umar Chapra's 1 books do.
Fard al-kifayah and Its Implications for Economic Policy
Land Ownership and Tenure
Interest Free Financing and Banking
Taxation in Islamic Economy
Poverty Employment and Economic Growth
In discussing the principle of fard al-kifayah and the role of the Islamic state in providing public goods, Dr. Haq advocates a policy of nationalization of resources as an appropriate policy for an Islamic state to follow. The same policy is extended elsewhere to include price fixing and direct control of the grain trade, and by implication, of all other commercial activity.
In the beginning of chapter 10, the author correctly notes that Islam allows land accumulation without any restrictions and recommends a balanced economic life for a Muslim without indulgence in opulence, luxury, and expensive pleasures. A Muslim is portrayed as a person who works hard, is productive, saves his money, invests it profitably, and assists the needy.
Interest Free Financing and Banking
In this section, there are two instances where the author creates confusion. The first instance is when he uses inaccurate definitions, and the second instance occurs when he draws a wrong policy conclusion. He uses the expressions "unearned income" and "fixed rent" in an incorrect context (p. 119). His discussion leaves one with the impression that these two sources of income are completely forbidden in Islam, which is far from the truth.
1 - Umar Chapra, Islam and the Economic Challenge (Leicester, UK: IIIT, 1992).
2 - "The Role of Public and Private Sector in an Islamic Perspective," in Proceedings of the Fifth International Islamic Economic Seminar (Herndon, Va: IIIT Publications, 1993).
by Hamudah Abdel-Ati (From Islam in Focus)
The economic life of Islam is also based upon solid foundations and Divine instructions. Earning one's living through decent labor is not only a duty but a great virtue as well. Dependence of any able effortless person on somebody else for a livelihood is a religious sin, a social stigma and disgraceful humility.
A Muslim is enjoined by God to be self-supporting and to stay away from being a liability on anybody. Islam respects all kinds of work for earning one’s livelihood so long as there is no indecency or wrong involved. With a clear conscience and due respect from society the Muslim can roll up his sleeves and undertake any kind of work available to provide for himself and his dependents.
Whatever the individual makes or earns through lawful means is his private possession, which neither the State nor anybody else can justifiably claim. In return for this right of private possession he has only to fulfill certain obligations to the society and pay certain taxes to the State. When this is done, he has full rights to protection by the State, and his freedom of enterprise is secure and guaranteed.
The economic system of Islam is not drawn in the light of arithmetical calculations and capacities of production alone. Rather, it is drawn and conceived in the light of a comprehensive system of morals and principles. The person who is working for another person or for a firm or an institution is ordained by God to do his work with efficiency and honesty.
Business transactions enjoy a great deal of attention from Islam. Honest trade is permitted and blessed by God. This may be carried out through individuals, companies, agencies and the like. But all business deals should be concluded with frankness and honesty. Cheating, biding defects of merchandise from the dealers, exploiting the needs of customers, monopoly of stocks to force one’s own prices are all sinful acts and punishable by the Islamic Law.
Those who devour usury will not stand except as stands one whom the Evil One by his touch has driven to madness. That is because they say: ‘trade is like usury’. But God has permitted trade and forbidden usury. Those who, after receiving direction from their Lord, desist, shall be pardoned for the past; their case is for God (to judge). But those who repeat (the offense) are Companions of the Fire; they will abide therein (for ever). God will deprive usury of all blessing, but will give increase for deeds of charity; for He loves not creatures ungrateful and wicked (2:274-276).
And the Firmament has He raised high, and He has set up the Balance (of Justice) in order that you may not transgress (due) balance. So establish weight with justice and fall not short in the balance (55:7-9). This is to guide man to resort to justice and straightforwardness in all his dealings and transactions. The future of cheaters is grim and their doom is awful. Here is how the Qur’an looks into the matter:
Woe to those who deal in fraud, those who, when they have to receive by measure from men, exact full measure, but when they have to give by measure or weight to men give less than due. Do they not think that they will be called to account on a Mighty Day, a Day when (all) mankind will stand before the Lord of the Worlds (83:1-6)?
Besides that, there are numerous Traditions of Prophet Muhammad excluding the cheaters, exploiters, monopolizers and dishonest business people from the band of the true Muslims. Any business deal that involves injustice or cheating or exploitation is strictly inhibited and cancelable by the Law even after it is concluded.
Proprietors are constantly reminded of the fact that they are in reality mere agents appointed by God to administer their holdings. There is nothing in Islam to stop the Muslim from attaining wealth and endeavoring for material improvements through lawful means and decent channels. Yet the fact remains that man comes to this world empty-handed and departs from it likewise. The actual and real owner of things is God alone of Whom any proprietor is simply an appointed agent, a mere trustee.
