Dr. Asad Zaman

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Lectures on Islamic Economics

Course Outline

Lecture 1: Principles of Islamic Education

Lecture 2: Origins of Western Social Science

Lecture 3: Islamic and Western Conceptions of Scarcity

Lecture 4: Limits to Market Economy

Lecture 5: Rebuilding Islamic Societies

Lecture 6: Contrasts between Islamic and Western Economic Views

Lecture 7: Roots of European Thought

Lecture 8: Legitimization of Pursuit of Wealth

Lecture 9: The Evils of Interest

Lecture 10:  The Normative Foundations of Scarcity

Lecture 1: Principles of Islamic Education

1. Islamic Approach to Knowledge:

وَمَا خَلَقْتُ الْجِنَّ وَالْإِنسَ إِلَّا لِيَعْبُدُونِ (51:56)

51:56 I created the jinn and humankind only that they might worship Me.

Every act in the life of a Muslim should be an act of worship. It is stated in a Hadeeth that those who get to paradise will have no regrets, except for the moments they spent in neglect/forgetfulness of Allah. As a teacher, my teaching should be an act of worship. As a student your study should be an act of worship. How can we make this happen?

There are three major requirements for an act of worship (and many minor ones). The first is the intention. All acts are judged according to intentions, and even the greatest ones, like acquisition of knowledge, or the sacrifice of ones life, or wealth, can fail to be worship if the intention is not purely the pleasure of Allah Subhanahu wa T’aala. Similarly, a small act, like giving a date in charity, can be of great value in the eyes of Allah if done with the pure intention of pleasing Allah. Secondly, the action must be done in obedience to the commandments of Allah. Thirdly, the action must be done according to the Sunnah of our prophet Mohammad s.a.w.

It is clear to all that the Ummah of the Muslims is in great difficulty on many fronts, including spiritual, social, political and economic. All Muslim leaders have been concerned with the issue of how these problems can be solved. However, errors in diagnosis have led to the pursuit of the wrong remedies, which have aggravated problems instead of solving them. In fact, our Deen Islam is the greatest gift of Allah to humankind and is complete and perfect. It contains the methods needed for solving our current problems. Unfortunately, some of the core teachings of Islam have been forgotten by Muslims as a whole, and there are no living instances of Islamic societies (with all institutions -- political, economic and social – based on Islamic principles ) currently in existence. Since Islam is a way of life, and not a philosophy or an intellectual enterprise, the prophecy of our prophet Mohammad s.a.w. that “Islam came as a stranger, and will soon become a stranger” has come true. In this course, we will show how the teachings of Islam can solve our economic problems in ways far superior to those that leading experts in Western economics know of, or those contained in contemporary textbooks.

In delivering this lecture, it is my intention to become part of the struggle for the establishment of the Deen of Islam. This has been ordained by Allah as a duty upon all Muslims, and was the main task carried out by our prophet Mohammad s.a.w.. The establishment of the Deen requires co-ordinated action on many fronts, including the spiritual, social, political and economic. By the grace of Allah, many Muslims are actively engaged in this effort in the many dimensions required. Making this intention places the burden of a great responsibility upon me. I must make sure that everything I teach is relevant and significant for this purpose. Not only must I filter out irrelevant information, but I must prioritize so that the most important knowledge relevant to the achievement of this goal is delivered to the student.

I ask my students to make the same intention. Do not sit with the intention of memorizing materials to pass the course requirement for a degree, which will allow us to get a job and make money. Instead, make the intention of using the knowledge acquired in this course to serve the Ummah of our prophet Mohammad s.a.w. Like Ibraheem alaihissalam, say:

قُلْ إِنَّ صَلاَتِي وَنُسُكِي وَمَحْيَايَ وَمَمَاتِي لِلّهِ رَبِّ الْعَالَمِينَ (6:162)

6:162 Say: Lo! my worship and, my sacrifice and my living and my dying are for Allah, Lord of the Worlds.

It is natural for those who do not believe in the hereafter to concentrate on the pleasures of this world. Because they currently dominate the world, the message that life is about accumulating wealth, pursuing power, and enjoying the luxuries of this world, is being spread via powerful media throughout the world, including the Muslim lands. All of the great Muslim leaders throughout the centuries have led simple lives, free of ostentation and luxury. According to a Hadeeth, “No doubt, (true) luxury is the luxury of the Akhirah”. Hazrat Umer r.a. used to eat coarse bread made from unrefined flour. When a guest asked him why, he explained that not everyone among the Muslims could afford refined flour. This feeling of responsibility for all, and of refraining from luxury (Israf or Tabzeer) out of consideration for others, was an important ingredient in the construction of the Ummah, the Muslim community. Revival of this spirit among the Muslims today would go a long way towards solving economic problems which face us. It is also directly opposed to the heart of conventional Western economic theory, which is based on the idea that every man cares only for himself, and would maximize his consumption even if his neighbor is starving. In addition, economic theory suggests that this state of affairs – maximization of individual selfish utilities – leads to optimal economic outcomes for the society as a whole.

Since Allah T’aala has purchased our lives and wealth in return for Jannah, it follows that we are not free to do as we please. Instead, we must devote our lives to Allah, in the way shown by our prophet Mohammad s.a.w. One of the central elements in the character of our prophet Mohammad s.a.w. was compassion and concern for all human beings. The suffering of the believers weighed heavily upon him:

لَقَدْ جَاءكُمْ رَسُولٌ مِّنْ أَنفُسِكُمْ عَزِيزٌ عَلَيْهِ مَا عَنِتُّمْ حَرِيصٌ عَلَيْكُم بِالْمُؤْمِنِينَ رَؤُوفٌ رَّحِيمٌ (9:128)

9:128 INDEED, there has come unto you [O mankind] an Apostle from among yourselves: heavily weighs -upon him [the thought] that you might suffer [in the life to come]; full of concern for you [is he, and] full of compassion and mercy towards the believers.

He was also deeply concerned about the fate of the unbelievers, so much so that Allah T’aala consoled him about this, asking him not to kill himself with sorrow.

فَلَعَلَّكَ بَاخِعٌ نَّفْسَكَ عَلَى آثَارِهِمْ إِن لَّمْ يُؤْمِنُوا بِهَذَا الْحَدِيثِ أَسَفًا (1

18:6 (Asad) But wouldst thou, perhaps, torment thyself to death with grief over them if they are not willing to believe in this message?

If we emulate our prophet, and develop concern and compassion for all human beings in our hearts, we will lead lives of service to mankind, instead of lives devoted to fulfillment of personal desires and wants. We will also be in violation of fundamental axioms of economic theory, and living proofs of its failure. Unfortunately, it is not enough to point to our books or our history to show that people can act according to Islamic ideals. It is necessary to implement Islam in our lives to show that this is the case. This is the challenge facing the Muslims: to live up to demands that Islam places upon us. The Quran praises those who give to others while they themselves are poor:


وَالَّذِينَ تَبَوَّؤُوا الدَّارَ وَالْإِيمَانَ مِن قَبْلِهِمْ يُحِبُّونَ مَنْ هَاجَرَ إِلَيْهِمْ وَلَا يَجِدُونَ فِي صُدُورِهِمْ حَاجَةً مِّمَّا أُوتُوا وَيُؤْثِرُونَ عَلَى أَنفُسِهِمْ وَلَوْ كَانَ بِهِمْ خَصَاصَةٌ وَمَن يُوقَ شُحَّ نَفْسِهِ فَأُوْلَئِكَ هُمُ الْمُفْلِحُونَ 

59:9 But those who before them, had homes (in Medina) and had adopted the Faith,- show their affection to such as came to them for refuge, and entertain no desire in their hearts for things given to the (latter), but give them preference over themselves, even though poverty was their (own lot). And those saved from the covetousness of their own souls,- they are the ones that achieve prosperity.

Can we give to others, while expecting no compensation from them, and only waiting for our reward from Allah? Islamic Economics is one aspect of the struggle to bring about the inner spiritual transformation required for this purpose in ourselves and in all human beings.

2. A Unique Historical Event:

The most important episode in the history of mankind is the coming of our Prophet Mohammad s.a.w. with the message of Allah for mankind. The historical period during which he arrived is referred to as the “Jahilliyyah” or the “Age of Ignorance” (darkness). Syed Abul Hassan Ali Nadwi has described this period of history in much greater detail in his book “ Briefly, the central characteristic of the age of Ignorance was that the ability to differentiate between good and evil had been lost. The exploitation and oppression of the poor and weak by the rich and powerful was commonplace and accepted as natural by all parties. Cruelty, torture, free sex, drugs, gambling and other behaviors not worthy of human beings, were popular and widespread. The law of the jungle prevailed. Justice was unknown, and the rule was to support your kin, whether he was in the right or in the wrong.

Our prophet Muhammad sallalaho alaihe wassalam brought two things to the world which changed the course of history.

One was the Deen of Islam, which was the message of Allah for mankind.

 الْيَوْمَ أَكْمَلْتُ لَكُمْ دِينَكُمْ وَأَتْمَمْتُ عَلَيْكُمْ نِعْمَتِي وَرَضِيتُ لَكُمُ الإِسْلاَمَ دِينًا (5:3) 

Today have I perfected your religious law for you, and have bestowed upon you the full measure of My blessings, and willed that self-surrender unto Me shall be your religion.

This was the perfect way of life for all human beings, the greatest gift of God to mankind.

The Second was the method by which this Deen was to be spread, to enter and transform the lives of people. These methods were extremely effective and powerful. People who used to bury their own daughters, kill each other over trivial disputed, and generally behave in ways which showed no mercy or compassion for others, changed drastically. The companions of the Prophet gave help to others, even when they were themselves hungry. They made tremendous personal sacrifices for the welfare of others. They absorbed the message of Islam fully, and also absorbed the methodology required to transmit this message to others. As a result, within a short period of time they changed the course of human history.

It was a unique event in the history of mankind that the Muslims spread over the world and conquered two major empires, not for the sake of power or riches, but solely to bring the benefits of Islam to all human beings.

Thee na kuch taigh zany apni hukumet kay liay

Sar bakaf phirtay thay kya Dahr main doulat kay liay? – Iqbal

We did not bring out our swords for the sake of conquest and government.

Nor did we risk our lives for the sake of acquiring loot and wealth

Hodgson writes that “ Muslims succeeded in building a new form of society, which in time carried with it its own distinctive institutions, its art and literature, its science and scholarship, its political and social forms, as well as its cult and creed, all bearing an unmistakable Islamic impress. In the course of centuries, this new society spread over widely diverse climes, throughout most of the Old World. It came closer than any had ever come to uniting all mankind under its ideals.”


1. What were the characteristics of Jahilliyyah? Also, what were the characteristics of Rome, Persia and China at the time of the coming of our Prophet s.a.w.? For a detailed answer on how all of these civilizations were enveloped in darkness, see the book by Syed Abul Hassan Ali Nadvi entitled:

2. List some of the changes that occurred among the people who accepted Islam, in terms of personal character.

3. List some major differences between pre-Islamic Arabian society, and post-Islam Muslim society that emerged after the teachings of prophet s.a.w. Had been absorbed by the Muslims.

4. List some the characteristics of the Prophet s.a.w. which were crucial to the success of his mission to change the people and through them the world.

5. List some of the methods used by the prophet which were used to bring about the tremendous social transformation that occurred as a result of his mission.

1 3.An Important Current Debate Among Muslims

An extremely important question to ponder is: What was there in the message of Islam which changed the course of human history? Does this message have the same power, relevance and importance today as it did fourteen centuries ago?

As we have seen, non-Muslim historians acknowledge the power of the message of Islam, in its historical context[1]. However, they believe that this power was available in simpler times, and is no longer relevant to the complex modern world. The simple message of Islam no longer has the power to radically transform human lives and living experience, and to change the course of history.

Sadly and unfortunately most Muslims have also come to agree with this western analysis. They believe that progress of Muslims today depends on mastering Chemistry, Biology, and Physics, and on acquiring democratic governance, industrializing, and generally imitating developments in Europe over the past three centuries or so. It would be useful to formulate these two positions as opposing points of view in a debate:

Majority Position: An inclination towards monasticism (rehbaniyat) forbidden in the Quran but encouraged by Sufis led the Muslims to ignore worldly progress. In the meantime, the unbelievers made spectacular progress in learning the worldly sciences, and left us far behind. The only way to reverse this is for Muslims to acquire these worldly sciences, which is also strongly recommended and encouraged by our Deen,

Minority Opposition: The message of Islam has the same power to revolutionize the world as it did fourteen centuries ago. The core teachings of Islam deal with spiritual development, and it is this spiritual development which is the greatest need of the Muslims today. If Muslims could learn the lessons of Faith (eeman), Trust (Tawakkul), Courage, Generosity, Compassion and Concern for others, Character (Ahklaq) and community (becoming one body: the Ummah), which are contained in the Quran and Hadeeth, we could change the world as we did in earlier times.

The Majority Position leads to the following formulation of the problem of “Islamization of Knowlege”:

• Progress of Muslims depends on acquisition of European knowledge.

• There are many areas where European knowledge conflicts with Islamic views.

• Resolving these conflicts will enable us to assimilate the European ideas without abandoning Islam, and allow for progress.

This then, is one set of motives for the project of Islamization of knowledge.

The Minority Opposition considers the over-valuation of Western knowledge as part of disease. The Quran asks us to rejoice in what has been given to us of the Deen in the form of the Quran and the Hadeeth, and consider it as superior to the wealth of unbelievers:

قُلْ بِفَضْلِ اللّهِ وَبِرَحْمَتِهِ فَبِذَلِكَ فَلْيَفْرَحُواْ هُوَ خَيْرٌ مِّمَّا يَجْمَعُونَ

Q10:58 Say: "In this bounty of God and in His grace (that is, the Quran), then, let them rejoice: it is better than all that they may amass!"

The same idea is expressed in a Hadeeth narrated by Sa`eed ibn Sulaym radiyal-laahu `anhu: "If a person who has acquired knowledge of the Quran considers another person who has been gifted with something else to be more fortunate than himself, he has shown disrespect to the blessings of Allah ta`aalaa bestowed on him on account of his learning of the Quran." The problem of Islamization of Knowledge from this point of view is that of putting Western knowledge in its proper place as useful, but not central to human pursuits. Accomplishing this task still requires a mastery, and even a going beyond mastery of the Western knowledge.

The minority position will be clarified and considered in greater detail in a subsequent lecture. In todays lecture, we will consider some arguments for and against the Majority Position.

There are many reasons why Muslims have come to believe that Islam by itself is not sufficient for their needs in the current times, and that we must make serious efforts to acquire contemporary Western knowledge in order to progress. We will now list these reasons, and explain why these are wrong.

1 3.1 Is Progress the Acquisition of Worldly Goods?

OBJECTION (to the idea that Islam is the answer to our current problems)

Manifestly, the West is far ahead of us both in terms power and in terms of possession of material goods. To compete with them, we need to learn how they came to dominate the world and to follow their strategies, which have proven successful.


Allah T'aala has said in the Holy Quran:

لاَ يَغُرَّنَّكَ تَقَلُّبُ الَّذِينَ كَفَرُواْ فِي الْبِلاَ

3:196 LET IT NOT deceive thee that those who are bent on denying the truth seem to be able to do as they please on earth:

In a long narration (see Chapter 3, Story 2, Hikayatus-Sahaba, Fazaile Amal), Umer R.A. asked the prophet to pray for ample provisions, like those give to the Romans and Persians. The prophet rebuked him saying that ease and comfort in the hereafter are much better than ease and comfort of this world, and latter was for the unbelievers while the former was reserved for the believers.

Abu Hurairah narrated that: “Said the Prophet (sallallaho alaihe wassallam): When my Ummah begins to attach more importance to the world, and to regard it as a source of glory, the awe and importance of Islam will vanish from their hearts. (continues)”

This is the key: if we attach importance to the world, and define progress as the consumption of luxury goods, then we will no longer consider Islam to be important. This is exactly what has happened. Under the influence of the hegemonic West, Muslims learned to think of progress as acquisition of worldly goods, and neglected the deep teachings of Islam on the spiritual level. Within the western worldview, spirituality is meaningless, and hence knowledge about methods for making spiritual progress is not important.

LESSON: If we think that progress lies in acquisition of the riches of this world, as all those who deny the Akhirah do, then we will think it is necessary to follow western ways. However, Islam teaches us to seek the pleasure of God, and to compete which each other for doing the best deeds (the ones most pleasing to Allah), instead of competing for worldly goods. For those who seek the Akhira, Allah T'aala will also give them the mastery/domination of this world.

2 3.2 Has Islam Failed Us?

OBJECTION (to the idea that Islam is the solution to our current problems)

During the process of colonization, nearly all Muslim lands were conquered by European powers. If Islam had the same power as it did fourteen centuries ago, then this would not have happened.


The answer to this is that on countless occasions, barbarians have overwhelmed people who were at a far greater level of culture and civilization. The Huns sacked Rome, the Vandals and Visigoths, Mongols and Tartars were energetic tribes who raided and destroyed peoples who had far more complex and advance cultures. It is universally acknowledged that European Crusaders who conquered Jerusalem behaved barbarically towards the native Muslims, while Muslims behaved in a much more civilized way during the re-conquest of these territories. Similarly, the Mongol conquest of Baghdad is not a testimony to the failure of Islam. It is no doubt true that comfort and luxury had led to overall relaxation in the practice of Islam in general among Muslims. As is usual, religion becomes reduced to a set of rituals and spirit behind them is lost. It was this weakness which led to the losses of Muslims to enemies.

3 3.3 Are Muslims Already Practicing Islam?

OBJECTION (to the idea that Islam is the solution to our current problems)

Muslims are already practicing Islam. So further progress in that direction is not needed. What we lack is the western technologies and education, and that is where efforts must be made.


Islam is a way of life, not just a belief or a philosophy. Islam covers all dimensions of human existence. Everywhere in the Islamic world today, our political, social, economic, and educational systems are all extremely far from Islamic ideals. Because the living reality of Islam cannot be seen anywhere, it is immediate that Muslims as a whole are very far from Islam. Islam is not only a set of teachings for individuals, it is also a methodology for changing the world we live in. If Muslims were living Islam, they would be engaged in a strenous effort to spread to good and to prohibit the evil all over the world, at the sacrifice of personal comforts, as well as families and businesses. This is what the Quran explicitly asks of Muslims: to prefer the struggle for the Deen over and above all worldly pleasures:

9:24 Say: "If your fathers and your sons and your brothers and your spouses and your clan, and the worldly goods which you have acquired, and the commerce whereof you fear a decline, and the dwellings in which you take pleasure - [if all these] are dearer to you than God and His Apostle and the struggle in His cause, then wait until God makes manifest His will; and [know that] God does not grace iniquitous folk with His guidance.

It is clear that as a whole, Muslims are far from this explicit requirement of the Quran to prefer the struggle for establishing the Deen to their personal pleasures.


Zaman, Asad (2006): Developing an Islamic world view: An essential component of an Islamic education. Published in: Lahore Journal of Policy Studies 1 1 (2007): pp. 95-105.

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Lecture 2: Origins of Western Social Science

Distinguishing between Right and Wrong

كُنتُمْ خَيْرَ أُمَّةٍ أُخْرِجَتْ لِلنَّاسِ تَأْمُرُونَ بِالْمَعْرُوفِ وَتَنْهَوْنَ عَنِ الْمُنكَرِ وَتُؤْمِنُونَ بِاللّهِ

3:110  YOU ARE indeed the best community that has ever been brought forth for [the good of] mankind: you enjoin the doing of what is right and forbid the doing of what is wrong, and you believe in God.

At the beginning of each action (amal), we renew our intention to make our worship and struggle and living and dying purely for the sake of Allah. In our study of today, we make the intention of serving Allah, by carrying out the duty of taking his message to all of humanity. This duty has been explicitly assigned to the Ummah of the prophet Mohammad, s.a.w. in the Quran.

1. Preliminaries

SUMMARY: An inferiority complex generate by defeats on battlefields, colonization, as well as awe of technological achievements leads us to undervalue our own Islamic traditions, which is a big spiritual problem

Even if we try very hard, we will be unable to count the blessings of Allah upon us. Among the greatest of these blessings is the Deen of Islam. The knowledge given to us Muslims in the form of this Deen is deep, sophisticated, essential to spiritual development, and unknown to the rest of mankind. Unfortunately, the vast majority of Muslims today are ignorant of their intellectual heritage:

Ganwa di ham ne jo aslaf say meerath pay thi, surraya say zamin par asman nay ham ko de mara.

We wasted the treasures inherited from our ancestors

And were thrown to the ground from the skies where we used to fly

The books of our ancestors do not even burden our shelves with their weight; they are confined to dusty libraries while shiny new western texts occupy our minds and hearts.

The problem of Islamization of knowledge is the problem of integrating these two traditions: the Islamic intellectual tradition with the knowledge acquired by the west in the past few centuries. This is stated below as the central problem to ponder in this lecture:

Integrating Two Intellectual Traditions: Throughout the Islamic world, two systems of education are operating in parallel – A western secular education, and an orthodox Islamic education. The two have almost nothing in common, and create different types of skills, worldviews, and even personalities, leading to many conflicts in Islamic societies. Can these two traditions be merged, so that all types of education fit harmoniously within a single Islamic paradigm?

Today many Muslims have the idea that learning how to build refrigerators, cars, atom bombs and rockets to the moon is superior to learning Taqwa, Tawakkul, Khushoo in Salat, humility, integrity, courage, honesty, compassion, trustworthiness, and generosity. This lack of respect for our traditions creates spiritual problems:

Since Western knowledge is concerned solely with affairs of this world, according it importance will cause the awe and importance of Islam to vanish from the hearts:

Abu Hurairah narrated that: “Said the Prophet (sallallaho alaihe wassallam): When my Ummah begins to attach more importance to the world, and to regard it as a source of glory, the awe and importance of Islam will vanish from their hearts. (continues)”

Envy of the West, valuation of their material possessions and meager worldly knowledge above the promises of the Akhira and our own religious heritage runs into conflict with many ayat of the Quran and the Hadeeth, some of which were cited in the first lecture. The point under discussion is rather subtle, and worth stating carefully and clearly, as below:

The Spiritual Problem: It is not the acquisition (or failure to acquire) western knowledge which is our current problem. It is the inferiority complex acquired by more than a century of losses on the battlefield, and colonization, which leads Muslims to value Western knowledge over and above the Deen of Islam, and to accord it much more respect than it deserves. This attitude creates the greatest obstacle to the project of Islamization of knowledge

2. A Historical Parallel

SUMMARY: Absorption of alien bodies of knowledge into the Islamic framework requires discrimination: the ability to sort out the right from the wrong. Awe of alien achievements leads to indiscriminate adoption of all alien ideas many of which may be wrong.

A similar problem has occurred once before in Islamic history, and it is very instructive to consider the parallels. This problem occurred when the books of the Greek philosophers were translated into Arabic around the time of Haroon Al-Rasheed. The depth and sophistication of some of these writings impressed some Muslim intellectuals greatly. These scholars wanted to assimilate this stock of Greek knowledge into Islam. They argued that “Reason” (by which was meant Greek philosophy) was on par with Wahy or revealed knowledge, as expressed in the Quran and Hadeeth. This group was called the Mu’tazala. They were very influential and succeeded in winning the Khaleefa to their views. It is only the promise of Allah to protect the Deen that preserved the Ummah from adopting these views. Some Ulema of integrity made great personal sacrifice and stuck to the position that Wahy was superior to all human intellectual efforts. With the help of Allah, they ultimately prevailed.

Had the Mu’tazilah been successful, Greek philosophy would have been accepted as being part of the religion of Islam. Concepts like the Earth is the center of the universe, and many other Greek ideas which have since been proven wrong, would have become part of Islam. Then, we would have suffered from the same problem of conflict with Science that the Catholic Church (which did accept Greek teachings) had. The battle between science and Christianity that took place in Europe was ultimately lost by Christianity and this had a tremendous impact on both belief in Christianity and the attitude of European scientists towards religion. This conflict is a very important source of the problem of Islamization of knowledge. European science is taught in way which has built in prejudice against religion, created by this historical conflict. In Muslim countries, when science is taught following Western textbooks and methods, this (hidden) prejudice is communicated to the students, and creates doubts about faith in Islam.

It was the Taqwa of the Ulema which preserved Islam from the encroachments of Greek philosophy. An extremely important element in the intellectual battle was the book “Tahafatul-Filasafa” by Imam Ghazali. This book turned the tide against Greek ideas. In it Imam Ghazali showed up the many errors of the philosophers, while accepting the little bit that was correct. The key to note here is that Imam Ghazali went beyond the Greeks – he mastered their philosophy, and analyzed it, and accepted the good and rejected the bad.

Today we are faced with a similar problem with respect to Western knowledge. Both an inferiority complex and a lack of mastery leads one to accept many western ideas without necessary critical examination. As just one simple example among many that could be provided, western economic theory argues that people “maximize utility” – that is, they maximize their personal pleasure from consumption, without any concern or regard for others. Accepting this theory uncritically, some Muslims have also argued that Islam says the same thing. There exist verses in the Quran and hadeeth which describe the selfish tendencies of man, and these can be used to build such an argument. However, the Quran and Hadeeth describe these tendencies as evils to be overcome, in striving to achieve goodness:

لَن تَنَالُواْ الْبِرَّ حَتَّى تُنفِقُواْ مِمَّا تُحِبُّونَ وَمَا تُنفِقُواْ مِن شَيْءٍ فَإِنَّ اللّهَ بِهِ عَلِيمٌ

3:92 [But as for you, O believers,] never shall you attain to true piety unless you spend on others out of what you cherish yourselves; and whatever you spend - verily, God has full knowledge thereof.

