Islam and Economics: A Primer on Markets, Morality, and Justice
By Ali Salman
Acton Institute, US
Pakistani public intellectual Ali Salman’s new book, Islam and Economics: A Primer on Markets, Morality and Justice, is a much-needed work, offering a slightly non-academic overview of Islamic economics.
I found myself developing an interest in the book after witnessing a wave of recent public display of hatred and anger in the name of Islam. The volume gives hope for imagining that a vision and determined will can help us alter the focus of our attention, from the stagnant notions of salvation through the humiliation and lynching of humans, to the greater meaning of life that may be found in the domain of ideas and economic activity.
The book is a fairly reasonable read if one is interested in the following questions: does Islam promote capitalism? Can there be Islamic capitalism? Does Islam present a case for socialism? Should we strive for Islamic socialism? Does Islam offer a unique theory for an economic framework and social justice? What are the ethical tenets of the Islamic economic framework?
Salman’s book can be divided into three sections. First, he outlines the basic principles of the Islamic economic framework by chiefly relying on the classical understanding of Islam. Second, he outlines structures and institutions that can ideally play a role in regulating markets in an Islamic state. Finally, he comments on the applicability and functioning of these principles and institutions in Muslim as well as non-Muslim societies.
A public intellectual attempts to map out the doctrinal and historical basis for a framework for economic activity and social justice under Islam
Contrary to popular debates and scholarly literature, Salman addresses three fundamental questions to present his distinctive model of an Islamic economic framework: Who owns what? How is wealth created? How is the wealth distributed?
He explores these questions from both doctrinal and historical perspectives to offer an alternative view. He clarifies that he does not intend to offer any new interpretation but, as the book reveals, he does end up offering a certain perspective for looking at Islamic economics.
Islam respects the idea of private ownership, but it also establishes that natural resources are divinely owned and belong to humankind, Salman argues. He elucidates that though such resources are gifts of nature, human efforts to extract them are not free. Islam respects private ownership and does not offer any justification for the nationalisation of private industry.
In response to the second question, Salman focuses on a verse from Surah An Nisa: “Believers, do not consume your wealth among yourselves in vanity, but rather trade with it by mutual consent.” Trade is a key feature in Islamic theory about wealth creation.
Finally, in analysing how wealth is circulated, Salman argues that “the circulation takes place through trade as well as through taxes, which in the case of the Islamic economic framework constitutes zakat [obligatory charity], ushr [levy on agricultural produce] and a possible land value tax.”
After outlining broad theoretical and conceptual principles, Salman outlines certain institutional settings that will regulate economic affairs in an Islamic state: price freedom, free trade, market regulations, riba [usury, fiscal policy], waqf [“social protection of people by people”] and the law of inheritance.
Salman repeatedly reminds us that the state’s role is to ensure free trade and it is not empowered to disrupt the market.
He points out that though the Holy Quran does not explicitly talk about price control, Prophet Muhammad (PBUH) declared that tasir [price control] is forbidden. However, later Muslim jurists were found to be divided on the question of price freedom. Imam Abu Hanifa and Imam Malik were conditionally in favour of tasir for the larger public good.
This idea was further developed by the scholar Ibn-i-Taymiyyah, who said that it was obligatory to intervene in special circumstances such as wars and famines. On the other hand, Imam Shafi and Imam Hanbal were against the idea of price control, arguing that it would increase people’s miseries.
After offering various accounts from Islamic history, Salman maintains that the general consensus is that price control is forbidden by Shariah under ordinary circumstances.
However, like early jurists, Salman admits that there can be problems regarding distortion of price in the market. To ensure the smooth functioning of the market, the office of muhtasib was created by the Prophet, the first appointee being Hazrat Umar. Notably, the muhtasib’s role was to ensure undisrupted economic activity, not to obscure it through official means.
Salman repeatedly reminds us that the state’s role is to ensure free trade and it is not empowered to disrupt the market without any legitimate reason. To put it differently, one chief argument of the book is that Islam projects and defends economic freedom. Freedom appears to be at the heart of the Islamic economic framework. Broadly speaking, economic freedom is what ultimately translates into all other forms and expressions of freedom.
In chapter three, Salman mentions that the Islamic state can intervene in commodity markets in case of “cheating, coercion or theft.” He also outlines some other scenarios and conditions under which the Islamic state can intervene. The question is: what does an Islamic state mean? This pushes economic theory into other spheres, ie political.
Salman extensively quotes theologian Javed Ahmad Ghamidi’s work, also mentioning that “Ghamidi does not consider the establishment of an Islamic state as a religious obligation.” However, Ghamidi talks about the economic framework and calls it “economic Shariah.”
I contend that politics cannot be completely delinked from economics. Practically, one main objective of political organisation is to create order where economic stability is ensured and undisrupted growth is achieved. So how can an economic framework based upon the principles of Shariah be implemented in a secular state? Will implementation of economic Shariah ultimately lead to the creation of an Islamic state?
Ghamidi’s work mentioned in Salman’s book does not offer any answer. Similarly, Salman also does not talk about the formation and structure of an Islamic state. For an economic theory to be considered inclusive and meaningful, it has to have a link with politics.
Moreover, Salman suggests that the iqta [assignment of tax revenue] system can provide “a workable arrangement for the development of natural resources.” Here, he does not recognise the fact that iqta during Seljuk rule caused a major blow to Muslim intellectual and economic dominance.
Andrew Watson, in his book Agricultural Innovation in the Early Islamic World: The Diffusion of Crops and Farming Techniques, argues that iqta was responsible for the agricultural downfall of the Muslims around 1000 CE. It not only restricted private property, but also damaged entrepreneurship.
Though Salman quotes several contemporary Islamic scholars, he doesn’t focus on existing socio-political realities. For instance, he does not address how an Islamic economic framework will operate under the current international system, where not only complex interdependence exists, but also several institutions of global governance. Salman’s model appears to have evolved in isolation, as it seems to have no connection with existing global challenges.
But despite its certain deficiencies, in a country such as Pakistan — where the youth is being indoctrinated to become extremist defenders of the self-styled idea of religion — books such as this are much-needed oxygen for ensuring the survival of reason and promotion of dialogue.
Rather than glorifying extrajudicial killings in the name of faith, and preparing youth to die in the name of religion, Pakistan’s youngsters need to be told about economic activity, entrepreneurship and prosperity rights.
The reviewer is a research assistant at San Diego State University.
He tweets @Farah_adeed
Published in Dawn, Books & Authors, May 29th, 2022