It is He Who has made you (His) agents, inheritors of the earth: He has raised you in ranks, some above others; that He may try you in the gifts He has given you. Verily, your Lord is quick in punishment, yet He is indeed Oft-Forgiving, Most Merciful (6:165).
Moreover, the Qur’an reports to mankind an interesting discourse between Moses and his people. It runs as follows:
Said Moses to his people, ‘pray for help front God, and wait in patience and constancy; for the earth is God’s. He gives it as a heritage to such of His servants as He pleases; and the end is best for the righteous.’
They said, ‘We have had nothing but trouble, both before and after you came to us.’ He said: ‘It may be that your Lord will destroy your enemies and make you inheritors in the earth; that so He may try you by your deeds’ (7:128-129).
This discourse between Moses and his people does not imply in any sense a recognition of any privileged genus of mankind on account of racial origin or ethnic identity. Nor does it mean that the Qur’an approves completely of the conduct and conceptions of the followers of Moses in later centuries. The tone of the text is rather reproachful and critical of the doubters; and reassuring of the fact that everything in the earth belongs to God, Who distributes it among His servants in the form of inherits trusts and objects of trial. The point is brought home time and-.again throughout the Qur’an. For example, it says:
To Him belongs the dominion of the heavens and the earth, and all affairs are referred back to God ... Believe in God and His Messenger, and spend (in charity) out of the (substance) whereof He has made you heirs. For, those of you who believe and spend (in charity)-for them there is a great reward. And what cause have you why you should not spend in the cause of God? For to God belongs the heritage of the heavens and the earth (57:5,7,l 0).
Unlike Communism, Islam replaces the totalitarian artificial supremacy of the Communist State by the beneficial supremacy of God; and the Communist theory of class warfare by sound morals, mutual responsibilities and cooperation. On the other hand, it gives utmost assurances against greedy capitalism and ruthless exploitation by proprietors. The economic system of Islam grants full recognition of the "independent" entity of the individual and his natural aspirations to work and possessions.
Although man is encouraged to work, is free to enterprise, is entitled to earn and possess, the fact that he is a mere trustee provides the necessary measure to insure proper handling of his possessions, his trusts. He has authority to earn, to invest and to spend. Yet in so doing he is guided by high principles to save him from going astray.
And render to the kindred their due rights, as (also) to those in want, and to the wayfarer. But squander not (your wealth) in the manner of a spendthrift. Verily, spendthrifts are brothers of the Evil Ones, and the Evil One is to his Lord (Himself) ungrateful.
Make not your hand tied (like a niggard’s) to your neck, nor stretch it north to its utmost reach (like a foolish spendthrift); lest you become rebuked and destitute. Verily your Lord does provide sustenance in abundance for whom He pleases, and He provides in a just measure. For He does know and regard all His servants (1 7:26-27, 29-30).
- Self-Imposed Dependence
- Restructuring our Economic Systems
[Condensed from a talk by Justice Mufti Taqi Usmani, delivered at the International Conference of the World Muslim Congress.]
The nineteenth century was a century of political oppression whereby the powerful Western nations enslaved most of the Asian and African nations including a large number of Muslim countries.
Now the Muslim world is looking toward the coming century with hope that it will bring for it total independence in the real sense so the Muslims may find their due place among the nations of the world and may be free to live according to the Quran and the Sunnah of the Prophet, Sall-Allahu alayhi wa sallam.
However, this hope cannot be realized through wishful dreams. We will have to work hard for our total freedom even more than we did for our political freedom. We need a total revision of our strategy, a well-considered plan, a collective resolution, and a revolutionary approach.In this paper, I would like to confine myself to two major issues.
This tragic situation cannot last forever. If we are not prepared to mend our ways, some natural process of revolution is bound to find its way. If we want to avoid disastrous consequences of such revolution, we'll have to restructure our economic system on the basis of clear guidance provided by the Qur'an and Sunnah.
Book Review of Muhammad Akram Khan.
By Zubair Hassan Introduction:
It is perhaps desirable to preface the review of a book with a brief description of its form and content, more so in the area of Islamic economics, where formal writing structures have yet to evolve and much diverse material tends to be treated under similar, even misleading, titles. Akram's book opens with an erudite foreword by Khurshid Ahmad. The text contains six chapters of uneven length spread over 111 pages.
Scarcity, as explained above, is a part of the divine scheme to spur humanity into action and to test people thereby, for the Qur'an not only talks of God's bountiful resources but also informs us that He alone is the source of knowledge and that He gives it to those who seek only bit by bit, lest they become proud and arrogant. The proposition that scarcity of resources is just a human-made phenomenon must be taken with a grain of salt.