This shows that good Muslims must spend from what they love on others, exactly the opposite of the utility maximization described in Economics textbooks. The struggle to achieve piety and righteousness requires fighting certain built-in tendencies, and the extent to which we are successful is also the extent to which western theories will fail to describe Muslim behavior. The point we want to make here is only that western theories conflict with Islamic views, but some Muslim scholars did not recognize this conflict and accepted western views uncritically and sought to show that Islamic views were in harmony with these western views.

3. False Claims of Western Science:

SUMMARY: While there are many useful ideas in the body of knowledge developed in Europe, and known as “science,” there are also many ideas which are wrong, harmful, and in conflict with Islamic views.

During the colonial period, Ulema in British-India observed how western education served to weaken the faith, and some of them forbade it. Even though it seemed important to advance in the world, acquire prestige status and power, preservation of faith was more important than all of these.

Today, we cannot avoid engaging with the problem of Western knowledge, and how to assimilate it within an Islamic framework. To engage with it, one must first learn the contents of the Western intellectual tradition. To learn this tradition, one must study as a student or an apprentice in Western academic institutions – currently there are no alternatives available to this approach. A student must necessarily accept the claims of his teacher for the most part. If he questions everything a teacher says, he will never succeed in learning the subject matter. Therefore, in the process of study, students are forced to accept certain basic Western claims about the nature of Western knowledge which are in fact false. Acceptance of these claims, many of which are in conflict with Islamic views, leads to many difficulties in the Islamization of knowledge. The first of these claims is the following:


Western knowledge (physical and social sciences) is factual and objective. It is universal and a-historical.

We provide a more detailed explanation of these charms that western scientific knowledge claims for itself:

1. Factual: This means that, like 2+2=4, the claim of western science are true, and verifiable by anyone.

2: Objective: This means that the knowledge is the same for all human beings and does not vary from person to person.

3: Universal: This means that the knowledge remains the same across time and place.

4: A-historical means that the particular history of Europe does not affect the knowledge, which is independent of particulars of human history.

If this claim is accepted as true (and unfortunately, most Muslim who have studied in Western institutions do accept this claim), then the problem of Islamization of knowledge takes a very different form from the position that we will take. It makes no sense to try to Islamize facts like “2+2=4” or to reject the law of gravity because it was discovered by a Christian. If something is a fact than all must accept it. If there appears to be a conflict with Islamic teachings, then we must re-interpret the Islamic teachings to make the conflict disappear – we cannot have Islamic teachings in conflict with facts. Nor should we try to change the facts to make them fit Islamic views. We will now argue that all four of these claims of Western science are false.

Are Scientific Laws factual and objective?

There is a huge literature under the name of “philosophy of science”. The goal of this field of study was precisely to establish these claimed virtues for science, and ALSO to deny this same validity to religious knowledge. It is impossible to cover this field in a few short paragraphs. We will just give a few pointers to the problems of factuality and objectivity in scientific knowledge:

Problem 1: Induction Is Not Valid

Scientific laws are based on extrapolation of an observed pattern. For example, after observing sunrise daily for 1000 years, one might conclude that this is a universal pattern which will continue forever. This is called the problem of “induction” in the philosophy of science. Given a large collection of facts/observations all of which fit into one pattern (law), can we conclude that the law is universally valid? Although many have wrestled with this problem, none has solved it, and it has finally been concluded that it cannot be solved. There is no finite collection of observations such that one can validly derive a universal law from them.

Problem 2: Falsification of Popper

Because of failure of induction (problem 1), many philosophers of science came to the realization that scientific laws could not be proven true. However, they can be proven false, if we find an exception to the pattern on which the law is based. Based on this idea, a famous philosopher of science, Karl Popper came up with the following widely accepted ideas about the nature of scientific theories:

1. A scientific theory must be falsifiable. That is, there must be some observable phenomenon such that if we see them, we will reject the theory. If the theory is compatible with all possible observations then it cannot possibly explain any observation, and hence is not a scientific theory.

2. Powerful scientific theories are those which are easily falsifiable. Many observations will conflict with them and cause rejection. If a powerful theory survives for a long time, then it is a good theory. Because nature has been given a lot of chances to reject the theory but it failed to do so.

These ideas, which are widely accepted by philosophers of science, clearly show that scientific theories are not established facts, and indeed can never be established beyond a shadow of doubt.

Problem 3: Scientific Revolutions of Kuhn

Most people have the following idea about the progress of science. We start with a small amount of scientific knowledge, and it grows gradually in the light of our experience. As it grows, we will eventually learn everything significant and useful. Analysis of the history of how science has progressed led to a startling discovery by Thomas Kuhn. His book which describes this discovery is called “The Structure of Scientific Revolutions” and is one of the most important and influential books of the twentieth century. Kuhn showed that most of the time science does follow the “normal” pattern of gradual growth, increase and accumulation of knowledge. However, from time to time there are “revolutions”. In these revolutions, the entire stock of previous scientific knowledge is discarded, and a new start is made afresh from fundamental principles which have nothing in common with the previous scientific theories. This means that the idea of gradual growth towards knowing everything is wrong. Also, in light of this picture, it is entirely unclear which theory is true or objective. Kuhn showed that choice among theories is not made on the basis of which is “better” objectively, but on many other more subjective grounds. Again this creates doubts about the objectivity and universality of scientific knowledge. Kuhn’s investigations also revealed the historicity of western science: how context, and history influenced the development of ideas. This aspect will be discussed in greater detail in later lectures.

4. Conquest Songs of Victors

SUMMARY: Western Science contains some extremely useful facts as well as some extremely harmful and wrong philosophy. It is essential to separate the two and to understand the difference, in order to successfully integrate this body of knowledge into an educational curriculum founded on Islamic teachings.

There is no doubt that science and technology have led to spectacular gains in knowledge in the west. Evidence of this is before our eyes in the form of automobiles, computers, aeroplanes, electrical gadgets of all sorts, as well as incredible advances in the sciences of life – medicine, biology, as well as the sciences of death – war technology, weapons of mass destruction etc. Scientific and technological developments have had an impact on nearly all dimensions of human existence.

Despite all of these impressive achievements, it does not follow that all claims made about science by Europeans are true. Nor does it follow that their theories are reliable in all areas. If a Nobel prize winning physicist gives advice about what makes a marriage last, this is not likely to be better than the advice given by an uneducated old man with experience in human relations.

The phenomenon we wish to discuss in the section is summarized by the saying that history is the conquest song of the victors, and cannot be trusted to provide an accurate picture for the reasons of victory. In general, if we ask someone who is successful why he has been successful, there is no reason to expect that we will get a good answer.

o If we ask a person who has lived for more than a 100 years the secret of his longevity (which may be due to good genes) he might give an answer which has no relation to his long life.

o A successful business may not have any clue as to why they are hugely successful. If they later fail using the same methods, they might be equally clueless about the reasons for failure. A LUMS professor of business strategy conducted a series of interviews with successful business CEO’s in Pakistan. His results were startling. ALL of the successes were due to luck, and none were due to skilful strategic planning of some type.

o Winners of big prizes in lotteries are often interviewed about how they won the big prize. Almost no one attributes it to pure luck (even thought this is the right reason). They always find some reaons for the luck – they did something which created the luck, or were wearing some lucky color, or stroked a rabbit’s foot etc. etc.

o Because the Allies won World War II, accounts of the leaders and generals like Churchill celebrate their achievements. Lloyd George Memoirs of the War show how most of these people were extremely incompetent, and made blunders which cost millions of lives. Worse, they covered these up and did not learn important lessons. The reason they won was because there was even greater incompetence on the other side.

From this general analysis, I would like to distil only one lesson:

Western science has been tremendously successful.

On the other hand, Western Philosophy of Science, which provides answers to the following questions, has been a tremendous failure.

What is Science? How does it progress? Why it is reliable?

Unfortunately, as science is taught in the west, both of these are mixed up and taught at the same time. This leads to the problem of Islamization of knowledge. The philosophy which is explicitly and implicitly contained in the syllabi of science as taught in the west is wrong, and must be cleansed in order to be able to bring these into the ambit of an Islamic syllabus. This job has not yet been accomplished by anyone.

Here are some of the claims which are made explicitly or implicitly by philosophers of science. These claims are wrong, and conflict with Islam, but are absorbed by students of western sciences, in process which is damaging to the faith. These claims are all the more dangerous because they are often hidden, and not actually discussed but assumed without question in the course of study:

1. Science provides the only reliable guide to truth.

2. Science will eventually be able to solve all human problems.

3. The concept of “God” was invented by man to explain natural phenomenon like rain, lunar cycles etc. Now the science provides the correct explanations, God is no longer necessary.

There are many other such erroneous ideas, but the main ones listed above should suffice to explain what I am trying to say here.

The critical problem faced by those who would Islamize knowledge is that we need to be very precise about what is accepted and what is rejected from the body of Western knowledge. Very accurate discrimination is needed. Just as we cannot afford to accept wrong ideas, so it would be erroneous to reject the correct ones. For example, some Muslim scholars rejected the idea of men landing on the moon, saying that the Quran states that

55:33 (Picktall) O company of jinn and men, if ye have power to penetrate (all) regions of the heavens and the earth; then penetrate (them)! Ye will never penetrate them save with (Our) sanction.

They argue that the unbelievers would be given the permission to penetrate heavens by Allah, and so the lunar landing was a hoax. Similarly, other scholars have argued that the Earth is flat, on the basis of misinterpretation of other Quranic verses.

We cannot afford wholesale rejection of Western ideas. At the same time, we cannot afford wholesale acceptance either. To discriminate between the good and the bad requires a level of expertise in the western sciences. Only a select few among the Muslims have been able to achieve this level which is required for success in the project of Islamization of knowledge. Fortunately, once the dimensions of the problem are understood, it should be possible to carry it through to a successful completion. This is our hope and goal with respect to economic theory in this set of lectures and course. All fields of knowledge will require separate study by their own experts to carry through this project. May Allah resolve the difficulties which the Ummah is facing on fronts, and help us become part of the solution to these problems.


Read the articles, designed to provide an antidote to the myth of European superiority.

1. Failure of Modernization Theories

2. Ways of the Eagles

3. Dark Side of the Enlightenment Project

4. European Transition to Secular Thought

These are available from:

See Also:

Lecture 3: Islamic and Western Conceptions of Scarcity

1. Introduction

“Scarcity” is at the heart of economic theory. If there is an abundance of all material wealth, then there would be no need to discuss economic issues. After agreement on this fundamental issue, Islamic economics and conventional Western economics part ways. The Western analysis of the causes of scarcity, how to handle the problem, and the consequences of solving the problem are radically different from Islamic views. The purpose of this note is to discuss these differences and argue that the Islamic views are superior, and in accordance with observations.

As discussed in Zaman (2007), a fundamental problem facing the project of Islamization of Knowledge is the lack of confidence among Muslims due to over a century of defeats on the battlefield. Ibn-e-Khaldun remarked on the tendencies for the defeated nations to emulate the victors in all ways. In fact, barbarians have often defeated more civilized nations historically. In recovering from defeat, one must analyze carefully the causes for defeat and seek to remove them, rather than uncritically accepting the superiority of the victor in all dimensions. In the context of economic theory, Zaman (2008, An Islamic Critique) discusses how flawed Western economc theories conflicting with Islamic views have generally been accepted by Muslims. In this paper, it is our aim to show that the Quran and Sunnah offer far greater wisdom on management of economic affairs than is currently available with the leading experts from the West. In particular, the Quranic analysis of the fundamental economic problem of scarcity is deeper and more sophisticated than standard Western analysis. Thus we do not stand in need of borrowing Western economic theory.

3: Selfishness and Greed, or Cooperation?

Economic textbooks teach us that men behave purely selfishly. Islam teaches us that men have both the tendency towards evil, and the capability of being good. When we look at the world, we observe very large amounts of charitable, compassionate and self-sacrificing behavior, which violates the teachings of economics theory. Because of the wrong predictions of economic theory, economists are almost always surprised by the results of the ultimatum game, which show that human being often choose to take a loss rather than be treated unjustly (Camerer 2003). Thus, empirical evidence strongly favors Islamic views over those taught in current conventional economic texts.

3.1 Consumer Behavior: Islamic View

The Quran tells us that man has the tendencies towards greed, acquisitiveness, and love of worldly things:

(Q3:14) Fair in the eyes of men is the love of things they covet: Women and sons; Heaped-up hoards of gold and silver; horses branded (for blood and excellence); and (wealth of) cattle and well-tilled land. Such are the possessions of this world's life; but in nearness to Allah is the best of the goals.

However, the Quran warns us not to pursue these goals, but instead to turn to Allah. The Quran teaches us that man has the potential to rise higher than the angels, and also the potential to be worse than the beasts. As the Quran states: (Q95:4) “We have indeed created man in the best of forms, Then do We abase him (to be) the lowest of the low.” This means that human can be greedy, selfish and acquisitive, but they can also be kind, charitable and generous. The Quran praises those who give to others, even though they are themselves poor:

(Q39:9) “who love all that come to them in search of refuge, and who harbour in their hearts no grudge for whatever the others may have been given, but rather give them preference over themselves, even though poverty be their own lot for, such as from their own covetousness are saved - it is they, they that shall attain to a happy state!”

3.2 Comparison with Neoclassical Views

Economics textbook agree with the idea of men being motived by the love of worldly possessions expressed in verse (Q3:14). However, neoclassical textbooks do not mention the possibility of (Q39:9) – that men may be generous enough to give to others even while being poor themselves. Money donated to charities forms a significant component of the GDP in most countries, and charitable behavior is an important element of the social safety network for the poor. The Quran places great emphasis on spending for the needy, but there are no chapters on charity in neoclassical textbooks. Because of their single minded focus on selfishness, some economists have even attempted to explain altruism as emerging from selfish motives (if we help others, they will help us in times of our need).

Which of the two visions offers us better understanding of human behavior, both as a consumer and in other domains? All over the world, children are taught to share, not to be selfish, and generosity receives praise. Studies of human behavior contradict the idea of Adam Smith that bakers are motivated solely by profit. People find meaning in their lives from serving others, professional pride, and many other non-economic motives. The tunnel vision of neoclassical texts which confines human motivation to selfish greed does not help us understand economic behavior – rather, it hinders such understanding. The Quran offers us much deeper insights, which are confirmed by experimental studies of human behavior in many domains.

4. The Needs/Wants Distinction.

We show that Islam makes a clear distinction between needs and wants, and encourages fulfillment of needs, but discourages fulfillment of idle desires. Conventional economics does not make such a distinction. The Islamic view matches observed behavior and is essential for sustainable development. This is because the luxurious lifestyles currently being pursued by the rich are causing tremendous amounts of environmental damage and can neither be sustained into the future, nor can they be shared with the masses. Thus Islamic views offer greater wisdom than is contained in current conventional economic textbooks.

4.1 Islamic Views on Needs and Desires

The Quran encourages us to fulfill our legitimate needs:

Q7:31 O Children of Adam! wear your beautiful apparel at every time and place of prayer: eat and drink: But waste not by excess, for Allah loveth not the wasters.

However, excess and waste is discouraged. Islam is a religion of moderation, and asks us to be neither stingy nor profligate. Wealth which is beyond our needs should be spent on others less fortunate than us:

Q2:219 They ask thee how much they are to spend; Say: "What is beyond your needs." Thus doth Allah Make clear to you His Signs: In order that ye may consider-

This clearly shows that human needs are limited. On the other hand, wants or desires are unlimited, as the following Hadeeth indicates:

Al-Bukhari: Volume 8, Book 76, Number 447: Narrated Anas bin Malik: Allah's Apostle said, "If Adam's son had a valley full of gold, he would like to have two valleys, for nothing fills his mouth except dust (of the grave). And Allah forgives him who repents to Him."

The Quran strongly discourages pursuit of idle desires:

45:23 Hast thou seen him who maketh his desire his god, and Allah sendeth him astray purposely, and sealeth up his hearing and his heart, and setteth on his sight a covering? Then who will lead him after Allah (hath condemned him)? Will ye not then heed?

Those who restrain themselves from following their based desires will attain Paradise:

79:40 But unto him who shall have stood in fear of his Sustainer's Presence, and held back his inner self from base desires, 79:41 paradise will truly be the goal!

To summarize, needs are limited, and we are encouraged to fulfill them. The Prophet s.a.w. told a man with disheveled hair to display of the wealth which Allah had bestowed upon him. At the same time, wants are unlimited, and we are told not to pursue them.

4.2 Neoclassical Theory Rejects Needs/Wants Distinction.

Complex historical processes starting with the corruption of the Catholic Church, subsequent emergence of Protestant sects, and their violent fights with each other, led eventually to the rejection of faith in Europe. In accordance with the Hadeeth that the life of this world is a prison for believers but heaven for the unbelievers, one of the high priorities of secular thought has been to build heaven on earth, by pursuing wealth and desires as much as possible. There is a tension between pursuit of selfish desires and social harmony, and resolving this was one of the major issues tackled by secular political philosophy in Europe (see Tawney 1926, for a detailed discussion). While religious thought condemns selfish behavior, a secular world demanded a philosophy to justify freedom to pursue self-interest so as to be able to enjoy a heaven on earth (which would replace the heaven in afterlife promised by religion. The ‘invisible hand’ was the first such philosophy, which suggested that selfish behavior would lead to socially optimal outcomes. Subsequent developments have also been motivated by the need and desire to justify the maximum amount of freedom for all economic agents. As Galbraith recognized: “The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness.”

In economic, political, and social domains, secular Western thought has been driven by the idea of giving as much freedom to individuals as possible. Within economic theory, justification of free markets has been a central concern. The Chicago school and Austrian economists represent a polar extreme in defending free markets even in the presence of monopolies, externalities and other market imperfections. The Great Depression of 1929 led nearly everyone to the clear recognition that free markets can lead to catastrophic performance and misery for millions, and made socialist and communist solutions to economic problems appear attractive to many. Keynes rescued the free market by providing a theory which suggested that free markets would function well as long as the government ensured full employment by fiscal or monetary policy. A more detailed discussion of the European historical experience and its impact on formation of social sciences in general, and economics in particular, has been given in Zaman (2008, Islamic Economics: A Survey) and in Zaman (2009).

` It is only in light of this history that we can understand why, despite its obvious importance and relevance to economic issues, no mainstream Western economics textbook mentions the needs/wants distinction. Taking the difference between needs and wants into account would highlight the failings of the free market, and frustrate the main intent of neoclassical theory. Western style free markets are ideally suited to fulfilling idle desires of the wealthy for luxury, and not well suited to serving the needs of humanity. According to a recent report entitled “World Hunger: Twelve Myths” prepared by the California based Institute for Food and Development Policy, there is food in abundance in the world, so much so that in the developing world, 78% of all malnourished children aged under five live in countries with food surpluses. The USDA report, Household Food Security in the United States, 2004, says that 38.2 million Americans live in households that suffer directly from hunger and food insecurity, including nearly 14 million children. That figure is up from 31 million Americans in 1999, a five year period over which GNP per capita increased by roughly 10%.

A situation where the money spent on idle desires by a small number of rich people is enough to feed all the millions of hungry people on the planet cannot be considered ‘optimal’ by anyone. Nonetheless, economists justify this by invoking Pareto optimality. They argue that it is impossible to make interpersonal comparison of utility, and hence we cannot say that the society benefits by taking away the third glass of wine from a rich person to give milk to a hungry infant. Modern economic textbooks do not differentiate between needs and wants. They argue that the goal of the economic system is to fulfill all desires of all consumers (without differentiating needs and wants), and that the free market accomplishes this goal in an efficient way. Islam teaches us to fulfill needs, but not to pursue idle desires. Unbridled pursuit of luxurious lifestyles by small numbers of wealthy has led to increasing inequality, rapid depletion of scarce natural resources, and environmental damage on a scale to threaten all life on this planet. An uncritical acceptance of Western theories of social science has been an obstacle to adoption of deeper insights offered by Islam, which offer far greater potential for Islamic societies, as discussed in Zaman (2008, Improving Social Science Education).

5. Causes of Scarcity

One Western diagnosis for the reasons for scarcity is that there are too many people. This was initiated by Malthus, and the idea continues to guide policy to this day. The Quran explicitly denies this idea, and states that God sends sustenance for all his creation. We show in this section that misguided Western policies based on the idea of ‘surplus’ people have caused tremendous damage, as well as degrading and devaluing human beings. Islamic views accord with the empirical data which shows that food supplies have kept up with population, despite tremendous increases in population.

5.1 Western views: Malthus and his followers

Malthus was afraid of the possibility that the population would increase faster than the food supplies, in contradiction to this verse. Malthusian ideas have had, and continue to have, a tremendously negative impact. In a book tracing the ideas which led to the ‘Final Solution’ of Hitler, Schrieber (1926) writes that:

Malthus created an atmosphere which not only prevented a real solution to the social problems, but also promoted the repressive legislation which worsened the conditions of the poor in England. It was reasoned that better conditions for the poor would only encourage them to further propagate, putting those who were capable of work at a disadvantage. Malthusianism then moved forward to achieve its greatest triumph in 1834 with a new law providing for the institution of workhouses for the poor, in which the sexes were strictly separated to curb the otherwise inevitable over-breeding. This type of thinking has an inherent devaluation of human life through fear that the ever increasing population of lower classes will devour the more civilised or "better" people. This kind of philosophy, of course, urged the calling forth of drastic measures to handle the problem. The first resurgence took place a hundred and fifty years after his death, resulting in the birth-control movement, a principle which is based on Malthusianism. Following the Second World War, the idea was again taken up and today receives new momentum in the "population explosion" campaigns.

Modern followers of Malthus founded the Club of Rome, about which Rolf Witzsche writes as follows:

The first official presentation of a global depopulation policy occurred 1969 with the founding of the "Club of Rome" by officials of NATO and the Travistock Institute of British Intelligence. The club was founded to promote the "no-growth" (genocidal) Malthusian ideology which later became known as the "post-industrial society" program. In 1972, three years after its founding, the Club of Rome published its infamous "Limits to Growth" doctrine which demanded the immediate termination of industrial development throughout the Third Word.

"The Limits to Growth" book, based on this doctrine, turned out to be a fraudulent document. It was later admitted by one of the club's own directors to have been based on a fraudulent computer study. Nevertheless, the publication of the book was hailed as a necessary "shock treatment" of all of the world's governments that were still committed to the principle of technological progress which stood in the way of the advance of poverty. Then, on Aug 26, 1974, during the first U.N. sponsored International Conference on Population in Bucharest Romania, the the Club of Rome's population reduction program was introduced and formally accepted. 1974 was also the year when the Club of Rome introduced its "Mankind at the Turning Point" declaration which said: "The World has Cancer, and the Cancer is Man." 

This grinding down towards radical depopulation by policy, created the policy atmosphere in which Henry Kissinger prepared his most infamous document, the National Security Study Memorandum 200 (MSSN200), which states that Third World population growth is a threat to U.S. control of raw materials. The document cites 13 developing nations as recommended depopulation targets for the U.S. government. Henry Kissinger's policy for selective depopulation by overt means was formally adopted in 1975. Henry Kissinger warned, however, at this time, that the imperial reason behind the U.S. population reduction efforts must be strictly concealed.

However, data shows that despite the tremendous increase in population, food supplies have kept pace. Although there is a large amount of poverty, hunger, and malnutrition in the world, it is not due to lack of resources. As documented above, tremendously harmful policy decisions have been made because of wrong assumptions in contradiction to Quranic advice.

5.2 Islamic View: God is Bountiful

The Quran tells us clearly that we need not fear that population will exceed the food supplies:

17:31 Hence, do not kill your children for fear of poverty, it is We who shall provide sustenance for them as well as for you.

Many verses testify to the bounty of God.

17:20 All [of them] -these as well as those -do We freely endow with some of thy Sustainer's gifts, since thy Sustainer's giving is never confined [to one kind of man].

27:73 Now, verily, thy Sustainer is indeed limitless in His bounty unto men - but most of them are bereft of gratitude.

57:29 And the followers of earlier revelation should know [52] that they have no power whatever over any of God’s bounty, [53] seeing that all bounty is in God’s hand [alone]: He grants it unto whomever He wills - for God is limitless in His great bounty.

Islamic scholars have concluded from these, and other verses, that there is no scarcity at the level of needs, contrary to the views of Malthus and his followers. This is also in accordance with the data, which shows that the food to population ratio has remained remarkable stable, despite tremendous increases in population. Men informed by the Quranic vision would not have made the policy mistakes documented in the previous section, which continue to adversely affect the world today.

Even more remarkable is the Nobel prize winning analysis of famines by Amartya Sen (1983). Because it was frequently the case that famines followed crop failures, it was widely believed that shortage of food supplies led to famines. However, detailed analyses by Sen showed that this was not the case. The most vulnerable class were the landless laborers, who could not find jobs when crop failures occurred. It was their inability to earn a wage, as opposed to shortage of food that led to famines. Sen wrote that the society did not consider them ‘entitled’ to food, since they could not earn a living. He documents how, at the time people were dying of hunger, food was being shipped out of the famine areas – outsiders had money to pay for the food which the hungry people did not have.

As already discussed earlier, the Quran says that God provides sustenance for all, and therefore denies the idea that famines occur due to shortages of food:

Q11:6 There is no moving creature on earth but its sustenance dependeth on Allah.

The Quran pinpoints the nature of the problem, and gives the exact solution required:

Islam creates entitlement for the poor, ordaining that:

"In their wealth there is a known right for those who ask for it and those who have need for it." (Q70:24-25)

The problems of hunger, famine, and deprivation are created because the wealthy do not acknowledge the right of those who are needy for a share of this wealth. The Quran narrates the story of the owners of a Garden who sought to avoid sharing the fruits of the harvest with the poor, and how their Garden was destroyed because of this (Q68:17-27). Poverty researchers have shown that just 0.7% of the GNP of the richest 22 countries would be enough to eliminate all hunger in the world. Similarly, very small amounts of money, readily available from many sources, would be enough to eliminate the worst kinds of misery and deprivation from the world. The problem is not the lack of resources; the famous ‘scarcity’ of economics. The problem is that the Qaroon’s of this world feel that they have a right to all the wealth they have earned by their own cleverness, and do not feel the need to share it with anyone.

The right diagnosis is crucial for determining the right remedy. If the economists diagnosis of ‘scarcity’ is correct, then we must work on increasing the material resources. This is the direction being pushed by many international institutions and people. However, given that existing resources are already adequate to remove poverty, as pointed out by Sachs (2006) and others, the problem lies in a different direction. It is in the lack of compassion for the poor, and the failure of the wealthy to share with the less fortunate. The Quran identifies this as the problem, and explains the strategies to be used for the solution, as we shall see.

6. Solving the Problem of Scarcity

The Western view on how to solve the problem of scarcity is by the accumulation of wealth. As discussed below, Keynes thought that encouraging selfishness and greed in the society would lead to rapid accumulation of wealth. With enough wealth, all social, political, and even moral problem of man would be solved. This has not turned out to be the case empirically. The Islamic view is that there is no scarcity at the level of needs. There are enough resources for everybody, but problems arise because the wealthy do not acknowledge the right of the poor to a share of their wealth. The solution is to encourage compassion, sharing, and to enjoin the good. Wants are unlimited, and scarcity cannot be removed by trying to fulfill idle desires – desires increase as wealth increases. Therefore the Islamic solution to scarcity at the level of desires is to limit desires. Strategies for doing so are provided in Islamic teachings.

6.1 Western Solution to Scarcity

As belief in religion and afterlife diminished in the West, it was natural for them to turn to the pursuit of the pleasures of this world. Lack of sufficient material resources was the biggest obstacle to this pursuit, and ‘scarcity’ became the central problem for man. The Bible states that “It is easier for a camel to go through the eye of a needle, than for a rich man to enter the kingdom of God.” Tawney (1926) has described the historical process in which Europeans went from believing in the Biblical “Love of money is the root of all evil,” to Shaw’s “Lack of money is the root of all evil.” Quite apart from the fact that sufficient wealth would enable the fulfillment of all desires, it came to be widely believed that removal of scarcity would solve all problems, social, political and moral. With enough wealth, people would be kind and generous, and social conflict and strife would be eliminated because there would be nothing left to fight for. Nelson (2001) has detailed how economics became a religion in the West.

One of the most clear sighted statements of Western concepts in this direction has been given by Keynes. He thought it was temporarily necessary to “pretend that fair is foul, and foul is fair” for “foul is useful, and fair is not.” By pursuing wealth using foul means of avarice and greed, mankind should free itself from the economic problem, so as to be free to turn to higher pursuits (cited in Khan 2004):

When the accumulation of wealth is no longer of high social importance, there will be great changes in the code of morals. We shall be able to rid ourselves of many of the pseudo-moral principles which have hag-ridden us for two hundred years, by which we have exalted some of the most distasteful of human qualities into the position of the highest virtues. We shall be able to afford to dare to assess the money-motive at its true value. The love of money as a possession — as distinguished from the love of money as a means to the enjoyments and realities of life — will be recognised for what it is, a somewhat disgusting morbidity, one of those semi-criminal, semi-pathological propensities which one hands over with a shudder to the specialists in mental disease ... But beware! The time for all this is not yet. For at least another hundred years we must pretend to ourselves and to everyone that fair is foul and foul is fair; for foul is useful and fair is not. Avarice and usury and precaution must be our gods for a little longer still. For only they can lead us out of the tunnel of economic necessity into daylight.

Note the clear statement that for two hundred years, the West has exalted ‘the most distasteful of human qualities [love of money] into the position of the highest of virtues.’ Keynes, and his followers, the neoclassical economists, feel that this is necessary to acquire wealth. Once enough wealth has been accumulated, then man can afford to be moral.

6.2 Islam Denies the Validity of the Western Solution

The Quran denies that accumulation of wealth will solve the problems of man.

Q23:55-56 Do they think that because We have granted them abundance of wealth and sons, We would hasten them on in every good? Nay, they do not understand.

Q104:2 [Woe unto him] who amasses wealth and counts it a safeguard, 104:3 thinking that his wealth will make him live forever!

This also matches the empirical evidence. Lane (2001) and Layard (2005) have shown that despite tremendous increases in wealth in the West, satisfaction, contentment, happiness, and the sense of well-being has not increased. This shows clearly how the pursuit of the riches of this world is an ‘illusion,’ as the Quran tells us.

The Quran also denies the idea, expressed by Keynes and many others, that men will become generous once they have enough wealth:

(Q9:75-76) And among them are such as vow unto God, "If indeed He grant us [something] out of His bounty, we shall most certainly spend in charity, and shall most certainly be among the righteous!" But as soon as He has given them [aught] out of His bounty. they cling to it niggardly, and turn away in their obstinacy [from all that they have vowed]

This has also been the Western experience. Accumulation of wealth and encouragement of greed has not led to the Utopia dreamed of by Keynes or Samuelson. Instead a society quite similar to the pre-Islamic Jahiliyya has arisen – see Mothers who Kill their Children by Meyer et. al. (2001) for just one of the striking parallels. Nelson (2001) writes that after fifty years of preaching that wealth will solve all problems, Samuelson is honest enough to recognize that his prophecy has not been fulfilled: “Great affluence has not brought about the slackening of economic ambition,” and we live in a “ruthless economy.” Again, the reader is invited to judge for himself whether we should follow the Quran or the leading Western economists.

6.3 Islamic Solution to Scarcity: Needs

Islam has a two-pronged approach to the problem of scarcity. Since there is no scarcity at the level of needs, the only thing necessary is to get those who have surplus wealth to share it with those who are in need. The Quran condemns those who do not urge the feeding of the poor.

[Q69.34] “Nor did he urge the feeding of the poor.”

This verse tells us that not only must we feed the poor ourselves, we should also urge it on others. In other words, we are required to campaign against poverty as Muslims. If we carry out our responsibility, which is part of the general command to this Ummah of spreading the good and prohibiting the evil, this will solve the problem of scarcity at the level of needs.

How to carry out this command is also addressed by the Quran, which is full of exhortations to spend in the way of Allah. A more detailed discussion of both the encouragement for charitable spending, and the manner in which this is to be done is given in Kahf (undated). Many books have been written by Muslims and a good collection of Ahadeeth and Quranic verses related to the subject are given in Fazail-e-Sadaqat. Some crucial elements of the Islamic strategy for accomplishing this goal are listed below.

Compassion: The development of feeling for others is stressed in Islam. The Quran writes about the Prophet s.a.w. that “heavily weighs upon him (the thought) that you might suffer, full of compassion and mercy towards the believers.” In other verses, the Prophet is described as being “Mercy for all mankind.” The Quran praises those who feed others while being themselves hungry: (Q39:9) “who love all that come to them in search of refuge, and who harbour in their hearts no grudge for whatever the others may have been given, but rather give them preference over themselves, even though poverty be their own lot: [13] for, such as from their own covetousness are saved - it is they, they that shall attain to a happy state!” The second caliph of Islam, Umer Farooq R.A., ate coarse bread, because he felt ashamed to eat refined bread when not all of the public could do so. It is the spread of sentiments like this which can solve the problems facing the world today.

Infaq: Tremendous emphasis is placed on spending money for the sake of Allah. This is the primary purpose of acquisition of wealth. In the opening lines of the Quran, the believers are characterized as those who spend on others:

(Q2:2-3) THIS DIVINE WRIT - let there be no doubt about it - is a guidance for all the God-conscious. Who believe in [the existence of] that which is beyond the reach of human perception, and are constant in prayer, and spend on others out of what We provide for them as sustenance.

Those who came to the prophet for advice about what to do with (surplus) money, were advised to invest it in the Hereafter. Kahf (undated) writes that the word “Infaq” --spending for charity – is mentioned in the Quran 167 times, many more than the combined mention of the famous four practical pillars of faith. The number of Ahadeeth which encourage spending for the sake of Allah is extremely large, and many collections of such Ahadeeth have been made in book form (for example, Fazail-e-Sadaqat). The emphasis in these is to change our ways of thinking to value the gains of the Hereafter over the gains of this world. For example:

2:261 The parable of those who spend their substance in the way of Allah is that of a grain of corn: it groweth seven ears, and each ear Hath a hundred grains. Allah giveth manifold increase to whom He pleaseth: And Allah careth for all and He knoweth all things.

In Hadeeth, it is narrated by Ayesha r.a. that a goat was sacrificed, and the meat was distributed. The Prophet s.a.w. asked about what was left. Ayesha r.a. responded that only one shoulder of the goat remained. The Prophet s.a.w. said that everything remains except for this shoulder – that is, that which has been distributed has been permanently saved for the hereafter, while that which has not been distributed has been lost to the hereafter.

Avoidance of Waste: Spending more than necessary (Israf) is wasteful of resources, and also deprives the needy. According to a 1997 study by US Department of Agriculture's Economic Research Service (ERS) entitled "Estimating and Addressing America's Food Losses", about 96 billion pounds of food, or more than a quarter of the 356 billion pounds of edible food available for human consumption in the United States, was lost to human use by food retailers, consumers, and foodservice establishments in 1995. Roughly 49 million people could have been fed by these resources[2]. In presence of such statistics, showing wastage and resulting loss of efficiency, how can claims of “market efficiency” – that is market structures lead to efficient outcomes -- be taken seriously? Such claims are made on purely theoretical grounds by economists, without any regard to the empirical side, or observations of market efficiency. It is clear that Israf, spending more than what is necessary, leads to massive inefficiency, loss of food that could have gone to feed the hungry, as well as creating an atmosphere of indifference to the needs of the poor. Market institutions do nothing to resolve this problem, which is addressed directly by Islamic teachings. I have not found any material related to Israf in the heterodox schools of economics either. This supports my claim that Islam offers solutions to economic problems which are needed by the world, rather than our being in need of economic ideas from orthodox or heterodox economics.

6.4 Islamic Solution to Scarcity: Limit Wants

The second prong of the Islamic approach is the treatment of wants or desires. Islam acknowledges the limitless nature of wants, as the Hadeeth from Bokhari cited earlier shows. Islamic teaching shows that accumulation of wealth or material resources will not result in elimination of this ‘scarcity,’ because wants will expand as the wealth increases. Thus the reason for ‘scarcity’ is not lack of wealth or material resources (as per Western conception) but rather the limitless nature of desire. Thus, no amount of expansion of GNP will eliminate this scarcity. This Islamic point of view receives strong empirical support from recent research. Lane (2001) and Layard (2005) have shown that substantial increases in wealth have not led to corresponding increases in satisfaction, contentment, wellbeing or happiness of human beings. This is a clear sense in which the pursuit of worldly possessions is an illusion (Q3:185, Q57:20). Conventional economists, policy makers and planners study policies to increase the rate of growth of GNP per capita, and spend tremendous amounts of energy to achieve goals which have no perceptible impact on human welfare.

The Quranic solution to scarcity at the level of ‘wants’ is to ask people to lead simple lifestyles, be content with what they have, not to envy others who have more.

The Quran berates those who have taken their desires for their God (45:23), and states that paradise is for those who fear God and restrict their desires (79:41-42). Allah teaches us not to envy luxurious lifestyles of those who do not believe in the day of Judgement, since all they have is the life of this world, which is pitifully small and limited compared to the next.

4:32 Hence, do not covet the bounties which God has bestowed more abundantly on some of you than on others. Men shall have a benefit from what they earn, and women shall have a benefit from what they earn. Ask, therefore, God [to give you] out of His bounty: behold, God has indeed full knowledge of everything.

9:59 And yet, [it would be but for their own good] if they were to content themselves with what God has given them and [caused] His Apostle [to give them], and would say, "God is enough for us! God will give us [whatever He wills] out of His bounty, and [will cause] His Apostle [to give us, too]: verily, unto God alone do we turn with hope!"

The Prophet s.a.w. told us that real wealth is the wealth of the heart (i.e. contentment).

Prohibition of Envy: Islam prohibits us to envy others, and teaches us strategies to prevent it.

(Q4:32) And in no wise covet those things in which Allah Hath estowed His gifts More freely on some of you than on others: To men is allotted what they earn, and to women what they earn: But ask Allah of His bounty. For Allah hath full knowledge of all things.

The Prophet told us to look at people less fortunate than us in wordly affairs, so that we would feel thankful for what we have. Making others envy us, via conspicuous consumption, is also prohibited in Islam. From Veblen (1899) to Lane (2001) and Layard (2005), many have identified this as an important source of waste and unhappiness in capitalist economies. Western advertisements for luxury products encourage consumers to be the envy of their neighbors, and be the first to own some new product. In complete contrast, the Prophet taught us to keep a share for the neighbor in the fruit that we bought – if we could not afford to do so, then we should bury the peel of the fruit, so that the neighbor’s children would not see and feel regret.Our Prophet s.a.w. taught that “Do not let the smoke from your house bother your neighbor” – that is, if your neighbor can smell your cooking, you should share your food with him. The rich should conceal their riches to prevent envy – the exact opposite of conspicuous consumption. At the same time, the poor are encouraged to not envy the rich, but to be content with their lot. True richness is that of the heart with a generous disposition. Implementing in our hearts this degree of concern for other would enable a small amount of material goods to go a long way towards fulfilling social needs.

Avoidance of Tabzeer (Q17:26,27): While Israf is spending more than what is needed, Tabzeer is to spend on what is entirely unnecessary, illegal or Haram. If consumers were to spend only on their needs, there would be a substantial fall in demand for consumer goods, and substantial increase in savings. This would lead to substantial funds being available for investment and welfare projects and corresponding increases in growth and welfare of the poor. However, capitalist societies have mechanisms to prevent this reallocation of resources to useful purposes. Marketing is used to create feeling of need in consumers for entirely unnecessary products (like “Pet Stones,” expensive “Barbie Dolls” and other fad items). Conspicuous consumption, first analyzed by Veblen, is to buy things so as to be the envy of the neighbors, or to establish status, both of which are Haram in Islam. These lead to massively wasteful and inefficient market outcomes, which are not recognized as such by conventional economists because of their assumption that Consumer demand is the final judge of what is useful or not. As Muslims, we cannot accept this assumption, which legitimizes consumption of the Haram as well.

7. Concluding Remarks

The Quran describes the human tendencies for greed and acquisitiveness with disapproval: (Q89:20 And ye love wealth with inordinate love!) It also describes the consequences of this greed graphically:

30:41 Corruption doth appear on land and sea because of (the evil) which men's hands have earned, that He may make them taste a part of that which they have done, in order that they may return.

To me it seems that this verse hints at the environmental damage which would be caused by unconstrained greed and attempt to wrest wealth out of the earth via exploitation.

While the wrong Western diagnosis that lack of wealth is the source of ‘scarcity’ leads them to pursue the wrong remedies, the Quran offers us the correct solution to the problem. Instead of striving for more wealth, the Quran teaches us to restrict our idle desires, strive to lead simple lifestyles, and to spend on others less fortunate than us. It also teaches us to be content with what we have, and not envy those who have more material wealth. We should also have compassion for others, and not seek to make them envious of our consumption, if we have more. In particular, ‘conspicuous consumption’ is not permitted in Islam. If we return to these simple formulae of Islam, Islamic societies would enjoy much more satisfaction with much fewer consumption goods than currently. As in the days of the Prophet s.a.w. where the level of contentment of the primitive Islamic community was much higher than that of Roman and Persian communities with much higher standards of living.

These teachings of Islam are the key to economic progress, in the sense that if we follow them, it will not only increase welfare and satisfaction, but also lead to rapid economic growth. These do not have parallels in Western economics. I have only outlined some arguments, which relate to a small and specific domain. Islamic teachings relating to economic affairs are much more vast and cover a substantially larger set of issues. It is sad that Muslims have neglected their heritage, and have envied that of others. It is not fitting for one who has been given knowledge of the Quran to envy those who do not have this; it is likely to arouse the anger and ire of Allah, who says

3:196 LET IT NOT deceive thee that those who are bent on denying the truth seem to be able to do as they please on earth: 197 it is [but] a brief enjoyment, with hell thereafter as their goal - and how vile a resting-place! –

In accordance with the Quranic teaching of “O believers, why do you say that which you do not do,” (61:2) the main issue of Islamic economics is to bring the teaching of Islam into our lives and into the lives of our fellow Muslims. When we start practicing these teachings by leading simple life styles and caring for our fellow human beings, an Islamic economic system will come into existence. Muslim societies are distant from the practice of Islam (as witnessed by levels of Zakat collection, for example), and so our priorities must be to restore the practice, which will lead to the desired theory. This means particularly that Muslim economists must strive to put Islamic teachings of Islam in their own lives and demonstrate Islamic economics by being living models. May Allah give us the capacity to understand and obey his commands and plant our feet firmly on the path of Guidance.

8. References

Colin F. Camerer, Behavioral Game Theory: Experiments in Strategic Interaction, Princeton University Press, 2003.

Christoph Jensen, “From Malthus to Eugenics to Racial Hygiene to Ethnic Cleansing”

(see also R. Steiner Oct. 7th 1916: ‘Goethe and the Crisis of the 19th Century’)

Monzer Kahf, “Infaq in the Islamic Economic System,” Undated. Available from monzer. accessed 30 June 2007.

Ali Khan, “Self Interest, Self Deception, and the Ethics of Commerce,” paper presented at Islamic Development Bank (IDB), Roundtable on Islamic Economics: Current State of Knowledge and Development of the Discipline, Jeddah May 26-27, 2004.

Robert E. Lane, Loss of Happiness in Market Economies, Yale University Press, 2001.

Richard Layard, Happiness: Lessons from a New Science, Penguin Press, 2005

John O. Ledyard, “Public Goods: A Survey of Experimental Research,” in Kagel and Roth (eds. 1995).

Seyyed Vali Reza Nasr, “Islamization of Knowledge: A Critical Overview,” Islamic Studies, Autumn 1991, p. 387-400.

Robert H. Nelson, Economics as Religion: from Samuleson to Chicago and Beyond, Pennsylvania State University Press, 2001.

Jeffrey Sachs, The End of Poverty: Economic Possibilities for Our Times,Penguin, 2006

Amartya Sen, Poverty and Famine: An Essay on Entitlement and Deprivation,Oxford University Press, USA, 1983,

Julian Lincoln Simon, The Ultimate Resource 2, Princeton University Press, 1998.

Bernhard Schreiber, The Men Behind Hitler, translated by H. R. Martindale, 1960. []

R. H. Tawney, Religion and the Rise of Capitalism, New York: Harcourt, Brace & World, Inc., 1926.

Rolf Witzsche, “Aids and The History of Depopulation Policies,” Cygni Communications, Canada, 1995.

Asad Zaman, “Islamic Economics: A Survey of the Literature,” Religion and Development Research Programme, Working Paper 22, Univ. of Birmingham, 2008.

Asad Zaman, “Improving Social Science Education in Pakistan,” Lahore Journal of Policy Studies Vol. 2 No. 1, June 2008.

Asad Zaman, “An Islamic Critique of Neoclassical Economics,” draft June 2008, submitted to Islamic Studies.

Asad Zaman, “ Developing An Islamic Worldview: An Essential Component of An Islamic Education,” Lahore Journal of Policy Studies, Vol 1, No. 1, p95-108, 2007

Asad Zaman, “Origins of Western Social Science” Journal of Islamic Economics, Banking and Finance, vol 5, number 2, 2009.

Lecture 4: Emergence of Market Economies and Societies

The Market Economy and Its Limits

By the “Market Economy,” we mean a method of organizing economic affairs within a society so that an un-regulated market is the means for conducting nearly all material transactions within the economy. In such economies, decisions about production of goods, valuation, trade, distribution, etc. are all settled by individuals or small groups acting with maximum possible freedom, and a minimal set of legal or social constraints. Since this is the dominant mode of organizing economic activity currently, it appears natural, and alternatives are hard to imagine. In fact, as Polanyi (1946) notes, “Previously to our time, no society has ever existed that, even in principle, was controlled by markets.” To understand the functions and effects of the market economy, it is necessary to delve into the history of its emergence and rise to a global system. This analysis, undertaken below, leads to the following conclusions:

1. A market economy requires supporting institutions, social structures, political structures, ideologies, and ways of organizing knowledge. Labelling all of these elements combined as a “market society,” we can say that market economies can only exist within market societies.

2. Social structures required for market economies conflict with traditional social mechanisms. This implies that transitions to market economies are accompanied by violence and destruction of traditional social norms. Recent history is a record of resistance and conflict between traditional society and market society.

3. The global dominance of market economies has led to glorification and praise of their virtues. The tremendous damage inflicted on the world and society by the emergence of market economies has been suppressed A realistic assessment shows that urgent action is needed to rescue man and society from the brink of disaster to which the market economy has brought all of us.

Because of the damages caused to society by the market economy, Polanyi (1946) in The Great Transformation forecast its demise following the largest crisis in his time, namely World War 2. The unexpected recovery and rise to global dominance of the unregulated market, and its dreadful consequences have been documented by Klein (2008) in SThe Shock Doctrine: The Rise of Disaster Capitalism . Many of the central elements of the analysis which follows are borrowed from these two sources, referred to simply as Polanyi and Klein hereafter.

1. The Emergence of the Market Economy

A confluence of historical forces led to the emergence of a market economy in seventeenth century England. The most important of these are the weakening of the hold of religion, and also the rise in the power of the landed aristocracy in England. Both of these forces are conveniently represented in the brief realm of Oliver Cromwell, who beheaded King Charles I, and also massacred large numbers of Irish Catholics.

1.1: Rise of Secular Thought: The European experience of massacres, violence, and massive social disturbance due to religious conflicts led even religious leaders to agree to the use of secular principles to organize society for the sake of social harmony. Release of the constraints of religion allowed the introduction of values and principles dramatically opposed to traditional values. The most important of a large number of such changes was the replacement of the Biblical idea that “The love of money is the root of all evil” by Bernard Shaw’s sentiment that “The lack of money is the root of all evil.” Traditional society honors those who renounce material possessions, values simplicity over luxury, and considers gluttony, avarice, covetousness, and greed as sinful characteristics. Market societies honor the wealthy, consider poverty as a vice, promotes luxurious lifestyles, and consider greed and selfishness as natural and socially useful.

This transition of thought is in accordance with the Quranic verse (2:257) that those who deny God will move from the light into darkness.

1.2: Rise of Landed Aristocracy: In the long standing battle between monarchs and aristocrats, kings had supported commoners against the nobles, to keep a check on their power. Efforts of the aristocracy to gain complete control over their landholdings (the commons, in particular) had been successfully resisted for some time, but Cromwell’s victory shifted the balance of power permanently in favour of the landed aristocracy. They wasted no time in putting up enclosures, which prevented access of large numbers of the poor to grazing land and other means to eke out a living. The resulting social catastrophe has been described by Polanyi as follows:

The lords and nobles were upsetting the social order, breaking down ancient laws and custom, … by violence …. They were literally robbing the poor of their share in the common, tearing down the houses … ( of ) the poor. The fabric of society was being disrupted; desolate villages and the ruins of human dwelling testified to the fierceness with which the revolution raged, endangering the defenses of the country, wasting its towns, decimating its population, turning its overburdened soil into dust, harassing its people and turning them from decent husbandsmen into a mob of beggars and thieves.

2. Consequences of Social Disruption

These events in England had far reaching consequences, both temporally and spatially. We list those most important to our current theme, the emergence of the market economy.

2.1: Property Rights: Political tussles frequently led to re-allocation of lands in favour of victors. Utilizing their newly gained power against the monarchs, aristocrats sought to prevent this by developing new theories of property. Instead of viewing land as a sacred trust, a gift of God to all humans, the idea of ownership and private property as a natural right was introduced. Philosophers like Locke argued that the right to own property was prior to the social contract, so that governments could not alienate property.

The effects of this historical change on modern thought can be seen in the concept of “Pareto efficiency.” According to this theory, re-allocation of property must command universal support. In a society where a few have all the resources, and the masses have nothing, modern economic theory prohibits us from recommending a redistribution in favour of the poor. Instead of seeing this as an ethical commitment to property rights over the rights of the poor to a decent living, economists view Pareto efficiency as an ethically neutral and value free scientific idea.

2.2 Changing Conception of Poverty: Poverty is an honourable condition in traditional societies. Christian monks take vows of poverty, and the Bible states that it is harder for a rich man to enter paradise, than for a camel to pass through the eye of a needle. Our prophet Muhammad s.a.w., refused riches and wealth, lived with very few possessions, and prayed to Allah to be counted among the poor. Poverty emerged as a social problem for the first time in England, following the first privatization – that is, the enclosures. While the poor have always been with us, traditional societies accept and fulfil collective responsibility for feeding the poor. An essential element of a market society is the idea of blaming the poor for their poverty, which was first introduced by Malthus. According to him, it was over-breeding that led to poverty, while poverty led to vice, misery and squalor. To the natural cures of plague, pestilence, and wars for the reduction of population, Malthus added birth control as a means of combating poverty.

For reasons to be discussed, the traditional concept of social responsibility for the poor must be destroyed to allow unregulated market economies to function. Malthusian ideas created the possibility not only of blaming the poor for their poverty, but also of arguing that helping the poor would hurt society in the long run. Feeding the poor would lead only to more over-breeding, which would create even larger numbers of poor in the long run. This idea, that helping the poor hurts them in the long run, takes many different shapes in modern economic thought. Reagan and Thatcher reduced taxes on the rich, arguing that this would increase growth because the rich would invest and increase productivity. The poor would only consume the tax cuts, reducing savings, investments and growth – this would hurt the poor in the long run.

3. Essential Requirements of a Market Economy

The many institutions and ideologies required for self-regulating markets to function are listed below. This section relies fundamentally on the analysis of Polanyi.

3.1 Labour Markets: Production in a market economy depends on the ability to hire labor and a market for labor. Labor is time or the material from which human lives are constructed. It is not normally for sale. England got a fifty year headstart on the industrial revolution because of the surplus pool of labor created by the enclosures. It was the desperate condition of the large numbers of people evicted from their homes and barred from their conventional means of livelihoods, that led to the possibility of a labor market. Under normal social conditions, people would not submit to the indignity of a labor market requiring them to sell their labor for money. Massive disruption of the social fabric created the conditions required for large scale production in factories to come into existence. A similar catastrophe did not take place in Europe, which caused it to lag behind.

3.2 The Market for Land: Traditional societies value a harmonious relationship between man and nature, treating land and all that lives on it as a sacred trust, a gift of God to humankind. Yet a market economy must separate the man from the land, and turn both into commodities freely available for sale and purchase. Strengthening of property rights and large scale enclosures created the possibility of agricultural capitalism, and the production of large amounts of surplus food as well as industrial raw materials like cotton. This coincided with the industrial needs for raw materials as well as the need for food for large numbers of laborers not engaged in agriculture. The remoteness of the owner from the land allowed him to view it as merely an input to a production process, a means for producing wealth. In a traditional society, a labourer invests his life energies and efforts, and enjoys the reward of bringing valuable products out of dead land. In a market society, economic necessity compels the labourer to sell his time for money. He is alienated from the land and the produce, both of which belong to his employer. It is the loss of this sense of “mother earth” as an organic entity with an intimate relationship to man that has led to the global environmental catastrophes that threated to destroy us all.

3.3 Money and Financial Markets: The strength of the market economy lies in its ability to produce far beyond the minimal requirements of society. This surplus production creates its own inexorable demands on the structure of market societies. Subsistence economies have small self-sufficient subgroups with minimal trading requirements and hence little use for money. Demand for surplus must be created by promotion and marketing of luxurious lifestyles. Having large amounts of surplus necessitates trade and hence also the use of money for trading purposes. Commodity money functions adequately in non-market societies where trading is marginal and peripheral. Commodity money is not flexible enough be adequate for market economies which engage nearly everyone in monetary transactions and have large and fluctuating amounts of trade, conducted over long distances in geography and time, and with unfamiliar trading partners. This accounts for the rapid introduction of token monies in market economies. Since token money is directly of no use, the best way to understand it is as a government guaranteed financial instrument – it allows trade based on promises to pay which are flexible, backed by the government, and (hence) obligatory on all members of the society.

Fluctuations in the quantities of money as well as the needs of trade can lead to fluctuations in price levels – these have been the bane of market economies which require stable prices to function smoothly. Many mechanisms, including the introduction of central banks and other government policies have been tried to smooth out the business cycle without success. Problems are substantially exacerbated by international trade, which cannot be conducted in terms of token money for obvious reasons. Polanyi (1946) discusses the mechanisms for price stabilization at the international level, and how their breakdown led to both world wars. He also suggests that the market economy is inherently unstable, inflicts tremendous damage on man, society and environment, and must be replaced by alternative mechanisms for productions and distribution of goods.

4. Market Ideologies and Consequences:

The Quran (104:2) condemns those who “gather wealth, and count it,” instead of encouraging the pursuit of wealth. Furthermore, wealth in excess of needs should be spent for Allah – that is, on socially useful projects, and on other needy people. In direct contrast, market economies encourage the pursuit of wealth “to the point of being absolutely irrational,” according to Max Weber. Excess wealth is to be spent on personal luxuries, or to be used to multiply wealth even further, but not on social welfare or on the poor and needy! Spending on the poor and needy undercuts the labor market, strengthens the laborers against the capitalists, and results in reduced profits for investment and growth. Classical economist Ricardo wrote that “The principle of gravitation is not more certain than the tendency of (laws providing relief for the poor) to change wealth and vigor into misery and weakness (and) universal poverty.” Similar sentiments can be found in contemporary writings of economists. Milton Friedman argued that firms should exclusively pursue profits and should not engage in socially beneficial activities.

The relentless demand for profits, the production of surplus goods, the legitimization of the pursuit of wealth, and greed and selfishness, has led many disasters and crises both local and global. Polanyi has documented how the demands of the market economy led to world wars 1 and 2. Naomi Klein has picked up the story of capitalism from the 70’s to the recent times, and documented the sequence of disasters generated by the market economy. In the three major dimensions (Land, Labor, Money), replacement of traditional values by market society based values has resulted in catastrophe:

4.1 The Market for Human Beings: The Collapse of Values

Traditional social transactions are based on a mutuality, and partnership in the service of community and humanity. The market society replaced these by anonymous arms length trades of money for services. The gradual erosion of the sense of community, which accelerated in the post world war 2 era, has resulted in the destruction of family, in ethics of cooperation, generosity and trust. The family is the most fundamental unit of society, where children learn the rules governing social interactions. If the wife cannot trust the husband – and the Clinton-Lewinsky affair demonstrates that this is true from the top to the bottom – then no one can trust anyone else. This erosion of trust has been documented in many studies. For example, a report on “Fractured Families” put out by the Social Justice Foundation(2006) in the UK states that “We now have one of the highest divorce rates in the Western world and the fabric of family life has been stripped away in the past thirty years.”

Some effects of this breakdown are documented by Josephson Institute survey (2008) which shows that more than 30% of the 30,000 USA high school students admitted to having stolen from a store, parents or friends. According to the Center for Disease Control, USA also has the highest teen pregnancy rate in the world. The vast majority of approximately a million such pregnancies per year are unintended and have devastating social, economic and health consequences for both the unwed mother and the offspring. Promotion of the “Invisible Hand” idea that individuals pursuing selfish goals will produce socially beneficial results has led widespread corruption. Leaders like Madoff pursue Ponzi schemes, and the greed and dishonesty of followers in the finance industry has led to worldwide financial chaos and collapse. Many sources document massive corruption in post-Katrina, Iraq war, and recent bailout payments following financial meltdown. All of these developments can be directly traced to promotion of the core idea at the heart of market societies: all is fair in the pursuit of wealth.

4.2. The Market for Land: Environmental Disaster

By treating land, its products, and all that lives on it, as merely inputs into the process of the production of wealth, the market economy has done large scale environmental damage, destruction and depletion of forests and other natural resources, and created a looming catastrophe due to global warming. The idea that the market is self-regulating leads to the delusion that we don’t need to worry about these problems; if they matter, the market will automatically take care of it. The recent financial collapse should be a warning to those who believe this core belief of a market society. Barack Obama states that “All across the world, in every kind of environment and region known to man, increasingly dangerous weather patterns and devastating storms are abruptly putting an end to the long-running debate over whether or not climate change is real.”

Environmentalist Daniel Quinn writes that “Upwards of two hundred species.. mostly of the large, slow-breeding variety.. are becoming extinct here every day …These species are being burnt out, starved out, and squeezed out of existence. The endless production of radioactive wastes and other poisons are “hazardous to the future of life on this planet”. For the first time in the history of the world, every human being is now subjected to contact with dangerous chemicals, from the moment of conception until death. With great difficulty, consensus has been reached on global warming and how it threatens human life on the planet. Market societies have prevented a solution, which requires shared sacrifice and cooperation. Leading capitalist countries put self-interest and profits above cooperation for survival. Instead of proportionately sharing the burden of environmental cleanup and costs of anti-pollution measure, they attempt to put all the blame and the cost of adjustments on the poor and powerless countries.

4.3 The Market for Money: Financial Crisis and Collapse

As discussed earlier, commodity monies impose discipline and constraint which unregulated market economies cannot cope with. Token monies are able to adjust to changing market conditions and keep prices stable. However, use of token monies involves a crucial element of trust. Even when backed by gold or other commodities, no one is in a position to detect over-issuance of paper. For a large number of different reasons betrayals of this trust are common, and result in financial crises which have been extremely common in the twentieth century. Among the big ones, Taleb (2007) in The Black Swan writes that “In the summer of 1982, large American banks lost close to all their past earnings (cumulatively), about everything they ever made in the history of American banking—everything.”

Can we trust the invisible hand which guides selfish profit seekers to produce socially beneficial outcomes? The deep financial crisis currently enveloping the globe suggests otherwise. Even if the global economy recovers, which many pundits doubt, should we continue with a system which delivers shocks disrupting lives and livelihoods of vast numbers of people on a regular basis? There is ample evidence to suggest that alternatives which provide more comfortable lives for all human beings can readily be devised.

5 Concluding Remarks

The market economy is a European experiment with an alternative method of organizing society. Instead of intrinsic values of cooperation, trust, generosity, and other social virtues, many of which go against the natural grain of man, they sought to built a society with maximum freedom. Everyone is allowed to do whatever he desires, with a minimum of rules and regulations. The outcome of this experiment has been a complete failure on all fronts. Lane (2005) in The Loss of Happiness in Market Economies documents the fact that this freedom has not resulted in happiness. Numerous studies in the emerging field of well-being studies provide evidence for this. At the same time, crucial social structures like family, communities, as well as social values like cooperation, generosity and trust have been substantially depleted – more so in the heartland of the market economy, but also, to a lesser extent in the periphery. In addition to eating up social capital, the natural resources of the planet have also been depleted at an astonishing rate by the market society. Many have noted that a sure recipe for complete collapse and disaster is to simply continue in our present ways.

Fundamental and radical change is an imperative at this time. Islamic economics provides a radically different system which remedies the fundamental difficulties of market economies. A detailed analysis of the differences between the two, and how Islamic economics can deal with problems generated by market economy concepts is provided in Zaman (2008) Islamic Economics: A Survey of the Literature.

Lecture 5: Rebuilding Islamic Societies

1. Introduction

Islam came as a stranger, and has again become a stranger.

The society that came into existence following the spread of Islam had no resemblance to the pre-Islamic Arab society (Jahiliyya), nor any to the Persian and Roman societies which came under Islamic rule. During the Jahiliyya, the Arabian people had savage and barbaric customs including burying their own daughters alive, and killing each other for trivial matters. The most significant event in human history is the transformation of these people into paradigms of civilized behavior – the Quran praises them as those who feed others while they themselves are hungry. This miraculous effect of the training of the Prophet Muhammad [s.a.w.], the embodiment of God’s mercy to all the worlds, is desperately needed as the current times bear a close resemblance to the Jahiliyya. Counterparts to all evils of the Jahilliya, often exceeding the savagery and barbarism of the ancient Arabs, can easily be found in the modern world[3].

Islam has become a stranger in that modern Muslim societies have no similarity to the ideal society depicted in Islamic teachings and created and demonstrated as a living reality by the Prophet s.a.w. and his followers. In all domains of life, the dominant models are those derived from the West. All over the Muslims world, the vast majority of political systems, judicial systems, social welfare systems, educational systems, and patterns of culture reflect to varying degrees the influence of the colonial era, during which the West ruled over more than 90% of the Muslims. Even purely Islamic institution like the Madrassahs, the Masajid and the Awqaf, which formed the core institutions of Islamic societies, are but pale shadows of their original Islamic forms.

The first step to a revival and rebuilding of the Islamic forms is to strengthen the faith of the Muslims, and to create a desire for Islam in the hearts of the people. Without this critical step, no effort can succeed. Syed Ahmad Shaheed was heartbroken when his lieutenants appointed to enforce the Shari’ah in the Muslim areas under his control were killed by Muslims who were more attached to their local culture than to Islam. Similar efforts to re-establish Islamic ways all over the Islamic world have floundered because of the lack of preparation of the ground: Muslims resist these efforts and Allah T’aala withdraws his help due to the conflict among Muslims. It is the grace and mercy of Allah T’aala that He has inspired the movement of Tableegh and made it grow to be by far the largest and most universal movement for the revival of the faith in the Ummah. He has made it the cause of the strengthening of faith, which has led to widespread awareness that as Muslims we are living in very un-Islamic ways. The desire to replace the ways of West with pure Islamic ways has led to many efforts by many people and groups in many different departments of life. Unfortunately, successful efforts have been few and limited, while failures have been many. Our goal in this article is to analyze the causes of failure and to suggest new methods which may lead to more success in the struggle to re-establish Islamic ways.

2. Evolution versus Revolution

There are two main lines of thought among Muslims regarding methods to be used to move from our current state to the ideal Islamic forms. For convenience, we may label these as the “evolutionary” and the “revolutionary” approach. We will describe the form of these efforts and explain briefly why we do not expect that either of the two will succeed. Then we will describe a third way, from which we hope that the desired outcomes may emerge.

The evolutionary approach is to start with existing social, political and financial structures, and modify them gradually, in a step-by-step way, to bring them into conformity with Islam. The revolutionaries propose to tear down the existing structures completely, and build a new Islamic system from the foundations. Perhaps paradoxically, both groups have sound and strong arguments in their favor and against the other group. We discuss this in greater detail below.

There are many arguments in favor of the evolutionary approach. It is practical and immediate. We do not have to wait for, or organize for, the difficult and uncertain struggle required by a revolution. It is certain that a struggle for power will be opposed, and violence, death, and disruption will result. Especially within Islamic societies, revolutions will pit Muslims against Muslims, and this is extremely repugnant to Islamic principles. Many fuqaha have preferred peace under less than ideal circumstances to putting Muslim lives at risk in an internecine conflict. Instead, we work to transform institutions gradually and peacefully, through cooperation and mutual understanding and tolerance for dissenting points of view. This corresponds to the understanding of Islam as a middle way {Aitdal, which avoids extremism), and as a religion of peace.

Despite the strengths of the evolutionary argument, I find the revolutionary counter-arguments to be persuasive and justified. The existing Western systems are not, despite appearances, ethically neutral. A common confusion among evolutionaries is to mistake ethically neutral Western inventions like the car, telephone, computers etc. with Western social institutions like banks, legal and political systems, insurance, social security etc. The evolutionaries argue that just like Islam does not prevent us from benefiting from Western technology, it places no obstacles to our adoption of Western institutions, suitably modified by removing and replacing un-Islamic elements.

To oppose this idea, it is necessary to understand the historical background in which current Western institutions evolved. Briefly, as Europeans moved away from the religious values of Christianity, they attempted to construct a heaven on Earth, to replace the Paradise they had lost. This required many radical changes in their ways of thinking. Just one illustration is the transition from the Biblical idea that “the love of money is the root of all evil” to Bernard Shaw who said that “the lack of money is the root of all evil.” It was only when greed, avarice and the pursuit of wealth went from being evil and socially disapproved to desirable and virtuous that it became possible for modern financial institutions to come into existence. Banks promote the pursuit of wealth by the society as a whole, encourage the wealthy to multiply their wealth instead of spending on socially worthwhile causes, and generally promote the pursuit of luxury and indifference to the troubles of others. This was recognized and deplored by Christians (who lost this and many other battles) during the process of the European transition from their older systems to modern ones. The principles of self-interest and competition that underlie Western financial systems are inimical to the development of cooperation and community harmony; see Nelson (1969) The Idea of Usury: From Universal Brotherhood to Universal Otherhood for a historical study of the European experience. All of these ideas which lie at the heart of banking are in opposition to Islam. While interest is helpful in promoting the prized Western values of competition and greed, Western financial experts who have examined the issue in detail state correctly that banks can function on the basis of Islamic principles of profit sharing without difficulty. That is, just banning interest and replacing it by Musharka will not change the spirit, nature and functionality of Western banking.

Sixteenth century European society was based on Christianity and promoted cooperation, sacrifice of individual pleasure for the social good, and emphasized the afterlife over the pleasures of this world. The transition to secular thought led to the idea that each individual should be free to pursue his own heaven on Earth, in whatever manner suits him best, without regard for others. Social, financial, political, judicial and educational institutions designed to help people achieve these goals came into existence. These institutions form an interlinked system which cooperate and sustain each other to help a secular society pursue secular goals. This system cannot be modified in a gradual way to make it an Islamic system. To understand this, consider a simplified example. Suppose we were to say that since interest is banned, and Banks are based on interest, let us just ban Banks. Since banks form an integral part of the Western system, the whole system would collapse upon removal of a key component. Recognizing this led some Ulema to attempt to create a “substitute”. There is a lot of flexibility in the Western system. By altering the shape of some of the transactions, the bank can be re-shaped into an Islamic form, but the spirit of greed, pursuit of wealth, and indifference to others cannot be be taken out. If somehow we were to succeed in changing the spirit of the banking system, this would be equivalent to actually destroying the utility of the bank to the Western system. A genuinely Islamic bank would not be able to cooperate with the other elements of the Western systems and the system would collapse exactly as it would if banking itself were banned.

Banking has been taken just as an illustration; the same difficulty arises in nearly all fields. As a second example, consider reforming and Islamizing political institutions. Western political institutions are all designed around the fundamental idea of the nation-state. This idea of the nation state is in direct conflict with the idea of the Ummah.

When we accept the idea of working within the framework of the nation-state, we abandon the concept of the Ummah, and no amount of gradual change can fix this problem. It is a Western assertion that their institutions are ethically neutral and universally beneficial. They believe that they have achieved the most advanced civilization and that all others must follow them. Muslims who accept this falsehood see no harm in adopting these institutions, after patching up the un-Islamic elements. In fact, as we have argued, foundations of these Western institutions are based on secular ideas and in opposition to Islamic ideas. Furthermore these are mutually supporting, interlinked in complex ways, and designed to achieve goals which are in opposition to Islamic values. It appears virtually impossible to modify this system to achieve goals in direct opposition to those for these institutions have been designed.

On the basis of this argument, it would seem that we have no choice but to implement a revolutionary approach. We must tear down the entire Western system, and rebuild an Islamic system from the ground up. Nonetheless, there are serious difficulties with a revolutionary approach as well. The most important difficulty, which will be discussed in greater detail in the next section, is that we do not have functional models for a genuine Islamic system. It is not enough say that we must implement the Quran and Sunnah – concrete details of how this is to be done need to be spelled out. For reasons to be clarified, no one has a clear idea of how this can be done. This can be illustrated by the experience of Afghanistan and Iran, both of whom succeeded in creating an Islamic revolution. A critic of the Islamic system, Sohrab Behdad (1994) writes about Iran that

Similar to other utopias, the Islamic ideal world would be a just and humane society, without the exploitation, domination, alienation, and other social ills that have afflicted the contemporary capitalist and socialist societies. [However, in practice, the Iranian revolution did not succeed in creating such a system.] Frustrated by conflicts between the Parliament and the Ulema, one of the followers of Khomeini said: “Ten Years after the Islamic Revolution, … [we] ask you … to present to the world the unadulterated Muhammadan Islamic view on economics.” In June 1989 Ayatollah Khomeini died, unable to define his version of Islamic economic order. It has become apparent that an Islamic economic system is not capable of presenting a viable social alternative.

In a similar way, even though they were free to choose whatever system they wanted, there were no functional and practical models for an Islamic financial system which could be implemented by the Taliban. The Islamic government in Sudan is groping towards Islamic models, but there is no clarity on the desired outcome. Thus experience demonstrates that even a revolution would not succeed in getting us to an Islamic system. In the next section, we explain the source of this difficulty and suggest a way around it.

3. The Ideal Islamic System

Because the spirit of the Western institutions is secular, changing their form to achieve conformity with the Islamic law will not serve our purposes. Even more surprisingly, our own past will not provide us with adequate guidance for the difficult task which faces us. Even though we can find a complex of Islamic institutions in our past which are infused with the Islamic spirit, the modern times are so different in terms of their needs and requirements that the concrete shape of the required Islamic institutions will not resemble those which existed in our past. Our problem resembles that which the Jews faced when they decided to use Hebrew as the national language of Israel. The language existed only in books and there were no living speakers of the language. No one knew the correct pronunciations of the words, and there were no words in the ancient language for many of the objects which had assumed importance in contemporary life. The Jews invented the words and the pronunciations and overcame many other problems required to bring a dead language to life. In this section, we spell out the nature of the task facing us, which is similar but substantially more difficult.

The discovery of the “Genizeh documents,” – which is the same as “Janazah” – in a cemetery in Cairo has led to very important insights about the history of the period 300-800 Hijri or 950-1350 A.D. All sorts of papers containing religious terms were buried out of respect for the names of God. These include documents related to trade and commerce over this time period. These documents show the existence of an extensive network of trade from Spain to China centered around the Muslim empires. The framework and basis of this trade was the Hanafi law and involved Islamic methods of risk sharing finance. Muslim invented methods in conformity with Islamic law which created the possibility of global commerce. Historians who have studied the era have called it the “age of the commercial revolution,” and argued that these Muslim innovations created the basis for the capitalist system which later emerged in Europe. These Islamic methods for international commerce were destroyed by a series of large shocks, which included the crusades, Mongol invasions and destruction of Baghdad, and the bubonic plague. The international Muslim framework of trade never recovered from these shocks. With the rise of European power, Islamic methods and institutions for international commerce were replaced by primitive forms of the current capitalist interest based institutions.

The modern Western institutions for education, trade, politics, commerce, and social interactions evolved out of roots planted on the basis of a secular framework of thought. These started from primitive beginnings and gradually become more complex and developed linkages in response to historical needs. A much more advanced framework of Islamic institutions centered around masajid, awqaf, judicial and political structures was destroyed by various historical events, and went out of existence in the colonial era. Had these institutions remained in existence, they would have evolved to cope with the complexities of the modern era. In many arenas, the Ummah faces situations which have no historical precedent. This is why it would not be sufficient for us to rediscover the Islamic institutions of the past, although it would be helpful in providing a basis on which to build. Just as a language evolves and develops new vocabulary and literature, and acquires depth and complexity to cope with new situations, so our ideal Islamic institutional framework would have developed over the six hundred years that have passed since the Islamic domination of the globe. To compete effectively with modern Western institutions, we need to start from Islamic bases and imaginatively provide the depth and complexity that would have occurred due to developments that would have been required over six hundred years. This accounts for the difficulty of the task which we face.

To summarize, the evolutionaries underestimate the difficulties facing us. The capitalist system as a whole cannot be affected by making small changes in minor areas to some pieces of the system. The task requires changing all systems together in a co-ordinated way. Failure to do this is giving a bad name to the efforts of Islamization. Our elders claimed correctly that an Islamic system would provide justice, and a cure to the many evils of the dominant capitalist systems. However, the small and piecemeal changes we are making have no such effect, and critics argue that, despite our claims, we have nothing to offer. The revolutionaries have the right instinct that we need to build from scratch. However, neither party has a clear idea of what needs to done. The revolutionaries fail to realize that Islam builds on a ground that is currently un-opposed. That is the dimensions on which we need to work are not the ones where we face political resistance from opposing forces. Therefore, there is no need to make a revolution. We need to prepare the ground by changing ourselves. If we bring about the required internal changes, then Allah T’aala will change our conditions in accordance with His promise:

إِنَّ اللّهَ لاَ يُغَيِّرُ مَا بِقَوْمٍ حَتَّى يُغَيِّرُواْ مَا بِأَنْفُسِهِمْ

3:11 Verily, God does not change men's condition unless they change their inner selves;

4. The Third Way

If Western systems cannot be modified to serve our purpose, and a revolution to put in place ancient Islamic institutions will not work, what can be done to create an Islamic society? As the ayat 3:11 cited above says, the first task is change ourselves by creating the desire to live in a society governed by Islamic values. We have a long list of failures of efforts to impose Islamic structures by force on an unwilling people. This essay is addressed only to those who wish to live in an purely Islamic society and are looking for ways to bring this about. I do not seek to convince those who are doubtful about the value of such efforts that Islam has a lot to offer. Changing the hearts of doubters must be done in the traditional pattern, the Sunnah of all the prophets, which is the invitation to the good. This will eventually lead to creation of a living model of Islam, which will be the most powerful invitation.

In all areas of life, we need to create Islamic alternatives to existing institutions. To begin with we must start with small fledglings, seeds of the future system to come. As these newly planted institutions gain strength and grow, they will begin to support each other. The sequencing of our efforts must be carefully planned. Some of the institutions are robust and can survive and thrive on their own, while others will work only when the environment has become sufficiently favorable. Only after a sufficient amount of growth has occurred will we be able to address the issue of what is to be done with existing Western systems with which we will not interfere in the initial stages. Below I will describe the various types of efforts that we need to make along different dimensions. Before doing so, note that because of the radical novelty of Islamic ideas, we will not be able to offer convincing proof to skeptics that the new ideas we are trying to bring into the world will work. We will rely on Allah and have Tawakkul that he will sufficient for all our needs. Allah T’aala has promised to show us ways out difficulties which we cannot even conceive of or calculate. That is why we cannot describe precisely what will grow out of the seeds that we plant today. We cannot make a timetable or a flowchart or a provide a precise schedule of steps. Rather, in the way similar to the deliverance of the Bani Israel by Musa, when the spiritual preparations have been done than Allah T’aala will part the waters and create a way for us out of slavery.

This does not mean that we do not engage with with world. In fact we engage with the world in the best possible way, but this engagement is a means to seeking our path to Allah. In accordance with his promise that

وَالَّذِينَ جَاهَدُوا فِينَا لَنَهْدِيَنَّهُمْ سُبُلَنَا وَإِنَّ اللَّهَ لَمَعَ الْمُحْسِنِينَ (29:69)

Allah T’aala will guide us if we struggle with this world in the right manner. Below we provide a sketch of some of the important areas of our lives in which we need to struggle to bring about the changes required to put them into conformity with Islamic ideals. The sketch and the forms are tentative, since Islam emphasizes the struggle, and the feelings in the heart with which the struggle is carried out:

قُلْ إِنَّ صَلاَتِي وَنُسُكِي وَمَحْيَايَ وَمَمَاتِي لِلّهِ رَبِّ الْعَالَمِينَ (6:162)

Q6:162 Say: "Behold, my prayer, and (all] my acts of worship, and my living and my dying are for God [alone], the Sustainer of all the worlds,

In the process of the struggle, Allah T’aala will guide us to the concrete forms of social structures and institutions that are needed to express the spirit of Islam in the modern world. In this sections we discuss four fundamental principles which should guide our efforts at change. The principles are distilled from the teachings of Islam and also from the ways in which the existing institutions differ most from the Islamic teachings.

Equality: All are equal in the sight Allah, except by the virtue of Taqwa. This radical message needs to implemented in all dimension of our lives. It is a teaching of Islam that slaves are to be housed, clothed and fed on equal terms with the owner of the slaves. This means that servants, employees and subordinates must be treated with utmost respect as equals. Implementation of this message requires restructuring ways of working together for common goals. The standard command and control structures of un-Islamic firms and institutions cannot be used within an institution based on equality. A living example of the type we are seeking occurs within Tableegh, where thousands of people work together to run what is perhaps the biggest organization in the world, serving millions of Muslims worldwide. No one receives a salary, but all work together in a hierarchical structure. It is sometimes argued that this type of structure can only work within purely religious organizations. In fact it is a duty for Muslims to ensure that all our activities are purely religious; once we learn how to convert our organizations and institutions from profit seeking activities to God seeking activities, we will also learn the structures suitable to such activities.

Cooperation: The Western paradigms are based on the idea that there are no common goals in a secular society. Therefore cooperation is to be purchased. The servant, employee or subordinate sells his labor for money and does not share in the output. In Islamic paradigm, we will only engage in work which is socially beneficial – trade in goods or services which are harmful to society is Haraam. For socially beneficial products, all employees will participate in the reward from the benefits of the work. Thus the sweeper of the masjid or madrassa makes the intention of earning the reward for the activities of the enterprise. The idea of cooperative effort for a joint enterprise to serve society as a means to earn the pleasure of Allah leads to radically different structures for all social institutions. The idea that the “King” is actually a servant of the people [which is even now at least verbally acknowledged in the title “Khadim-ul-Harmain” in Arabia], the ‘boss’ is responsible for the welfare of all the employees, and that the entrepreneur, laborer and provider of funds are all equal partners in a joint enterprise to serve the Ummah changes the nature of the Islamic institutions.

Social Responsibility: As a society, we are collectively responsible for the needs of all those who cannot provide from themselves. It was in recognition of this responsibility that the first hospitals, orphanages, and facilities for travelers came into existence in the Islamic world. Umar r.a. said that if necessary, he would pool the resources of all to ensure that basic needs were met. Western societies put no limits on Israf and Tabzeer, even in presence of unmet basic needs. As a result, 28 million households were reported to have faced hunger and food insecurity in 2006 in the USA. This was not due to lack of resources, since several trillion dollars were spent on the Iraq war at this same time. While the principle of responsibility is widely acknowledged, the practice is very deficient within the Islamic world. We have all been influenced by western teachings which encourage us to spend excess on luxuries, rather than social welfare as recommended by the Quran:

وَيَسْأَلُونَكَ مَاذَا يُنفِقُونَ قُلِ الْعَفْوَ كَذَلِكَ يُبيِّنُ اللّهُ لَكُمُ الآيَاتِ لَعَلَّكُمْ تَتَفَكَّرُونَ

And they will ask thee as to what they should spend [in God's cause]. Say: "Whatever you can spare." In this way God makes clear unto you His messages, so that you might reflect

The understanding that money in excess of ones needs should be spent on the hungry and the uneducated, and that this is Farz-e-kifayah, would transform Islamic societies.

Local Action: A major obstacle to change has been implicit acceptance of a western idea regarding collective action. In a secular society, different people are assumed to have different religions and conflicting goals, so all collective action is left up to the government. Many Islamic thinkers have followed suit, and suggest that social change can only come after we capture the government. Historically, in Islamic societies, individuals and small groups have been the agents of change. A vast network of social welfare institutions was organized on a purely voluntary basis by individuals. Islam requires every individual to take care of his neighbors, and the worship of a rich man is not acceptable if his neighbor is hungry. Similarly the educated and pious are responsible to spread what has been given to them by Allah to their neighbors. For example, the prophet s.a.w. upbraided the Ash’ari tribe for not educating and training neighboring tribes with less knowledge. If every educated man considers it his responsibility to spread his knowledge, and every rich man considers it his responsibility to share his wealth with the needy, local actions by them will cause global change in Islamic society.

Islam is very strongly process-oriented rather than outcome oriented. Misunderstandings regarding this issue have led to many wrongly directed efforts by Muslim groups. The Quran encourages the rich to spend on the poor and to encourage others to spend on the poor – this will develop compassion and generosity, and create an ethos of giving and community feeling within the society. If one mistakes the intention of the command to be ‘helping the poor,’ one might advocate forcibly taking from the rich and giving to the poor if the rich do not give voluntarily – several Muslim authors have fallen into this trap. However, forcible policies will not achieve the desired ends of harmony, mutuality and community feeling between the rich and the poor. In general, the poor will not have the power to enforce such redistribution. In cases that they do (like the French Revolution and the Russian Revolution) class conflict, hatred, and injustice will result. The basic idea that Islam is concerned with what is going in inside the hearts of people, rather than the gross physical outcomes, is expressed clearly in the following Ayah:

لَن يَنَالَ اللَّهَ لُحُومُهَا وَلَا دِمَاؤُهَا وَلَكِن يَنَالُهُ التَّقْوَى مِنكُمْ كَذَلِكَ سَخَّرَهَا لَكُمْ لِتُكَبِّرُوا اللَّهَ عَلَى مَا هَدَاكُمْ وَبَشِّرِ الْمُحْسِنِينَ

(Q22:37) It is not their meat nor their blood, that reaches Allah. it is your piety that reaches Him

Because the goal is to change the hearts of the people, the struggle has to be carried out by individuals locally. Islamic history bears witness to the effectiveness of this strategy for social transformation on many occasions.

5. Need for Fresh Thinking in Secular Domains

At the time of Greek invasion of Turkey, a Turkish soldier went to the grave of a famous Sufi saint who was also known for his skills on the battlefield. He addressed him as follows: “O Shaikh, the Kuffar are invading our lands. Please rise up and help us!” The spirit of the Shaikh rose from the grave and slapped the soldier hard in the face. “You ask for help from the dead to fight the living? You must fight your own battles, as we did ours!”

On many occasions in history, Muslims have faced unique situations which had never arisen before. They rose to the challenges and devised solutions in conformity with the spirit of Islam and adapted to the circumstances. The political, economic and social structures which came into existence with the rise of Islam had no parallels in the Jahiliyya, nor in the un-Islamic societies of the past. Today we face situations which are unique, and have never before been faced by the Ummah. One group wishes to modify Western solutions and make them Islamic. Because the spirit of Kufr is deeply embedded in the western solutions to modern problems, this type of solution cannot work. Another group wishes to destroy western institutions and replace them with Islamic ones by making a revolution. The problem here is that the Islamic solutions that we need to devise require deep analysis and creative efforts at Ijtihad; these solutions cannot be found by turning back the clock. Preliminary analysis shows that the solutions lie in areas which are not contested, so that there is not need to destroy institutions or to seize power in order to implement these solutions. It is obvious to all that there is conflict between Islamic ideals and current western institutions which represent their solutions to modern political, economic and and social problems. A lot of Ijtihad is being undertaken to modify and bend the Shari’ah so as to legitimize existing Western structures, or suitable modifications of these structures. There is no need to modify the Shari’ah; rather, Ijtihad is needed in developing radical alternatives to current Western institutions which will embody the spirit of the Shari’ah. As an illustration, we present some ideas about areas in which creative and out of the box thinking is required to find genuine Islamic solution to problems being faced by Muslims today. Note that the forms to be presented are speculative; the actual forms which emerge may differ drastically from the ones sketched below. If recommended Islamic processes for bringing about change in the hearts, and producing Taqwa are followed, then Allah T’aala has promised to give us solutions from place we cannot foresee, and in ways we cannot calculate.

As a first example, consider the issue of suitable governance structures for Muslims. A lot of Muslim political thinking takes for granted existing Western institutions of the nation-state, parliamentary democracy, etc. etc. In fact, western political institutions and arrangements for governance are built on secular premises, and are in direct conflict with Islamic arrangements. As Iqbal recognized:

In taza khudaon main bara sab say Vatan hay,

Jo pairahan iska hay who mazhab ka kafan hay

Having abandoned religion, Europeans were forced to seek some alternative basis for collective action. They created a basis in the form of a nation. The process by which this idea of an “imagined community” was created, and people were made to believe in it, has been studied by historians. In Islam, the basis for unity is the Ummah, and local allegiances to tribes, languages, geographical entities are strongly discouraged. Those Muslims who take existing nation states and western political structures such as the multi party systems, democracy, voting, parliaments, etc. as given, and seek to build Islamic governance on top of these structures are doomed to disappointment. These western institutions cannot be modified to become Islamic. On the opposite extreme, some Muslims seek to destroy existing political structures, and replace them with Islamic institutions, principally Islamic Law and the Khilafah. While these are laudable goals, these groups have not given enough attention to devising effective strategies appropriate for current conditions. They seek to blindly imitate the past, arguing that these were the structures used by the Khulfae Rashideen, without recognizing the need for changes required for adaptations to current conditions. Many such groups have tried very hard and sacrificed many Muslim lives without achieving the desired results. This is because our ancient political structures were ideally suited to their own circumstances but modern societies differ very substantially from earlier ones.

The key to progress is to realize that the solutions we seek do not exist in any of the western paradigms, which are built on the denial of religion, and elevation of “science and reason” to a sacred status on the pattern of the Mu’tazila. An even bigger difficulty is that these solutions cannot be found in our past; our ancestors did a tremendous job of struggling with their own problems and finding their own solutions – they will get the reward for their efforts and we will not be asked about what they used to do. We must solve our own problems in our own ways. The spirit of Islam will guide us, and if we follow the Islamic processes for change, then appropriate forms will emerge which will not resemble anything in the West, nor will they resemble institutions from our own history. This is exactly what the early Muslims did; they translated the spirit of Islam into concrete forms by creating orphanages, hospitals, postal services, and many other institutions to provide governance and social services which had no parallels in the Arab past, nor in the institutions of Roman and Persian civilizations at the time. We must replicate their achievements: we will struggle to change the world as a means to achieving inner spiritual transformation and closeness to God in the spirit of the Ayah 26:69 cited earlier. If instead, we simply try to imitate without thinking, we will be deserving of the reproach of Iqbal that:

Thay to aba wo tumhare hi mugar tum kya ho –

hath pur hath dharay muntazir farda ho.

6. Recreating the Ummah

How can we structure political institutions in way that is pleasing to Allah? To think about this question is worship, and to struggle to bring about such structures is to be among the “wallazeena jahadoo feena” for whom Allah has promised guidance to his paths. This view permits reconciliation of the “Top Down” and “Bottom Up” approaches to rebuilding Islamic society which have divided Muslims. We engage in the (top down style) struggle to transform all dimensions of our lives (political, economic, and social) as a means to the inner spiritual transformation required by the bottom up approach. Thus there is no conflict between the two approaches.

Before thinking about strategies, it is essential to have clarity about Islamic goals for political struggles. The desired outcome is the creation of solidarity within the Ummah as a whole. Our traditions state that the Ummah is like one body, so that hurt to any part is felt by the whole. Many verses of the Quran testify to the importance of solidarity among the Muslims:

وَاعْتَصِمُواْ بِحَبْلِ اللّهِ جَمِيعًا وَلاَ تَفَرَّقُواْ وَاذْكُرُواْ نِعْمَةَ اللّهِ عْمَتِهِنِبِ عَلَيْكُمْ إِذْ كُنتُمْ أَعْدَاء فَأَلَّفَ بَيْنَ قُلُوبِكُمْ فَأَصْبَحْتُم إِخْوَانًا وَكُنتُمْ عَلَىَ شَفَا حُفْرَةٍ مِّنَ النَّارِ فَأَنقَذَكُم مِّنْهَا كَذَلِكَ يُبَيِّنُ اللّهُ لَكُمْ آيَاتِهِ لَعَلَّكُمْ تَهْتَدُونَ (3:103)

(Q3:103) And hold fast, all together, by the rope which Allah (stretches out for you), and be not divided among yourselves; and remember with gratitude Allah's favour on you; for ye were enemies and He joined your hearts in love, so that by His Grace, ye became brethren;

Failure to create this solidarity, and fighting among ourselves, will lead to weaknesses and allow our enemies to triumph over us.

وَأَطِيعُواْ اللّهَ وَرَسُولَ

هُ وَلاَ تَنَازَعُواْ فَتَفْشَلُواْ وَتَذْهَبَ رِيحُكُمْ وَاصْبِرُواْ إِنَّ اللّهَ مَعَ الصَّابِرِينَ

(Q8:46) And obey Allah and His messenger, and dispute not one with another lest ye falter and your strength depart from you; but be steadfast! Lo! Allah is with the steadfast

It is in the light of these commands that we must devise methods to rebuild the Ummah. It is a grievous error to take the existing western structures of nation-states as a given and start from this as a basis for Muslim political action. By creating artificial divisions among men, and creating an ideology which makes it desirable to die for ones nation, this idea has been responsible for a tremendous amount for strife, violence and bloodshed in the world. In addition, Muslims have been specifically and deliberately been divided into nations by enemies, as a part of the strategy to divide and conquer, and to foster conflicts among Muslims. For example, after the Russian conquest of portions of the Usmani Khilafat, the Muslims were divided into many different nations like Circassians, Georgians, Uzbeks, etc. Histories were written and traditions invented to create a feeling of allegiance to ones geographical region and language, to fight against the Muslim concept of Ummah which unites all Muslims. Similar efforts were made to promote nationalism within Islamic countries. The word “Turk” meant villager, and carried the connotation of ignorant, coarse, etc. The Turkish people identified themselves as Muslims and felt themselves to be part of the Ummah. An effective campaign was carried out to popularize the word “Turk” [ne mutlu Turkum diyene] and to replace the pan-Islamic feelings of the people by nationalistic sentiments. European sentiments of nationalism based on racism, language, geography were absorbed by the Turks and eventually resulted in bad blood between Turks and Kurds who had lived in peace and harmony as Islamic brothers for centuries. Nationalistic feelings, and racist or linguistic allegiances (which were non-existent among Muslims) have been created and have led to a substantial number of conflicts among fellow Muslims in the twentieth century.

Islam teaches us to value the bond of religion over that of blood, geography and language.

قَالَ يَا نُوحُ إِنَّهُ لَيْسَ مِنْ أَهْلِكَ إِنَّهُ عَمَلٌ غَيْرُ صَالِحٍ فَلاَ تَسْأَلْنِ مَا لَيْسَ لَكَ بِهِ عِلْمٌ إِنِّي أَعِظُكَ أَن تَكُونَ مِنَ الْجَاهِلِينَ (11:46)

Q11:46 He said: O Noah! Lo! he is not of thy household; lo! he is of evil conduct, so ask not of Me that whereof thou hast no knowledge. I admonish thee lest thou be among the ignorant

On many occasions in Islamic history, Muslims have shown that they have valued religious bonds over blood, geography and language. Today our failure to do so is causing tremendous damage to the Ummah. When we start political action at the level of the nation, we have already lost the battle for building genuinely Islamic institutions.

Islam provides us not only with the vision, but with methods and institutions designed to facilitate achieving this vision. How can we work to create the solidarity within the Ummah, and the possibility for collective action by the Ummah, which is the goal our political struggles? The methodology for collective decision making is “shoora” and the institutions for creating community are the Masajid, the Jum’a namaz, and the Hajj. How we can use these to achieve Islamic political forms is described in greater detail below.

6.1 Distinctive Islamic Methodology for Decision Making

The fundamental political problem is group decision-making in the absence of consensus and in the presence of conflicting interests. The main process of decision- making in an Islamic society is shoora or consultation. This was the practice of the Prophet Mohammad (s.a.w.) and is explicitly mandated in the Quran, which describes believers as being

وَالَّذِينَ اسْتَجَابُوا لِرَبِّهِمْ وَأَقَامُوا الصَّلَاةَ وَأَمْرُهُمْ شُورَى بَيْنَهُمْ وَمِمَّا رَزَقْنَاهُمْ يُنفِقُونَ (42:38)

(Q42:38) Those who hearken to their Lord, and establish regular Prayer; who (conduct) their affairs by mutual Consultation; who spend out of what We bestow on them for Sustenance;

Despite explicit injunctions that Muslims decide their affairs by Shoora, this has been largely forgotten by the Ummah. So much dust has gathered on the books describing the methodology for shoora that some Muslim political thinkers confuse it with democracy. Because it has fallen out of practice, many controversies over how it should be done have arisen. It is a great favour of Allah to have revived the practice of Shoora in the context of the worldwide movement of Tableegh. A detailed understanding of the mechanism can only be understood by experiencing it in action; theoretical discussions are not adequate. The main thing to understand is that the mechanism is designed to create consensus and unity in the hearts of the Muslims. There are many different principles for shoora which help in arriving at this outcome. While dissent, free discussion, and debate on merits of alternative views are encouraged during the process of shoora, the community is urged to unite on the final decision taken:

فَبِمَا رَحْمَةٍ مِّنَ اللّهِ لِنتَ لَهُمْ وَلَوْ كُنتَ فَظًّا غَلِيظَ الْقَلْبِ لاَنفَضُّواْ مِنْ حَوْلِكَ فَاعْفُ عَنْهُمْ وَاسْتَغْفِرْ لَهُمْ وَشَاوِرْهُمْ فِي الأَمْرِ فَإِذَا عَزَمْتَ فَتَوَكَّلْ عَلَى اللّهِ إِنَّ اللّهَ يُحِبُّ الْمُتَوَكِّلِينَ

Q3:159) It is part of the Mercy of Allah that thou dost deal gently with them Wert thou severe or harsh-hearted, they would have broken away from about thee: so pass over (their faults), and ask for (Allah's) forgiveness for them; and consult them in affairs (of moment). Then, when thou hast taken a decision put thy trust in Allah. For Allah loves those who put their trust (in Him)

These methods for decision making contrast with European political mechanisms which assume the existence of irreconcilable conflicts in a secular society. Manicas (1989) writes in this context that “the only thing which people have in common is 'the government' and, paradoxically, their private interests!” and describes the history of the transition from the traditional polis to the modern societas form of political organisation in Europe. Since consensus cannot be hoped for, struggles and conflicts of interest are to be resolved in the favour of the majority. The European political system is a model of a perpetual battle between different subgroups, where the emphasis is on providing means for resolving these battles within the framework of a legal system perceived to be fair. These models are based on the historical experience of Europe, with perpetual warfare among differing Christian sects. Islam aims much higher than European models can conceive. Unity among Muslims is prized above all the treasures of the world:

وَأَلَّفَ بَيْنَ قُلُوبِهِمْ لَوْ أَنفَقْتَ مَا فِي الأَرْضِ جَمِيعاً مَّا أَلَّفَتْ بَيْنَ قُلُوبِهِمْ وَلَـكِنَّ اللّهَ أَلَّفَ بَيْنَهُمْ إِنَّهُ عَزِيزٌ حَكِيمٌ (8:63)

(Q8:63) And (moreover) He hath put affection between their hearts: not if thou hadst spent all that is in the earth, couldst thou have produced that affection, but Allah hath done it: for He is Exalted in might, Wise.

Furthermore, the previous verse suggests that this unity will also protect us from the treachery and deception of the enemies. In shoora all members are encouraged to think about what is best for the group as a whole, in preference to the interests of individuals or subgroups. Implementing shoora on a large scale in Islamic societies requires training indivduals to put group interests above personal interests. This is what was achieved by the training of the Prophet s.a.w. in the Islamic community, and this was a key to their success. Islam has many mechanisms for achieving this goal, which the Quran exhorts:

إِنَّمَا الْمُؤْمِنُونَ إِخْوَةٌ فَأَصْلِحُوا بَيْنَ أَخَوَيْكُمْ وَاتَّقُوا اللَّهَ لَعَلَّكُمْ تُرْحَمُونَ

(Q49:10) The Believers are but a single Brotherhood: So make peace and reconciliation between your two (contending) brothers; and fear Allah, that ye may receive Mercy.

وَالَّذِينَ تَبَوَّؤُوا الدَّارَ وَالْإِيمَانَ مِن قَبْلِهِمْ يُحِبُّونَ مَنْ هَاجَرَ إِلَيْهِمْ وَلَا يَجِدُونَ فِي صُدُورِهِمْ حَاجَةً مِّمَّا أُوتُوا وَيُؤْثِرُونَ عَلَى أَنفُسِهِمْ وَلَوْ كَانَ بِهِمْ خَصَاصَةٌ وَمَن يُوقَ شُحَّ نَفْسِهِ فَأُوْلَئِكَ هُمُ الْمُفْلِحُونَ (59:9)

(Q59:9) But those who before them, had homes (in Medina) and had adopted the Faith,- show their affection to such as came to them for refuge, and entertain no desire in their hearts for things given to the (latter), but give them preference over themselves, even though poverty was their (own lot). And those saved from the covetousness of their own souls,- they are the ones that achieve prosperity.

This shows how Muslims are urged to resolve disputes and to give preference to others over themselves. When consultation is done with these sentiments, it creates unity and community feelings which is a priceless treasure, and brings the help of Allah. Existing political institutions which we have copied from the west create divisions among Muslims, encourage struggles and vilification of others, create bad feelings between the victors and vanquished in political struggles. These western methods cannot be adapted for use in Muslim societies. Trying to modify them or adopt them, or working within their frameworks, is harmful to the efforts to bring genuinely Islamic methods for governance into existence.

6.3 The Institutional Structure

Islam has not only provided us with mechanisms to achieve unity, it has also provided a fully functional institutional structure to enable us to realize this in a concrete fashion. At the heart of this structure is the five times daily prayer of the Muslims. Many Ahadeeth show that men must make these prayers in the Masjid. The masjid functions as a community center, where all local problems are resolved by consultation among neighbors. Many traditions testify to this character of the masajid, as the center of Muslim social activity at the local level. Hazrat Ayesha narrates that she saw soldiers from Abyssinia put on a show of acrobatic skill, and martial arts, at the Medina Masjid. When the Prophet s.a.w. walked into the masjid on one occasion, he saw two Halqa’s, one engaged in Zikr and another engaged in Ta’leem. One of the bitter enemies of Muslims who had done a lot of damage, was captured and chained to one of the pillars in Medina Masjid. After observing the activities in the Masjid for three days, he converted to Islam. Commentators write that this event is reported because three days was an unusually long time. The atmosphere of the masjid was such that most visitors would convert to Islam in a much shorter period.

It was prophesied that “Only the name of Islam, and only the script of the Quran” will remain to the Muslims. Just like our daily prayers have become rituals, instead of the intense engagement with Allah that they are meant to be, so our masajid have become merely buildings of bricks and stones, and not the center of local Muslim action. The potential power of this institution is shown by the Iranian revolution, where the sermons delivered at the masajid mobilized and united the whole nation, and were central to bringing it about. Today, by the grace of Allah, the effort is being made to revive this institution and to turn masjid into living centers of activity for the Deen on a 24 hour basis. In many masajid all over the world, daily mashwera, and activity to motivate the neighbors to spend more time on the Deen is taking place on a regular basis. This is the seed from which an Islamic structure can emerge at the local level, which will be basis of global activity. Binding the hearts of the people together at the local level requires getting neighbors to know each other, to learn to cooperate, and to act collectively in the common interest of Islam, sacrificing personal concerns when needed for the sake of the group. Current conditions are such that the majority of those who pray together regularly for years in the same masjid recognize the faces but do not know the names of their fellow worshippers. This must be changed to re-vitalize the Ummah.

The second level of integration is provided by the Jum’a namaz, which is meant to bring together the whole city. Current practice is such that virtually all the masajid are also used for Jum’a, contrary to the original intent. Since very large populations and difficulties in travel make it impossible for their to be one Jum’a for a city, we must modify the form of the institution to achieve the spirit. For example, we could gather 5 to 10 or more masajid from a suitable locality at a single Jum’a. If even this seems difficult, we could at least ask key representatives from each masjid to gather at a central location and hold mashwera regarding the locality every Juma’a. Perhaps a monthly meeting could be arranged for representatives from the entire city. This would provide us with the seeds of a distinctly Islamic structure of governance, not to be found in the west. This type of structure is also not easily seen in Islamic history, since the structures which emerged were always a mix of ideal Islamic institutions with practical compromises to historical situations. The Islamic methodology is to keep the ideal vision in mind and work to bring it about. The actual forms which will result cannot be predicted, but will emerge as a result of the level of Ikhlas in our efforts and the decisions of Allah. On the night of the Mairaj, the Prophet s.a.w. saw some threads going up to the Heavens and others coming down. On inquiry, Jibraeel a.s. reported that it was the deeds of the Ummah which were going up and the decisions of Allah which were coming down.

The third level of integration is provided by the Hajj, which brings representatives of the entire Ummah together on an annual basis. There is a lot of evidence to suggest that when the Ummah was a living entity, there was a lively trade of information and remedies for problems being faced by one segment of the Ummah were solved via united efforts. This aspect of the Hajj has been forgotten. When representatives of the entire Ummah meet, they should get together and discuss how to create better ties, to promote understanding, cooperation, and take united action at the level of Ummah. Once there is an annual meeting of representatives from all segments of the Ummah for the explicit purpose of reviving the concept of the Ummah as a collective body with common interests and needs, Allah T’aala will guide us to the ways of creating cooperative action in ways which we cannot calculate or imagine at this time. In consultation, creative methods for promoting integration like migration, skills and student exchanges, inter-marriages, open borders for Muslims, trade promotion, and many other issues would come under discussion. Today our thinking is constrained by Western frameworks for this type of activity, and we take action using western style institutions and organizations, following western methodology. This is despite the fact that Islam has furnished us with deeper insights on how to bring about social change, and given us methods and institutions for this purpose, which we are currently ignoring. For those who have been blessed with the knowledge of the Quran to look elsewhere for guidance is an extreme injustice, and is the source of failure for many types of efforts to bring about change.

7. Institutions for Justice

As discussed in the introduction, Islamic societies are far from Islamic ideals in nearly all dimensions of our lives. Coordinated changes on all fronts are needed to bring about the transformation that Islam calls for. It is impossible to discuss all of the work that is needed in the span of a brief article like the present one. Our goal is to provide some illustrations of the style and methodology for a new way to approach the problem of change. A key to the approach is the understanding that we struggle to change the world in accordance with the orders of Allah in order to bring about an inner spiritual transformation. Therefore, we measure the outcomes in terms of our own progress towards Allah, and not in terms of visible impact on the world. We make the choice to travel the path to the Lord, and struggle in Him so that He may guide us to his ways. A second crucial ingredient is to start with work on areas where change is feasible, and possible for us to do as individuals, and then in small groups. We move on to larger changes only after the ground is prepared. When there are large areas of our lives where Muslims voluntarily choose the ways of the Kuffar in preference to the ways of the Prophet s.a.w. then this must be the first target of reform. These general principles may be illustrated by methods to bring Islamic Justice or the law of the Shari’ah into the lives of the Muslims, the topic of this section.

There are aspects of Islamic law for the enforcement of which we need control of the state apparatus. However, there are also aspects for which all that is needed is people who desire to live by Islamic law. Historical examples show numerous failures of attempts to force people to live by Islamic law, when this desire is not present. Instead of following western methods of gathering votes to change the constitution, we could work on implementing the Shari’ah in areas where there is no opposition or restriction by the government. For example, we could try to ask all Muslims who enter into legal contracts with each other to include a clause which states that all disputes will be settled by binding arbitration according to Islamic Law by suitably trained Ulema.

To implement this vision, we will need to work simultaneously on two fronts. There is clear recognition of the need to update the curriculum of the Madrassahs – the subject matter being taught fails to address current social concerns of crucial importance in shaping Islamic societies. However the suggestions for reform, involving teaching sciences and computer skills, are based on western priorities regarding knowledge. If we start courses developing the skills of applying the laws of shari’ah to current trading transactions, and develop the personnel and institutions required to arrive at decisions of Islamic law for settling trade disputes, this will develop the educational curricula of the madrassa in directions which build on our strengths and are in conformity with our heritage. Similarly the madrassahs would be well placed to provide the basis for personnel and institutions which would give Islamic quality certifications, guarantee certain types of transactions and products, and provide similar Islamic services. Cooperative insurance and Islamic methods for investment require a mindset which is the opposite of that developed in modern business schools, which makes it difficult to convert existing western institutions to Islamic models. Providing madrassa students with sufficient training in modern transactions will be necessary to enable them to adjudicate trade disputes, and may also provide the seeds for launch of Islamic style trading institutions which differ radically from western counterparts. This type of preliminary work will develop the capacity to provide for an application of Islamic law on a larger scale. Currently, we simply do not have the capacity to provide this service. If it was announced that from tomorrow, all the laws of the land will be in conformity with the Shari’ah, we would not have the personnel with the skills required to provide judicial decisions in the volume required.

At the same time, we need to persuade people to resort to these newly created institutions for Islamic Justice within the umbrella of the madrassa. Initially, our target audience will be very small. A small number of committed Muslims trading with each other will agree to participate in this experiment. We will use Quranic exhortations for Muslims to settle their affairs by referring them to the Prophet and Allah. We will impress on the people that it is very reprehensible for Muslims to resort to courts based on Christian or Secular law. Since our initial capacity to handle trade disputes will be small, the fact that only a few will utilize this method will actually be to our benefit. Once an Islamic model for settling trade disputes comes into existence, people will be attracted to this model because they will see the advantages over conventional courts. Islam emphasizes speedy settlements, and also fairness and justice. Western systems of justice which are adversarial in nature, with a winner and loser. Islam seeks to find solutions acceptable to all, or at least those considered fair by all parties. The difference between these two approaches can easily be illustrated by actual practice in conventional western courts and by cases from our history.

In the US legal system, justice is an incidental by-product of a mediated struggle between opposing interests. An excellent discussion of the ethical issues is given by a panel of lawyers in “A case of competing loyalties” in Stanford Magazine (Fall 1983, p38-43). All on the panel agreed that a lawyer defending a male client known to him or her to be guilty of rape nonetheless is obliged to destroy the reputation of the female victim if this is the best possible defence. All agreed that the American criminal defence system is an adversarial process with artificial boundaries, rather than a pure search for truth.

The siege of Edirne illustrates the extremely high standards of Islamic justice. When supplies ran out, the army proceeded to requisition the necessities from the entire population. However, the Qazi ruled that the Kuffar who had paid Jizya had already paid for their defence and Muslims had no further claim on their properties. Despite life and death consequences, the seized properties were returned to the non-Muslims.

If we can achieve these standards of excellence, then people will flock to the newly found Islamic courts for settling trade disputes initially, and other disputes at a later stage. Once the taste for Shari’ah develops in the people, then a popular move to bring in the Shari’ah at a larger level will attract the popular support necessary for its implementation.

8. Concluding Remarks

وَيَأْبَى اللّهُ إِلاَّ أَن يُتِمَّ نُورَهُ وَلَوْ كَرِهَ الْكَافِرُونَ

There are many signs that an Islamic revival in underway. Many Muslims are working on many different fronts to bring about the changes which are needed to transform our current societies to genuinely Islamic ones. It would be our good fortune if Allah T’aala includes us among those who worked to bring this about, and makes us among those who are the apparent causes of this change.

Inspired by the powerful vision of Islam, the early Muslims changed the course of history. They derailed two powerful and ancient civilizations, and created a uniquely Islamic civilization the likes of which had never been seen before. This endured for a thousand years, much longer than any other enterprise of its kind. Among the many unique features of this civilization, one was that the conquests and empire was motivated by the command of God to go and spread the good to the whole world (“Amr bil Maaroof.”)

Thi na kuch taigh zani apni hukumut kay liay

Sar bakaf phirte they kya dahr main daulat kay liay?

This stands in contrast to other empires built for exploitation of foreigners and the search for glory and power. The many contributions that Islam has made to shaping human consciousness and all the world civilizations have been documented in many places; see for example Syed Abul Hassan Ali Nadwi’s book on the The Gifts of Islam to World Civilizations. In the period of dominance of the West, these contributions have been suppressed, but many recent books such as “The Theft of History” are now bringing them out in the open.

All signs point to the impending decline of the West. The most fundamental institution which shapes society is the family, where children receive instruction on what it means to be a human being and their responsibilities towards society. Western worship of wealth, careers, luxury, and greed have destroyed this institution so that large numbers of children growing up in the west are from broken families. Infidelity has become so commonplace that the leaders admit to having affairs and illegitimate children without provoking any serious censure. Children from broken homes do not experience the love of their mothers or the protective environment necessary for the development of basic social skills and sense of moral responsibility. The results are manifested in a recent large scale survey of high school children in the USA in which 30% admitted to stealing from stores.

The decline and fall of the West will not be of help to us. The rise of Islam can only be accomplished by our efforts to change ourselves and the help of Allah which will accompany such efforts. We must rise to challenge of finding bold and imaginative solutions to the multitude of problems currently facing all of humanity. We must realize that our traditions and Quran offer us wisdom and guidance which is outside the repertoire of the West. As single example, the framers of the constitution of the USA thought that it was too much to ask for a man to testify against himself, and protected him from this possibility via the 5th Amendment. However Allah T’aala expects us to be just even to our enemies and to provide testimony even if it goes against our personal interests and those of our kinfolk and friends.

يَا أَيُّهَا الَّذِينَ آمَنُواْ كُونُواْ قَوَّامِينَ بِالْقِسْطِ شُهَدَاء لِلّهِ وَلَوْ عَلَى أَنفُسِكُمْ أَوِ الْوَالِدَيْنِ وَالأَقْرَبِينَ إِن يَكُنْ غَنِيًّا أَوْ فَقَيرًا فَاللّهُ أَوْلَى بِهِمَا فَلاَ تَتَّبِعُواْ الْهَوَى أَن تَعْدِلُواْ وَإِن تَلْوُواْ أَوْ تُعْرِضُواْ فَإِنَّ اللّهَ كَانَ بِمَا تَعْمَلُونَ خَبِيرًا (4:135

4:135 O YOU who have attained to faith! Be ever steadfast in upholding equity, bearing witness to the truth for the sake of God, even though it be against your own selves or your parents and kinsfolk. Whether the person concerned be rich or poor, God's claim takes precedence over [the claims of] either of them. Do not, then, follow your own desires, lest you swerve from justice: for if you distort [the truth], behold, God is indeed aware of all that you do!

This standard of excellence is not conceived of in the Western canons. It was the job of the Prophet s.a.w. to demonstrate standards of behavior which exceeded the imagination of men, and this demonstration made it possible for other to follow in his way. For example, the way that the Prophet forgave sworn enemies who had done so much harm and personal torture of Muslims at the conquest of Mecca has been an inspiration and model for Muslim armies through history. No other people can offer similar examples. This time the same demand is being made of the Ummah as a whole. We must rise to present standards of behavior which are a model of excellence for all of humanity to follow. In the past, our forefathers rose to this challenge and created a civilization and culture which, according to Gibb “possesses a magnificent tradition of inter-racial understanding and cooperation.  No other society has such a record of success uniting in an equality of status, of opportunity, and of endeavours so many and so various races of mankind.” The same opportunity awaits us:

Sabaq phir parh Sadaqat ka, Adalat ka , shujat ka

liya jaye ga tuj se kaam Duniya ke Amaamat ka"

May Allah give us the taufeeq to grasp this opportunity, to live and die for His sake, and to utilize this short life to fulfill purpose for which He created us.


Ali Saheb Bijnori, Maulana Riyasat (1997) Shoora ki Shar’i Haysiat, [The Legal Status of Consultation], Sadiqabad, Pakistan: Ahsan-ul-Mataba

Lecture 6: Contrasts between Islamic & Western Economics

1. Introduction

There is substantial disagreement on the main features of Islamic Economics, on its subject matter, goals, appropriate methodology, etc. To address this difficulty, in a recent survey of the literature (Asad Zaman 2008a), the author has presented the key distinguishing features of Islamic economics, focusing on the contrast with conventional neoclassical economics. In this essay, we present in detail some of the background which necessitates this differentiation between conventional and Islamic economics. We believe that development of the discipline has been substantially hindered by writers who have sought to create conformity between the two. In the words of Nasr (1991), Islamic Economics has “failed to escape the centripetal pull of Western economic thought, and has in many regards been caught in the intellectual web of the very system it set out to replace.” It is our hope that this delineation and demarcation will create greater consensus on the nature of Islamic economics, and focus future efforts in more fruitful directions.

2. Goals of the Economic System

The first and most important feature which differentiates the Islamic views on economic affairs from Western conceptualizations is the goal of the economic system. The goal of the capitalist system is to increase wealth (or GNP per capita). The goal of the Islamic commands pertaining to economics is to use wealth to purchase the comforts of the hereafter – that is, to achieve spiritual progress.

2.1: Wealth is a Means to an End in Islam.

We cite below two leading scholars, in support of our view expressed above. Both state that economic activity is a means to an end, and not an end in itself, and that is the main factor which differentiates Islamic Economics from conventional economics. Many other authors on Islamic economics have expressed similar views; see Asad Zaman (2008a) for further references.

No doubt that Islam is opposed to monasticism, and views economic activities of man as quite lawful, meritorious, and sometimes even obligatory and necessary. It approves of the economic progress of man, and considers “Lawful or righteous livelihood” as an “obligation next to the obligations” – that is to say, an obligation of the secondary order. Notwithstanding all this, it is no less a truth that it does not consider “economic activity” to be the basic problem of man, nor does it view economic progress as the be-all and end-all of human life. Mufti Shafi (1978)

(Difficulties & perplexities in understanding economics arise because:) economic problems, which form a part of the larger problems of human existence, have been separated out of the collectivity and considered in isolation. This tendency eventually grew to the extent that economic problem became the central problem of human existence. This second mistake was even larger than the first. Maududi (1970)

The tendency towards greed and acquisition of wealth is built into human beings (Q89:20 And ye love wealth with inordinate love!) , and the Quran and Hadeeth warn against this in numerous places:

[Woe unto him] who amasses wealth, and counts it. He thinks that his wealth will be with him forever. Q104:2,3

In another verse -- “Q2:219 – They ask you as to what they should spend. Say ‘what is left over’” – it is specified that wealth which is in excess over needs should be spent for the sake of Allah. Thus the Islamic view is that wealth should be spent on others, for the sake of Allah. This is distinct from the Western view, now also gaining currency in Muslim countries, that wealth should be spent on one’s own self in the form of luxuries, or else hoarded and accumulated.

2.2 Wealth is an End in Itself in Capitalism

A defining characteristic of capitalism is the pursuit of wealth, and the use of wealth as a yardstick to define development and progress. For example, Weber writes that the ‘spirit of capitalism’ is defined by the ethic of pursuit of wealth:

In fact, the summum bonum of this ethic, the earning of more and more money, combined with the strict avoidance of all spontaneous enjoyment of life, is above all completely devoid of any eudaemonistic, not to say hedonistic, admixture. It is thought of so purely as an end in itself, that from the point of view of the happiness of, or utility to, the single individual, it appears entirely transcendental and absolutely irrational. Man is dominated by the making of money, by acquisition as the ultimate purpose of his life. Economic acquisition is no longer subordinated to man as the means for the satisfaction of his material needs. Weber (1955, Chapter 2).

He attributes this ethic as arising from a certain interpretation of the Bible favored by Protestants (in particular Calvinists), and ties the emergence of capitalism to Protestantism. There has been substantial debate and reactions to Weber’s thesis, but no one has questioned his characterization of the spirit of capitalism (documented by many references) as being the pursuit of wealth, as an end in itself. A leading sociologist, Arrighi (1997), in "Globalization, State Sovereignty, and the 'Endless' Accumulation of Capital," and elsewhere, has also put forth the thesis that this pursuit of wealth by capitalist societies can be seen as the root cause of many different social and economic transformations of recent history.

6. Using Material Wealth for Spiritual Pursuits

What are the ends to be achieved by the use of economic means? A clear and comprehensive statement is provided by the Quran:

(Q28:77) "But seek, with the (wealth) which Allah has bestowed on thee, the Home of the Hereafter, nor forget thy portion in this world: but do thou good, as Allah has been good to thee, and seek not (occasions for) mischief in the land: for Allah loves not those who do mischief."

Wealth is to be used to pursue the home of the hereafter (by doing things which will please Allah). Also, since wealth has been given to us a gift from Allah, we should also be generous in giving to others. These principles contrast starkly with Western views that wealth is to be used for luxuries, conspicuous consumption, and to generate more wealth – all three of these goals are specifically prohibited in Islam. Since our property is a trust from Allah and we cannot do with it as we please. Those who do not believe are quoted as saying that they have earned their wealth through their own efforts, and therefore have a right to do as they please with it:

(Q 11:87) They said: "O Shu'aib! Does thy prayer (religion) command thee that … we leave off doing what we like with our property? " .

In particular, pursuit of luxurious lifestyles and pleasure of this world is not the object of wealth; the Quran condemns the pursuit of idle desires (Q45:23,Q64:15-16), and emulation of the luxurious lifestyles (Q3:196).

These encouraged modes of behavior are not primarily for the economic welfare of society; that is a fringe benefit. Rather, behaving in these ways will bring us closer to God, leads to spiritual development, and develop the potential within us to be better than the angels. This is made explicit in: (Q92:18) he that spends his possessions [on others] so that he might grow in purity. In fact, all our efforts, striving, living and dying are directed towards God and God alone (Q6:162). For example, a comprehensive command of God, which subsumes all others, is “to enjoin the good and prohibit the evil.” We must do good (participate with our wealth and life in socially beneficial projects), encourage others to do so, and participate in good projects initiated by others. We present evidence that this command is targeted at internal spiritual development, and not necessarily social development:

• The Quran describes a community with three groups: the evildoers, others who did not do evil themselves but continued to associate with the evildoers, and a third group who called on the evildoers to stop (despite apparent futility of doing so). When the evildoers did not stop, the community was punished by God, and only the third party escaped punishment. (Q7:163-165)

• In (Q1:6-7), God describes some people whose hearts have been sealed off from the Truth (because of their evildoing). The verse continues that “It is the same for them whether you preach to them or not.” Interpreters of the Quran have said that while it is the same for them (since their hearts are sealed) it is not the same for us; we are commanded to preach even if there is no possible effect on outcomes. (e.g. Shafi [1993, vol 1, p 119])

• According to Hadeeth, the best Sadaqah is that best sadaqah is that of the pauper who labors, earns money and then gives it as sadaqah. In Ihya-Uloomudding, Ghazali also says that a sadaqah is not accepted unless the donor realizes that his benefit in *giving* the sadaqah is more than the gain of the recipient of the sadaqah in *getting* the sadaqah.

All of these show that the purpose of charity is to bring the giver close to Allah (and not directly to benefit the recipient). Similarly the purpose of preaching is not necessarily to achieve social change (although this will usually happen) but to bring about an inner transformation and achieve spiritual development. It is explicit in the teachings of Tableeghi Jamaat, the largest international Islamic movement currently, that the object of preaching to others is self-transformation (see Syed Abul Hasan Ali Nadvi 1990, or Metcalf 1996). We illustrate the effects of the priority of this internal goal over the apparent external one by an important example.

The Quran encourages the rich to spend on the poor and to encourage others to spend on the poor – this will develop compassion and generosity, and create an ethos of giving and community feeling within the society. If one mistakes the intention of the command to be ‘helping the poor,’ one might advocate forcibly taking from the rich and giving to the poor if the rich do not give voluntarily – several authors have fallen into this trap. However, forcible policies will not achieve the desired ends of harmony, mutuality and community feeling between the rich and the poor. In general, the poor will not have the power to enforce such redistribution. In cases that they do (like the French Revolution and the Russian Revolution) class conflict, hatred, and injustice will result.

7. Spending For the Sake of Allah

Tremendous emphasis is placed on spending money for the sake of Allah. This is the primary purpose of acquisition of wealth. In the opening lines of the Quran, the believers are characterized as those who spend on others:

(Q2:2-3) THIS DIVINE WRIT - let there be no doubt about it - is a guidance for all the God-conscious. Who believe in [the existence of] that which is beyond the reach of human perception, and are constant in prayer, and spend on others out of what We provide for them as sustenance.

7.1 Encouragement to Spend:

Those who came to the Prophet for advice about what to do with (surplus) money, were advised to invest it in the Hereafter. Kahf (2007) writes that the word “Infaq” --spending for charity – is mentioned in the Quran 167 times, many more than the combined mention of the famous four practical pillars of faith. The number of Ahadeeth which encourage spending for the sake of Allah is extremely large, and many collections of such Ahadeeth have been made in book form (for example, Fazail-e-Sadaqat). The emphasis in these is to change our ways of thinking to value the gains of the Hereafter over the gains of this world. For example:

2:261 The parable of those who spend their substance in the way of Allah is that of a grain of corn: it groweth seven ears, and each ear Hath a hundred grains. Allah giveth manifold increase to whom He pleaseth: And Allah careth for all and He knoweth all things.

In Hadeeth, it is narrated by Ayesha r.a. that a goat was sacrificed, and the meat was distributed. The Prophet s.a.w. asked about what was left. Ayesha r.a. responded that only one shoulder of the goat remained. The Prophet s.a.w. said that everything remains except for this shoulder – that is, that which has been distributed has been permanently saved for the hereafter, while that which has not been distributed has been lost to the hereafter.

7.2 Purposes of Spending:

In general, the purpose of spending for the sake of Allah is to please Allah and to purchase the home of the hereafter, as discussed earlier. More specific guidance is provided in several verses of the Quran and in the Hadeeth.

3:92 By no means shall ye attain righteousness unless ye give (freely) of that which ye love; and whatever ye give, of a truth Allah knoweth it well.

Spending is a means of attaining righteousness (Q3:92). According to Hadeeth, “The creatures are all dependent on God, and the most beloved by Him is the one who is most beneficial to His dependents.” Thus spending and treating others well will win for us the love of God. Spending on others is an expiation for sins (Q64:17), a way of warding off the punishment of God, a compensation for religious obligations one is unable to fulfill, and a way towards self-purification and spiritual progress (Q92:18). Spending on others is a way to cure one’s heart of covetousness, greed, and acquisitiveness:

[Q64:16] Remain, then, conscious of God as best you can, and listen [to Him], and pay heed. And spend in charity for the good of your own selves: for, such as from their own covetousness are saved – it is they, they that shall attain to a happy state!

7.3 Suggested and Preferred Categories of Expenditure:

Many possible beneficiaries on whom to spend our money on others have been designated in the Quran and Hadeeth. Our kinfolks, the traveler, the needy, those who ask for help, those who are deprived (of basic needs), orphans, widows, the sick, the indebted, neighbors and many other categories are specifically mentioned in the Quran and Hadeeth. Protecting domestic and wild animals and the environment, and providing infrastructure to support such ventures, also falls within the category of providing benefits to the creation of Allah, and hence is a recommended use of wealth. With this vast category of potential beneficiaries, a prioritization is necessary. The priority is to spend locally, and on urgent needs – the next of kin are the first targets, and our own neighborhood should be the first place where we spend our money. Then there is an increasing and widening circle of responsibilities for those who are capable to handling them. There is also a distinction between one-time spending for some specific need, and long term spending. Digging wells for water, and funding Trusts (Awqaf) for long term use on any beneficial purpose is called sadaqah jaria. Such actions continue to earn rewards even after death and have been strongly encouraged. In response to these encouragements, Muslims have set up millions of Awqaf for all sorts of charitable purposes. About one third of the land in the Ottoman empire had been endowed to some trust for charity. Similar figures have been calculated for the lands in the Mughal empire in India.

7.4 Codes of Conduct for Charity

Allah T’aala created life and death so that He could see which of us does the best deed. A charitable act is not merely giving of money to poor. There are many dimensions to this act of charity, and fulfilling all of the required conditions is what it takes to make a good deed. This life is a competition between us to see who can do the best of deeds. Below we list the requirements for a successful act of charity.

Intention: First and foremost, the intention of a charitable act must be to please Allah.

2:265 And the likeness of those who spend their substance, seeking to please Allah and to strengthen their souls, is as a garden, high and fertile: heavy rain falls on it but makes it yield a double increase of harvest, and if it receives not Heavy rain, light moisture sufficeth it. Allah seeth well whatever ye do.

This verse specifies that the intention of the act of giving must be to please Allah, and to achieve spiritual progress. If one spends in charity with the intention to be seen and praised by others, this is not acceptable to Allah (Q4:38). Similarly, giving to somebody currently in need with the idea that he may someday return the favor, does not qualify as charity in Islam. Giving in secret is generally preferred to giving openly, mainly because giving anonymously and in secret is a safeguard against the possibility of “Riya” or giving for show. (Hadeeth 15 p104 Fazail Sadaqat) Allah loves best those who give in secret. However giving openly may be preferred when it induces others to give. The Quran praises both those who give secretly and those who give openly:

2:274 Those who (in charity) spend of their goods by night and by day, in secret and in public, have their reward with their Lord: on them shall be no fear, nor shall they grieve.

Expect recompense from Allah Alone: Just as the act of charity is motivated by the love of God alone, so we must expect compensation from Him alone.

[Q76:8,9] and who give food - however great be their own want of it - unto the needy, and the orphan, and the captive,[saying, in their hearts,] "We feed you for the sake of God alone: we desire no recompense from you, nor thanks”.

We do not even expect the receiver to feel gratitude, nor do we expect any recompense from him. It requires training to learn to feel this way, since one naturally expects gratitude in return for gifts or charity. Imam Ghazali and other spiritual leaders teach us that we should feel gratitude towards the recipient of charity, as he/she provided us with a means and an opportunity to do a good deed which was pleasing to Allah.

Give with Good Grace: Money or Favors should be given generously, with good grace. While giving charity one must not insult, degrade, or injure the dignity of the recipient in any way. Similarly, one should not hold the favor over the recipient or remind him of it. A proverb says that “Do good, and throw it into the river.”

[Q2:262] Those who spend their substance in the cause of Allah, and follow not up their gifts with reminders of their generosity or with injury,-for them their reward is with their Lord: on them shall be no fear, nor shall they grieve.

Begging is prohibited except where absolutely necessary, and the poor are encouraged not to display their needs. Instead, the rich are encouraged to seek out poor.

2:273 (Charity is) for those in need, who, in Allah's cause are restricted (from travel), and cannot move about in the land, seeking (For trade or work): the ignorant man thinks, because of their modesty, that they are free from want. Thou shalt know them by their (Unfailing) mark: They beg not importunately from all the sundry. And whatever of good ye give, be assured Allah knoweth it well.

The famous Mohaddith Imaam Sha`abi Rahmatullah alaihe has said that unless a

rich person considers himself more in need of reward from Allah for his Sadaqah

than he thinks the poor person to be in need of his Sadaqah, he has wasted his

alms, which would be thrown back on him (Ihya-Ul-Uloom).

Give the Best of What You Have: Since wealth spent on charity is actually preserved for us in the hereafter, we should spend from the best of what we have:

2:267 O you who have attained to faith! Spend on others out of the good things which you may have acquired, and out of that which We bring forth for you from the earth; and choose not for your spending the bad things which you yourselves would not accept without averting your eyes in disdain. And know that God is self-sufficient, ever to be praised.

This is in contrast to our natural inclinations to give away in charity those objects which we are planning to throw away, or are no longer useful to us. When the verse [Q3:92, quoted above] was revealed, Abu Talha came to the Prophet s.a.w. and indicated that he loved the well “Beerha” best among his possessions. Since Allah T’aala has commanded us to spend from that which we love, he wished to give away this best loved possession in charity. [Fazail Amal Chap 6 Hadeeth 9].

Rewards are in Proportion to Sacrifice: Allah has praised those who give even though they are themselves hungry. We should not wait to become wealthy before spending on others. Some people earned money to give to others. A companion gave a handful of dates, which was very small compared to other donations. The Prophet rebuked those who laughed. With respect to this principle, the Quran states that:

Q65:7 [In all these respects,] let him who has ample means spend in accordance with his amplitude; and let him whose means of subsistence are scanty spend in accordance with what God has given him: God does not burden any human being with more than He has given him - [and it may well be that] God will grant, after hardship, ease.

This set of codes of conduct for givers of charity is matched by a parallel set of codes for the receivers of charity. All Muslims are required to earn for themselves and not be a burden on others (see Taseen 1998). Anyone who has sufficient material for his needs is not permitted to ask others for assistance. Since all our actions must be directed towards Allah alone, even the needy are encouraged to conceal their needs from humans and ask only Allah for assistance.

8 Islamic Concept of Man

Islamic economics and conventional Western theory differ fundamentally regarding how they conceive of human beings. This has immediate impact on the methodology adopted for the study of human beings, or social science.

The Islamic view of humans is dynamic and complex. It is acknowledged that greed and other base motivations exist in humans:

(Q3:14) Fair in the eyes of men is the love of things they covet: Women and sons; Heaped-up hoards of gold and silver; horses branded (for blood and excellence); and (wealth of) cattle and well-tilled land. Such are the possessions of this world's life; but in nearness to Allah is the best of the goals.

(Q50:16) It was We Who created man, and We know what dark suggestions his soul makes to him: for We are nearer to him than (his) jugular vein.

Even prophets are subject to temptations; Prophet Yusuf is quoted as saying that [Q12:53] "Nor do I absolve my own self (of blame): the (human) soul is certainly prone to evil, unless my Lord do bestow His Mercy: but surely my Lord is Oft- forgiving, Most Merciful."

Islam is concerned with transformation of men from followers of these base desires to those concerned with achieving higher goals. It was this change and transformation of the companions of the Prophet, which revolutionized the world and changed the course of history. Allah T’aala has “[Q90:10] shown him [man] the two highways [of good and evil]” and asked him to choose the good: (Q73:19) Verily this is an Admonition: therefore, whoso will, let him take a (straight) path to his Lord! . Thus it is clear that men have been shown the two paths, and given choice between good and evil. It is also true that, at some level, all human beings know the good from the evil (Q75:14), and therefore are responsible for their moral choices. Men know good from evil and are inclined to do good and refrain from evil. Repeated wrongdoing leads to loss of this moral sense, and breakdown of the internal moral compass that everyone is born with. However the door of repentance is always open, and anyone who wishes to can find a pathway to his Lord.

This Islamic view about humans conflicts in important ways, detailed below, with assumptions about humans embedded in Western social sciences. The use of the term ‘science’ indicates the desire to emulate physical sciences, which was generated by the tremendous prestige of physical sciences in the West. To achieve the scientific objectives of explanation, prediction and control, the material under study should be subject to fixed laws of motion. These laws can be ascertained by observing the subject matter carefully. In social science, it is necessary to assume that human beings have fixed characteristics and these determine their patterns of behavior in various types of social environments. Islam teaches us that these assumptions fail in important ways to describe human behavior.

8.1 Freedom

Man is free to choose between good and evil:

33:72 Verily, We did offer the trust [of reason and volition] to the heavens, and the earth, and the mountains: but they refused to bear it because they were afraid of it. Yet man took it up - for, verily, he has always been prone to be most wicked, most foolish.

This means that the past history does not determine the future behavior of man. A man who is drowning in sins, and has no apparent redeeming aspects may choose to become good – many traditions to this effect exist. Similarly, a man who has always been pious may choose an evil act in a moment of weakness. Allowing for this freedom is not possible in the context of a ‘scientific’ methodology since it does not allow for any laws of motion to govern the behavior of man. The future behavior of an individual, and also of a society consisting of individuals, cannot be predicted by studying the past. Perhaps the best example of this freedom is the emergence of Islam from the deserts of Arabia. Nothing in the past history of the Arab Bedouins would lead to a prediction of their initiation of a civilization which would dominate the world for a thousand years. Just as the actions and beliefs of a single man changed the world, so we all have the potential power, given by God, to change the paths of history.

Q24:55 Allah has promised, to those among you who believe and work righteous deeds, that He will, of a surety, grant them in the land, inheritance (of power), as He granted it to those before them; that He will establish in authority their religion

The strategy of observing matter and particles to discover their laws of motion has proven to be a brilliant success at unlocking the mysteries of nature. Can this strategy be applied equally successfully to the study of man and society? This is what Western social science attempts to do. Our contention is that the same methodology cannot be successfully applied. The idea that laws of motion derived from the past will help predict the future is often seen to be contradicted by human history. The Russian Revolution was sparked by the visions and dreams of a small number of people inspired by Marxist writings. No study of Russian history could lead to a prediction that this type of event was in the making. World War I seems to be another “butterfly event,” where a sequence of small and unpredictable acts of individuals were immensely consequential. Examples could be multiplied. We contend that history is made by men who dream of things that do not exist and inspire others to follow those dreams. Since these dreams are not rooted in the past, studying the ‘why’ of the past does not provide a good guide to the future. This makes the scientific method unsuitable to the study of man. Unlike human beings, particles do not have dreams, visions, and the free will to escape from the forces of past and determine their own trajectories (although quantum theorists may dispute this issue).

8.2 Plasticity

A second key element of human makeup is plasticity. In fact, Islam teaches us that all children are born on Islam, which is the religion of nature (Deen-ul-Fitrah), but childhood training causes them to deviate from the natural path. This does not mean that children are naturally cooperative and generous; rather, the recognition and appreciation of virtuous behavior is built into their hearts. This makes it easy to train them to be good. However, one can also train them in any other direction. Constant repetition, and habituation, can make almost any type of behavior appear natural.

Q6:108 …: For, goodly indeed have We made their own doings appear unto every community.

Q23:53 But people have cut off their affair (of unity), between them, into sects: each party rejoices in that which is with itself.

Whatever a community chooses to do starts to appear good to it. Thus there is no ‘essential nature’ of man which can be obtained by careful observations. Natural behavior is different in different communities as anthropologists have learned, and each community considers their own norms to be correct and good. The tremendous diversity of norms of acceptable behavior in different societies as well as the tremendous change in social norms in the USA in the recent past shows that there is no ‘natural state,’ which could be learned by studying this behavior.

The ‘scientific’ assumptions of fixed characteristics (as well as fixed laws of motion) play an important role in the formulation and assessment of research problems. Economists have assumed that people are selfish, but substantial evidence of cooperative behavior which may not serve self-interest has emerged. Thus the question “Are People Selfish or Cooperative?” is the title of a section in a literature survey of experiments on public goods by Ledyard (1995). Experiments on behavior show that people are neither. A small minority of people are unfailingly cooperative, a greater number are invariably selfish, while a majority exhibit different behavior in different circumstances. The idea that human behavior is plastic suggests that the question itself is not well-posed. Under suitable circumstances, even the most selfish person might choose to behave generously. Similarly, very generous people might choose to behave selfishly in certain circumstances. Evidence for this plasticity is provided by ‘framing effects’ discovered in behavioral studies: people respond to slight and theoretically inconsequential changes in experimental setups. The scientific method of detached observation is suitable under the assumption that man has a fixed nature which can be observed. If human nature is plastic, then the type of questions which need to be asked changes.

8.3 Human Development

Current Unsatisfactory State of the World: The results of unconstrained pursuit of material wealth in the West have been extremely unsatisfactory in many dimensions. Every day 25,000 people die of hunger, when only 0.7% of the GNP of twenty two nations would be enough to eliminate this problem (see, for example, ). The extraordinarily high standards of living in the West have been purchased at an extremely high cost to the world and the environment. Douthwaite (1999) has listed the ways in which this growth is an ‘illusion’ created by methods of calculating GNP which do not consider the huge costs incurred by these developments. As a single example, suppose that coal factories lead to lung cancer in many workers and neighboring cities. Standard accounting procedures would add BOTH to the GNP, one in the form of value of coal and wages of labor, the other in form of productivity of hospitals and income of doctors and the additional production of medicine. Many studies (e.g. Lane 2001 and Layard 2005) show that acquiring material wealth has not resulted in increase in happiness, satisfaction, well-being or contentment with life in the West.

Shift of Development Focus to Humans: All this has led to substantial reconsideration of the idea of development in the West. In the economic domain, early growth models of Harrod-Domar variety stressed the importance of ‘capital accumulation’ in the growth process. Careful analysis of growth experiences revealed that much of the observed economic growth could not be accounted for by capital accumulation. This lead to a search for alternative factors which caused growth. Many different lines of investigation have emerged, but all of them share a common thread: much greater emphasis on the human factor. Within standard economic theory, the role of human capital has come to be regarded as extremely significant to the process of growth. A recent book entitled Where is the Wealth of Nations? by Hamilton (2007), shows that by far the largest component of wealth of nations is embodied in human capital. This is much more significant than material wealth in the form of agricultural land, natural resources or the like. Similarly, Knowledge and the Wealth of Nations by Warsh (2007), shows the crucial role that human beings and their ideas (knowledge) have played in the development and growth process. All this research has shifted the focus of growth theory and determinants of growth from material factors to the human factor. However, as detailed below, many critics maintain that the impact of these new ideas on conventional economics has been mostly cosmetic, and is too little, and too late.

Islamic View of Knowledge: Knowledge has been given prime importance in Islam. The first word of the revelation was “Iqra” or “Read, in the name thy Lord”. There are large numbers of Ayat in the Quran, and larger numbers of Ahadeeth stressing the importance and superiority of the one with knowledge to the one who merely worships. That this stress on knowledge was absorbed by the early Muslim community is illustrated by many incidents. A striking one is the release of prisoners from Badr in return for their teaching reading and writing to 10 Muslims. Many authors have pointed out that Arabs had an oral culture, and this emphasis on reading and writing started with Islam (e.g. Kazmi 2005). Others have also attributed the rise and rapid growth of Islam to the thirst for knowledge inculcated in Muslims by their religion. The current state of decay and decline may also be attributed to the widespread ignorance and illiteracy among us. El-Ghazali (1994) has pointed out that human beings are central to the process of development in the Islamic perspective.

Alternative Views of Development: From a broader perspective, many have questioned fundamental assumptions of economists about growth. Conventional economic development theory is closely allied to modernization theory (e.g. Rostow 1978), which maintains that to develop is to become Western in all aspects (cultural, social, political, and economic), and this appears wrong. See Nkurunza (2007) for references to the Western internal critiques, and Arshad Zaman (1989) for a critique from the Islamic point of view. The idea of ‘human capital’ implicitly considers human beings as a factor in the production process. Many authors have argued that human beings are not a means to the end of production of wealth; they are the goal and the target of the development process. This change in perspective creates substantially different emphases on how to go about development. The crucial role of social capital, cooperation and trust in the development process is being recognized. Soft targets like governance, elimination of corruption, development of character are gaining increasing recognition as important components of the development process. Sen (2000) has discussed development in completely unconventional terms as being best viewed in terms of freedoms, and capabilities, of human beings.

Islamic Views: These are areas where traditional Islam excels, while Western approaches, which lack a moral basis, flounder and fail. Corruption, injustice, oppression, and many other evils of the culture of Jahiliyya were eliminated by the rise of Islam. The work of the Prophet and his companions led to a society of highly moral and responsible human beings, who were compassionate and considerate, and devoted their lives to the purpose of spreading the benefits of Islam to the World. Removing current failings of Islamic societies in terms of the key Islamic virtues of honesty, trustworthiness, and fulfillment of contracts can be seen as the key to future development. The perfect example has already been given to us in the shape of the efforts of our Prophet s.a.w. and his companions. It remains to emulate his work in our life and to propagate these characteristics in our societies.

Freedom for Minorities: The idea that Islamic conception of society is based on cooperation and harmony leads to the question of how minorities with different religious views would be handled. In fact, this cooperation and harmony also extends to minorities, to the extent possible. For example, obedience and respect for non-Muslim parents is necessary except when they order us to disobey God. Similarly, the Prophet himself will be the claimant on behalf of wronged non-believers. Religious minorities are given as much freedom as is practicable, to the extent of having their own personal law. This level of liberty to minorities has not yet been achieved in the West. Historically, Islamic civilization has displayed much greater tolerance and provided much greater freedom to minorities, than has ever been achieved in the West. See Waliullah (1961) and Walbridge (2002) for the history of the intellectual tradition of tolerance in Islam. In particular, the concept of allowing minorities a personal law separate from the overall law for the state is a radical innovation which achieves a level of freedom for subcultures currently not available anywhere in the West. See Menocal (2003) and Lowney (2005) for Muslim Spain, and Akyol (2004, 2006) for the Ottoman Empire and a symposium on Islam and Religious Freedom. In Human Development Report: Cultural Liberty in Today’s Diverse World by Sakiko Fukuda-Parr (2004), the provision of cultural liberties (of the type provided historically in Islamic civilizations) is presented as one of the pressing needs of the world.

9. Islamic Methodology.

The life of the Prophet s.a.w., and that of his followers, was devoted to a single purpose: to bring the message of God to human beings (Q12:108) ). The message has the power to transform lives. The culture of Arabia was completely transformed. Today our job as Muslims remains the same. An important aspect of this transformation is to change our own thinking, and that of the whole world about wealth and money. In response to the teaching of the Prophet s.a.w. The Companions of the Prophet learned how to spend money to purchase the Hereafter, as testified to by numerous incidents detailed in numerous collections of Ahadeeth (see for example, Fazail-e-Sadaqat). Companions who came to the Prophet for advice about how to spend their wealth were often advised to spend it on others.

The lifetime effort of the prophet was to change human beings, and hence society, by the process of “Commanding the good and forbidding the evil.” The whole life of the prophet is a lesson in how this social transformation is to be brought about. The effects of his efforts are reflected in the lives of more than a billion people, more than fourteen centuries after the end of his mission. The responsibility for this mission to spread the good was transferred to his followers:

Q3:110 YOU ARE indeed the best community that has ever been brought forth for [the good of] mankind: you enjoin the doing of what is right and forbid the doing of what is wrong, and you believe in God.

Throughout history, nations have been inspired by different visions and driven by different goals. Some have sought world domination and leadership, or riches and comfort, or cultural achievements. As noted by historian Hodgson (1974), the idea that the common goal of the Muslim community is to spread the good and prohibit the evil is unique. This vision guides all aspects of Islamic society. It is also forms the basis for the methodology of Islamic economics.

Is Islamic economics normative or positive? In light of the previous paragraph, the answer is neither – Islamic economics is transformative. The Quran asks us to change the world by inviting all human beings towards the good. A few elements of the ‘good’ in the economic domain have been spelled out earlier. Because of the comprehensive and integrated nature of Islamic teachings, it is not possible to separate the economic domain from other domains of life. This has been remarked by many writers on Islamic Economics. Some of the key features of Islamic economics would be to implement the teachings of Islam in our own lives and those of our students. We would also seek to spread the vision of justice and compassion for all – that is, not only must we feed the poor, we must also urge the feeding of the poor. Thus Islamic economics should be action oriented. The ivory tower model of disinterested scholars does not suit us. Our teachers should be passionate and committed, and involved in solving social and economic problems of the community utilizing the teachings of Islam. They should also involve the students in such work, which should form basic material from which the theory of Islamic economics is constructed.

The idea that Islamic economics is transformative resembles the Marxist concept of “Praxis” – Marxists do not seek to study the world but to change it. There is a key difference with Islamic ideas, however. Muslims struggle for justice, equitable economic outcomes, etc. because such struggle will bring about an inner spiritual transformation, and take us closer to God. Thus the goal of the struggle is spiritual, rather than material. Marxists emphasize material outcomes to the extent that they suggest that ideals, philosophies, and visions are also conditioned by the material prospects of human. Islam denies this emphatically, and tells us of the primacy and dominance of the spiritual over the material world. Human history bears witness to this primacy, as demonstrated by numerous instances of men with vision who have changed the world without any apparent material means of doing so.

10. Concluding Remarks.

In this paper, it has been our goal to show that Western social science takes as its premise a secular society consisting of self-interested individuals without souls and common goals. It is thus singularly inappropriate to adopt these teachings in Islamic societies. Insights that Islam has to offer about economics are, even now, superior to the best advice available from the most expert Western economists. By following Islamic teachings of simplicity and contentment, the Islamic society would manage to be better off with a far lower level of consumption than current Western levels. This would lead to a higher savings rate, which has been the marker of all high growth economies in the twentieth century. Higher savings is necessary but not sufficient for growth. Islam teaches us to spend money in excess of our needs on others and on social welfare. Recent research shows that the major component of wealth is embedded in humans. If we spend on others, we will increase cooperation and harmony, and increase the level of ‘social capital,’ and trust, recently identified as keys to development. In the past, Islamic societies have provided educational and health services for the entire population on a purely voluntary basis. If we can return to these values, we can enjoy the best of both worlds.

The idea of competition lies at the heart of the Western economic system, while cooperation lies at the heart of the Islamic economic system. The Western system was developed for a secular society, where common goals and cooperation could not be assumed. It takes as a basis a society of people pursuing individual selfish interests, which may or may not be in harmony. For example, Nobel Prize winner Friedman (2005) urges firms to pursue profits without regards to social considerations. Islam assumes common social goals, and commands us to cooperate. The golden rule is enjoined in the Hadeeth, as well as the idea that we cannot be believers unless we love one another. Following these commandments, and urging others to follow them, will change the world for the better.

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Lecture 7: Roots of European Thought

1. Introduction

A dramatic transition in ways of thinking took place in Europe between the sixteenth and the eighteenth century. Tawney (1930) describes this transition to secular ways of thinking as follows:

The theory of a hierarchy of values, embracing all human interests and activities in a system of which the apex is religion, is replaced by the conception of separate and parallel compartments, between which a due balance should be maintained, but which have no vital connection with each other.

An essential ingredient of secular thought is the idea that there are spheres of human life and intellectual effort which are not connected to religion. Islamic teachings match pre-modern European thought that religious considerations are of paramount importance in all spheres of life. In dramatic contrast, eighteenth century European thought treats social, political and economic thought without reference to religion or the spiritual aspirations of man. Tawney (1930) has documented this revolution in thought, and also provided the complex and subtle historical details of how it came about in England.

Since then, secular thought has come to dominate the world, influencing the thinking of all across the globe. Religion has been virtually driven out of the public sphere. Removal of religious barriers against greed, hedonism and individualism has led to

• social catastrophes: breakdown of families and community.

• political calamities: immoral wars conducted for control of resources.

• Environmental disasters: pollution, global warming, destruction of species and forests, all for the sake of multinational profits

• Financial Crisis: Ponzi schemes, large scale speculative gambling, and fraudulent practices encourage by putting greed above all social considerations.

More recently, the harmful effects of relegating spirituality and morality to a personal and private choice have become obvious for all to see.An effort is being made to reintroduce religion, spirituality and morality into debates and intellectual arenas from which they have been long excluded.

Our goal in this article is to review some neglected and forgotten aspects of European history which led to this transition from religious based thought to secular ways of thinking. As Western education has become widespread throughout the Islamic world, some aspects of secular thinking have also become widely accepted by Muslims. Secular thought is clearly incompatible with Islam, which is a complete religion and provides guidance in all spheres of life. Maulana Syed Abul Hassan Ali Nadvi has highlighted the conflict between Islam and Modernity taking place all over the world in Islamic societies. Our object is not to present a comprehensive or balanced picture of this European history, which has been done by many authors, in many books, from many different angles. Instead, we will highlight certain ingredients which are especially important to Muslims in the struggle to resist the encroachment of secular thought into Islamic societies. In particular, we will put stress on those teachings of Islam which create barriers against replication of the European history of loss of faith.

2. The Corruption of the Christian Clergy

The chain of events leading to the modern secular world was set in motion by what Barbara Tuchman has called “the most momentous event in the history of Europe” in her book The March of Folly. This is the corruption of a sequence of Popes in the sixteenth century which led to the rise of the Protestants and the Reformation. The following quote about Pope Alexander VI, who purchased his Papal Office (a sin called simony often legislated against by the Roman Catholic Church without much effect) illustrates some aspects of this corrupt behavior:

The already corrupt Papacy reached perhaps its ultimate depths during the reign of Rodrigo Borgia, who was elected to the papacy in 1492 … and who assumed the name Pope Alexander VI. (When) Borgia … became pope, myth and legend quickly rose up around his family. Alexander VI had four acknowledged children, three males and one female. Alexander VI was himself known as a corrupt pope bent on his family's political and material success, to an even greater extent than Sixtus IV had been. It was no secret that Alexander VI's oldest son Cesare, was a murderer, and had killed many of his political opponents.


Political power wielded by Popes led to countless actions more worthy of Machiavelli than of spiritual leaders, representatives of God on Earth. The famous saying “Power corrupts, and absolute power corrupts absolutely,” was coined in response to wrongdoings of Popes. It is worth noting parenthetically that 1492 was laden with events which changed the course of history. This was the year the Muslims finally lost their last foothold in Spain, and also the year in which Columbus sailed to discover the Americas. All three of these events continue to have significant impacts to this day. Some of the effects of the corruption of the church have been listed below:

Since the middle of the 15th century discontent with the state of the church was widespread:

• The wealth of the church had lead to spiritual shallowness and demoralization of the clergy. In Germany every 9th inhabitant was a member of the clergy. Though the church officially demanded for celibacy of the clergy, most clergymen had more or less clandestine sexual relations to women. Once even an illegitimate son of a pope was elected as pope.

• High clerics (bishops, abbots, canons), often delegated their pastoral duties to uneducated vicars to have more time for a luxurious life or at best for studies.

• A tendency to transform the churches instruments of salvation into legalism and profit: the personal confession to a priest (with spiritual guidance) had been turned into a system of preaching torments of hell, imposing severe penitence and selling indulgence.

• Scholastic theology had become a sterile repetition of formulae and this affected also divine services for the population.


Widespread discontent with the Catholic Church set the stage for the success of the revolt against it led by Martin Luther. Pope Leo X used the sale of indulgences to finance a massively luxurious rebuilding of Rome replete with statues and other artistic accompaniments. In particular, those who gave alms to his favorite project, the new St. Peter's Basilica in Rome, would have their sins forgiven. These “indulgences” exacted money from the simple-minded among the faithful by promising them perpetual happiness in this world and eternal glory in the next. The false doctrine and scandalous conduct of the "pardoners" were an immediate occasion of the Protestant Reformation. The aggressive marketing practices of Johann Tetzel in promoting this cause provoked Martin Luther to write his Ninety-Five Theses, protesting against what he saw as the purchase and sale of salvation. In Thesis 28 Luther objected to a saying attributed to Tetzel: "As soon as a coin in the coffer rings, a soul from purgatory springs". The Ninety-Five Theses not only denounced such transactions as worldly but denied the Pope's right to grant pardons on God's behalf in the first place: the only thing indulgences guaranteed, Luther said, was an increase in profit and greed, because the pardon of the Church was in God's power alone. Luther was excommunicated, but his ideas became popular and led to the Reformation, a landmark event in European history.

From this first step in the process by which Europeans lost their faith in God, and abandoned their religion, we can derive several important lessons, reinforcing the message of the Quran and Hadeeth.

2.1 Need for Separation of Religious and Temporal Leadership.

Many Muslim authors have regretted the split between the the religious and temporal leadership that occurred at the end of the golden period of the Rightly Guided Caliphs. The example of the Catholic Church is a reminder that power corrupts, and it takes men of very high integrity to be able to resist this corruption. If temporal and spiritual leadership are combined within a man of insufficient integrity, this could cause damage to the faith of the people, with consequences tremendously worse than lack of temporal power in the hands of the religious. People without sufficient spiritual training who are given religious authority will inevitably exercise this authority for worldly gain. Descriptions of Fir’on and Qaroon show the corrupting effects of power and money. The temptation to sell faith for money is described in the Quran:

تَكْتُمُونَهُ وَإِذْ أَخَذَ اللّهُ مِيثَاقَ الَّذِينَ أُوتُواْ الْكِتَابَ لَتُبَيِّنُنَّهُ لِلنَّاسِ وَلاَ

قَلِيلاً فَبِئْسَ مَا يَشْتَرُونَ فَنَبَذُوهُ وَرَاء ظُهُورِهِمْ وَاشْتَرَوْاْ بِهِ ثَمَناً

3:187 AND LO, God accepted a solemn pledge from those who were granted earlier revelation [when He bade them]: "Make it known unto mankind, and do not conceal it!" [143] But they cast this [pledge] behind their backs, and bartered it away for a trifling gain: and how evil was their bargain!

The cause of the crisis which eventually led to rejection of religion in Europe was the sale of indulgences to finance luxurious lifestyles and projects for reconstruction of Church buildings on a magnificent scale. Seen from a distance, the “sale of indulgences” seems like an obvious and gross violation of religious teachings. It is important for Muslims to realize that this is not true. The issue in question is very delicate. The Quran states (11:114) Lo! good deeds annul ill deeds. إِنَّ الْحَسَنَاتِ يُذْهِبْنَ السَّـيِّئَاتِ

There is a recommendation in Ahadeeth to do a good deed after doing a bad deed so as to remove its evil effects. Since spending in charity is a highly recommended good deed, it is a perfectly valid recommendation to a sinner that he should spend money on good to compensate for any sin (that he confesses to). As religious authorities, we may be able to evaluate the different uses for charity and recommend one use, such as spending on madrassahs or perhaps a particular madrassah, as the best use of charity at this time. This is exactly the logic that was by Church authorities to justify raising money for spending on Church projects.

In accordance with the Hadeeth that “Innamal A’mal bil niyyat” – the value of actions depends on the intentions – a recommendation to spend can be judged only according to the intention with which it is made. The delicacy of such issues is brought home by Ali r.a. refusal to kill the man who had spit in his face, because his anger had mixed up a personal intention with a purely religious one. This is a warning for those who seek power and prestige for Muslims as a means to the spread of Islam. To do this, one must have enough self-knowledge and self-control to recognize the tricks of the Nafs and to resist them. Seeking power for oneself is not a recommended course of action, and as an Ummah we must find ways of giving power to those who have the extraordinary Taqwa displayed by Ali r.a. to be able to differentiate between pure and impure intentions. How this is to be done is a question that we need to consider, but it is clear that western mechanisms of elections and democratic institutions do not take these considerations into account and cannot be adapted to our purposes.

2.2 Preferring Simple Lifestyles to Luxury

The immediate cause of the revolt against the Catholic Church was the sale of indulgences to finance luxurious construction. Today the Muslims are also engaged in the pursuit of luxurious lifestyles, even though this has been very harmful to us on many occasions in history. The Dolmabahçe Palace was built between the years 1843 and 1856 under the order of the Empire's 31st sultan, Sultan Abdülmecid , at a cost of five million Ottoman gold pounds, the equivalent of 35 tons of gold. Fourteen tons of gold in the form of gold leaf were used to gild the ceilings of the palace. Heavy interest based foreign loans were taken by the Khalifa for this enterprise. When these debts could not be repayed, Europeans demanded and obtained substantial amount of financial control over the Ottoman Empire. Details are provided in Blaisdell (1929) European Financial Control in the Ottoman Empire. This was a very important element in the eventual demise of the Empire and the abolishment of the Khilafat.

Currently, the western media are promoting the pursuit of luxurious lifestyles as the object of life throughout the Islamic world. This poisonous message, which is infiltrating the minds of muslims, is in stark contrast to the simplicity in lifestyle which is the ideal of Islam. The lifestyle of the Prophet s.a.w., who is the perfect model for us all, was simple in the extreme. He rarely had a second pair of clothing, apart from the one he wore, which was patched in many places. He did not eat his full two times in a row, and months would pass without a fire in his kitchen. This simplicity was maintained throughout his life, even though he received huge gifts on many occasions, which he distributed to the poor and the needy. His example was follow by Abu-Bakr and Umar, who are unparalleled in their combination of worldly rule with extreme simplicity of lifestyle.

One important feature of simplicity is to live in a way so as to not provoke envy or jealousy. One of the reasons for which Qaroon was condemned was his parading his wealth to the envy of his nation. Muslims are commanded to dress and feed their slaves as equals. Those who have more than their neighbors are told to share their blessings or else consume the extra concealing it from others so as to not cause envy. The Islamic spirit of moderation in consumption is perfectly expressed in

يَا بَنِي آدَمَ خُذُواْ زِينَتَكُمْ عِندَ كُلِّ مَسْجِدٍ وكُلُواْ وَاشْرَبُواْ وَلاَ تُسْرِفُواْ إِنَّهُ لاَ يُحِبُّ الْمُسْرِفِينَ

(7:31) O CHILDREN of Adam! Beautify yourselves for every act of worship, and eat and drink [freely], but do not waste: verily, He does not love the wasteful!

The prohibition of wastefulness (Israf) and unnecessary expenses (Tabzeer) together with the recommendations of spending money over and above our needs for the sake of Allah would go a long way towards solving the problems of Islamic societies.

2.3 The Worst of all Creatures

European history shows the importance of good behavior by the religious leaders. Bad conduct of religious leaders damages the faith of the people. This brings out the importance of the following Hadeeth:

A certain sahaabee of the nabee sallal-laahu `alayhi wa sallam asked him: "Who is the worst of all creatures?" He answered: "Don't ask me questions about bad things, but ask me questions about good things. The worst of all creatures are the guilty scholars" (i.e. those who do not practise what they say).

Corruption of their religious leaders was the first of a long sequence of events which eventually led to the loss of faith in God among the Europeans. In many areas of European history we see that the transition between the good and the evil is gradual, and takes place in a series of small steps, each one of which appears permissible, or only a minor change. This brings out the importance of vigilance, recommended in Ahadeeth which ask us to stay away from the boundaries between the Haram and the Halal.

In the past, madrassahs used to provide spiritual training in addition to intellectual and scholarly training. Nowadays this tradition has been largely abandoned and the spiritual training has been left up to the student, on his inclination and option. We need to bring back the spiritual training and make it an essential and central component of a religious education. Producing Ulema without taking any steps to ensure their training in the lines of Zikr, Taqwa, Khushoo’, Ikhlaq violates the spirit of Islamic teachings, since the central teaching of our Prophet s.a.w. was along these lines. There are many active movements in the Islamic world which aim to develop faith or Eeman; in addition to traditional Sufi orders, the Risale-Noor movement of Said Bediuzzaman Nursi, as well as the movement of Tableegh and Dawah, which is the largest grassroots movement in Islamic history.. It is important to note that Eeman is the base, and that development of good conduct, etiquette, social relations, and spiritual development requires further training for which we will need to look back at our traditions and revive institutions and methods developed for this purpose by our ancestors. This is in accordance with the following passage from Fazail-e-Amal:

Says the nabee sallal-laahu `alayhi wa sallam in another Hadith: "Knowledge is of two kinds: one, which remains on the tongue only and does not affect the heart and so is in fact an accusation from Allah; and the other which penetrates into the heart and revives the spirit: that is indeed useful." What we mean to say is that a Muslim should not acquire only that knowledge which concerns the formalities, but also the spiritual knowledge, which would purify his heart and enlighten his brain; otherwise it would be a cause for questioning on the day of qiyaamah as to how far it was acted upon.

Of course schools and madrassahs are the secondary sources of education, especially when it comes to moral education. The primary education takes place at home. It is essential to impart moral training (Terbiyyah) at homes to a much greater extent than is currently being done. To combat the flood of immorality being imparted by western media, it is essential for us to take steps to introduce the teachings of Quran and Hadeeth in every Muslim household on a regular basis. Special courses for newlyweds need to be designed to train them to bring up children in the right way. Many different Islamic groups have carried out many different experiments in trying to protect their children from the harmful effects of the current environments. We need to compare notes and evaluate different techniques to select good ones and compile instructions for those who are starting to worry about this problem. It will take concerted group effort to comply with the Quranic command: 66:6 O ye who believe! save yourselves and your families from a Fire

يَا أَيُّهَا الَّذِينَ آمَنُوا قُوا أَنفُسَكُمْ وَأَهْلِيكُمْ نَارًا

3. Rejection of Traditions and Formation of Sects

Martin Luther’s criticism of corrupt practices of the Roman Catholic Church was motivated by the intention of reform, and a return to earlier and purer forms of Christianity. Pope Leo X declared 41 articles of Luther's teachings as heretical, and Luther's books were publicly burned in Rome. Eventually Luther’s excommunication from the Catholic Church led to a split in Christiandom, with far reaching consequences for Europe and for the whole world. Some of the key ideas that we need to look at from this history are summarized in the passage below:

Martin Luther (1483-1546) stands in history as one of those unique forces, an individual who by force of will and by his ideas changed the world fundamentally. There are several ironies incumbent on Luther's pivotal role in history: 1) he doesn't really represent a break with the past, but rather a flash point where ideas and trends which had been smoldering in Europe for several centuries suddenly blazed aflame; 2) Luther initially saw himself as a great reformer of the Catholic church, a simple monk who thought the force of his ideas would single-handedly redirect the Leviathan of the church; in the end, however, he divided Christianity into two separate churches and that second division, Protestantism, would divide over the next four centuries into a near infinity of separate churches; 3) finally, Luther (and all the other reformers) saw themselves as returning Christianity to its roots, they believed that they were setting the clock back; in reality, their ideas irreparably changed the world and pushed it kicking and screaming, not into some ideal past, but into the modern era.

From: “World Civilizations: An Internet Classroom and Anthology,” webpage on Martin Luther ( ) by Richard Hooker(1996).

Note that Luther started out with the intention to reform the Church, and ended up splitting it and eventually destroying the basis of faith in Europe. Of special importance to Muslims are two of the concepts which were central to Lutheran theology in permitting a reformulation of Catholic teachings:

1. “sola scriptura” making the Bible the sole measure of theology, Previously, the Scriptures had been seen by some as the pinnacle of a hierarchy of sacred texts, and on par with the oral traditions of the Church.

2. “sola fida” or justification by "faith alone." Luther's first writing was The Sermon on Good Works, in which he argued that good works do not benefit the soul; only faith could do that.

The rejection of the (Catholic) tradition as a source of religious knowledge had serious consequences. The tradition serves to anchor possible interpretations of texts. Without this anchor, texts can be given a vast variety of interpretations. Initial disagreements between the early reformers like Luther and Zwingli made it clear that the inner eye of faith does not serve to resolve disputes nearly as easily as a fixed tradition and a process. The varied possibilities for interpretation of texts manifested themselves in the eventual split of the Protestants into a “near infinity” of churches.

3.1 Unity in Diversity

The formation of many different Protestant sects and their battles with each other over small theological issues was a very important cause for the loss of faith in Europe. This brings out clearly the importance of the Islamic tradition of tolerance for dissent, so that conflicting opinions may simultaneously be held to be acceptable Islamic solutions to a given problem.

شَرَعَ لَكُم مِّنَ الدِّينِ مَا وَصَّى بِهِ نُوحًا وَالَّذِي أَوْحَيْنَا إِلَيْكَ وَمَا وَصَّيْنَا

بِهِ إِبْرَاهِيمَ وَمُوسَى وَعِيسَى أَنْ أَقِيمُوا الدِّينَ وَلَا تَتَفَرَّقُوا فِيهِ

42:13 The same religion has He established for you as that which He enjoined on Noah - the which We have sent by inspiration to thee - and that which We enjoined on Abraham, Moses, and Jesus: Namely, that ye should remain steadfast in religion, and make no divisions therein.

A tradition named “Ilm-ul-Ikhtilaf” which is Islamic way of handling conflicts of opinion has no parallel outside of Islam. This is acceptance of the idea that there are more than one right opinions about a given religious issue. Useful discussions of Islamic source materials on tolerance of dissent are given by Shaikhul Hadeeth Maulana Mohammad Zakariyya Kandehlvi (1938) in his book Al Ai’tdal fil Maratib ar-Rijal and in Hujjat-ullah-ul-Balegha by Shah Waliullah (1750, conclusion of Part I). From the beginning, the Quran takes a very broad minded attitude – Allah T’aala promises to guide us to his ways, in plural, in the Ayat cited earlier in the introduction. He promise a good end to “Christians, Sabeans, Jews,” if they believe and do good deeds. The Prophet s.a.w. indicated that differences were a blessing for the Ummah and that all of the Companions (despite their differences) were rightly guided, so that following any of them would be sufficient for salvation. He also indicated that the Scholars who made a ruling on a controversial matter would receive one blessing if he made a mistake, and two if he did not. Muslims who give up and concede the argument to the other party, even though they believe themselves to be in the right, are promised palaces in Heavens.

All of this led a to situation where Muslims were broad minded and generous in their acceptance of disagreement. The attitude was that while there was one unique truth, we humans were fallible in our attempts to understand and no one is more fallible than myself. This humility permits tolerance of diversity. This was displayed in the emergence of four pathways – Hanbali, Malaki, Shafi’ee, and Hanafi – all of which accept the others as correct despite major disagreements on many issues. In a similar way, there are substantial disagreements among the different orders of Tassawuf, but none who claim unique access to the truth. This is in stark contrast with European and other cultural traditions, where small disagreements have led to the formation of sects and major battles.

The role of tradition in maintaining unity also becomes clear from this European history. If we take the view that the Quran and Hadeeth and the light of faith are enough for us, and discard the tradition of Islam, as represented by sayings and writings of the scholars in the 1400 years between now and the early prophetic era, we will go astray. One consequence of trust in the promise of God that:

إِنَّا نَحْنُ نَزَّلْنَا الذِّكْرَ وَإِنَّا لَهُ لَحَافِظُونَ

15:9 Behold, it is We Ourselves who have bestowed from on high, step by step, this reminder? [9] and, behold, it is We who shall truly guard it [from all corruption].

is that the truth is circumscribed by the opinions of the elders. That is, we cannot come up with a valid interpretation of the Quran that has not been held by anyone in the past 14 centuries. Even though there is huge range and diversity in the opinions of our elders, there is no room to deviate entirely outside these bounds as the West has done. If on the other hand we claim to directly interpret the Quran and the Hadeeth, and disregard the tradition, then the number of variant readings that is possible will be extremely large, and the possibility of going astray correspondingly large. This methodology, advocated by some modern Muslims, could provide the basis for fragmentation and formation of sects. In addition, the idea that the Hadeeth and the Quran are enough for us shares the attitude of contempt and disrespect that modern Western scholars have towards Islamic traditions. In effect, we are saying that the deep and complex intellectual traditions, and fourteen centuries of Islamic scholarship are of no value, and can be completely ignored. Such a position can only be taken by those who are in fact ignorant of these intellectual traditions.

3.2 The Ummah as One Body

The maintenance of unity among Muslims is a religious obligation of paramount importance, as indicated by many verses and Ahadeeth. It was realized very early by Muslims that this unity could not be achieved on the condition that every one would agree on all major issues of importance. Therefore they learned to create unity without seeking agreement on all theological issues.

وَأَطِيعُواْ اللّهَ وَرَسُولَهُ وَلاَ تَنَازَعُواْ فَتَفْشَلُواْ وَتَذْهَبَ رِيحُكُمْ وَاصْبِرُواْ إِنَّ اللّهَ مَعَ الصَّابِرِينَ

8:46 And pay heed unto God and His Apostle, and do not [allow yourselves to] be at variance with one another, lest you lose heart and your moral strength desert you. [50] And be patient in adversity: for, verily, God is with those who are patient in adversity.

The history of Europe shows the importance of unity. Disunity among scholars is exploited by those who are against religion to discredit religion as a whole. There are many occasions on which enemies of Islam have created and utilized divisions among Muslims to achieve victories. Islamic republics within Russia were separated into nationalities, and were given different cultures, histories and languages using a deliberate Russian policy to create divisions among Muslims. Differences among scholars were exploited to discredit the Islamic faith and seduce Muslims away from Islam into communism.

The Quran and Hadeeth warn us against such tactics. According to the Hadeeth, this Ummah is like one body, and the whole body feels pain if any part is hurt. Differences and conflicts between Muslims destroy the faith like the fire burns up dry wood, or the razor shaves off the hair. Great emphasis is placed on sila-rahmy, or maintaining connections with relatives. The best of conduct is to behave well and be kind to others even when they behave badly and are unkind to us.

3.3 Love and Tolerance

The horrifying example of St. Bartholomew’s Day Massacre (to be described in the next section), where vast numbers of innocents were slaughtered for no reason other than religious differences created a precedent which has had vast ramifications throughout European history. This in stark contrast with the deep love our Prophet s.a.w. for all of mankind, as the Quran proves:

أَفَمَن زُيِّنَ لَهُ سُوءُ عَمَلِهِ فَرَآهُ حَسَنًا فَإِنَّ اللَّهَ يُضِلُّ مَن يَشَاء وَيَهْدِي مَن يَشَاء فَلَا تَذْهَبْ نَفْسُكَ عَلَيْهِمْ حَسَرَاتٍ إِنَّ ا للَّهَ عَلِيمٌ بِمَا يَصْنَعُونَ

35:8 Is he, the evil of whose deeds is made fair seeming unto him so that he deemeth it good, (other than Satan's dupe)? Allah verily sendeth whom He will astray, and guideth whom He will, so do not kill yourself with sorrow for them.

His concern to save all human beings from the rigors of the hellfire was so great that he ignored all cruel treatments to Muslims and his own self, and gave love in return for hate. The example of Vahshi r.a. is amazing. The man who chewed the liver of the beloved uncle Hamza, was assiduously courted by the Prophet of Allah and converted to Islam eventually. This was even though seeing him was such a painful reminder of past events that the Prophet requested Vahshi not to come in front of him when he came to visit.

Historically, Islamic civilizations have displayed much greater tolerance and provided much greater freedom to minorities than has ever been achieved in the West. In particular, the concept of allowing minorities personal law that is separate from the overall law of the state arguably achieves a level of freedom for subcultures that is greater than currently available in the West. Western traditions of intolerance and persecution of minorities were directly responsible for the rise of secular thinking in the west. In stark contrast, Islamic traditions of tolerance created culture of peaceful coexistence between Jews, Christians in Muslims in Spain. In The Ornament of the World: How Muslims, Jews and Christians Created a Culture of Tolerance in Medieval Spain Menocal (2002) writes about how tolerant Muslim rulers created a culture of “philosophers, of poets whose work inspired Chaucer and Boccaccio, of weeping fountains, breezy courtyards, and a long-running tolerance profoundly rooted in the cultivation of the complexities, charms and challenges of contradictions. The Spanish reconquest of 1492 ended this era of tolerance, and initiated repression of Judaism and Islam. Ultimately, tortures and the Inquisition was use to force all remaining Muslims to convert to Islam. Western historians have recognized the achievements of the Muslims in this field; for example, Toynbee (1951) wrote: “The extinction of race consciousness as between Muslims is one of the outstanding moral achievements of Islam. In the contemporary world there is, as it happens, a crying need for the propagation of this Islamic virtue … of tolerance and peace”.

Travellers through the Muslim world have often recorded their experience of hospitality; see One Thousand Roads to Mecca: Ten Centuries of Travelers Writing about the Muslim Pilgrimage by Wolfe (1998). For example, Malcolm X. (1965) found in his travel experience “a spirit of unity and brotherhood that my experiences in America had led me to believe never could exist between the white and non-white…” While these traditions of love, tolerance and hospitality have been considerably weakened by the onslaught of modernity, enough remains to build them up again. The importance of doing so is clear from the European history which shows that violations of these traditions is a good way to drive people away from the faith. We must strive to recreate the traditions of love, which the Quran tells us is a gift from God more valuable than all the treasure on the Earth:

وَأَلَّفَ بَيْنَ قُلُوبِهِمْ لَوْ أَنفَقْتَ مَا فِي الأَرْضِ جَمِيعاً مَّا أَلَّفَتْ بَيْنَ

قُلُوبِهِمْ وَلَـكِنَّ اللّهَ أَلَّفَ بَيْنَهُمْ إِنَّهُ عَزِيزٌ حَكِيمٌ

(8:63) And (moreover) He hath put affection between their hearts: not if thou hadst spent all that is in the earth, couldst thou have produced that affection, but Allah hath done it: for He is Exalted in might, Wise.

4. Religious Wars in Europe

The historical details below are a condensed version of Lecture 6: Europe in the Age of Religious Wars, by Steven Kreis (2002):

(available at: :)

The Reformation smashed the medieval synthesis and destroyed the unity of the Christian matrix. Between 1560 and 1715, Europe witnessed only thirty years of international peace. The latter half of the sixteenth century and the beginning of the eighteenth century brought about one of the most passionate and calamitous series of wars that Europe had ever experienced. The growing division between Christian churches in Europe led to a series of armed conflicts for over a century. Protestants and Catholics shed each other's blood in prodigious amounts in national wars and in civil. The final result of these struggles was the overthrow and execution of Charles I in England in the middle of the seventeenth century, an historical earthquake that permanently changed the face of Europe.

On August 24, 1572, the day before St. Bartholomew's Day, royal forces hunted down and executed over three thousand Huguenots, including Coligny, in Paris. Within three days, royal and Guise armies had hunted down and executed over twenty thousand Huguenots in the single most bloody and systematic extermination of non-combatants in European history until World War II. The St. Bartholomew Massacre was a turning point in both French history and the history of the European Christian church. Protestants no longer viewed Catholicism as a misguided church, but as the force of the devil itself. No longer were Protestants fighting for a reformed church, but they suddenly saw themselves fighting for survival against a Catholic church whose cruelty and violence seemed to know no bounds. Throughout Europe, Protestant movements slowly transformed into militant movements.

By the mid-1580's, the Catholic League was in control of France and, after Henry III attempted to attack the League in 1588, the League drove him from Paris and embarked on a systematic massacre of non-combatants that rivaled the earlier St. Bartholomew's Massacre.

Henry of Navarre, as next in line to the throne, became King of France as Henry IV (ruled 1589-1610). Henry understood that the only way that France would find peace is if it were ruled by a tolerant Catholic king, so on July 25, 1593, he rejected his Protestant faith and officially became Catholic. On April 13, 1598, Henry IV ended the long and tiring religious wars in France by proclaiming the Edict of Nantes. This Edict granted to Huguenots the right to worship publicly, to occupy public office, to assemble, to gain admission to schools and universities, and to administer their own towns.

The year 1556 saw the accession of perhaps the most important monarch of the sixteenth century: Philip II of Spain (ruled 1556-1598). Of all the monarchs of Europe, Philip was the most zealous defender of his religious faith and his energies in pursuit of this defense greatly changed the face of Europe. Philip sent the Duke of Alba with an army to quell the Protestant revolt in the Netherlands in 1567. Alba imposed a tribunal, the Council of Troubles, to question and sentence heretics (Protestants). The Dutch called this council the "Council of Blood," for it managed to publicly execute thousands of people before Alba was forced from the Netherlands.

Philip finally decided to invade England after the execution of the Catholic Mary, Queen of Scots. On May 30, 1588, he sent a mighty armada of over 130 ships to invade England. The Armada contained over 25,000 soldiers and the ships gathered for the invasion in the English Channel south of England. In practical terms, the defeat of the Armada was a temporary setback for Spain. The 1590's saw impressive military victories for the Spanish. However, the defeat of the Armada was a tremendous psychological victory for European Protestants. Spain represented the only powerful military force that threatened the spread of Protestantism; when even the mighty Spanish navy could be defeated by an outnumbered English and Dutch fleet, Protestants everywhere were reinvigorated in their struggles against Spain and the Roman church. By the end of the seventeeth century, Spain was no longer a major player in the power politics of Europe.

With the exception of the English civil war, the last major war of religion was the Thirty Years War. It is fair to say, however, that this war was as much about politics as it was about religion. Just as the Palatinate was fanatical about the spread of Calvinism and Protestantism, so Bavaria was fanatical about the spread of Catholicism and the Counter-Reformation. When Frederick IV, Elector of the Palatine, formed a defensive league with England, France, and the Netherlands in 1609, Maximillian, Duke of Bavaria, formed a Catholic League. In 1618, the relationship between these two regions erupted into war; this war would outdo all the other previous religious wars in terms of extent and destructiveness. The Thirty Years War was, perhaps, the first World War fought in Europe, for nearly every state in Europe became involved in the war in some way or another. The sheer amount of casualties and human destruction made this war the most calamitous and disastrous war of European history before the nineteenth century. The Thirty Years' War was a terrifying war whose destruction was only matched by the First and Second World Wars. The land was destroyed and cattle slaughtered -- all of which was made worse by a re-visitation of the plague. The Holy Roman Empire lost one quarter of its inhabitants and its fragmentation into hundreds of small states delayed economic recovery as well as any hope for a unified Germany. And during the English Civil War of 1640-1660, the English beheaded their king in 1649. All of these conflicts were inspired by religious differences owing to the Reformation, and all of these conflicts had political, economic and social ramifications.

4.1 The European Mindset

These events created a deep and lasting impression on the European mindset. One of them was the idea that religion is the source of “all” wars. The reality is the many of the so called ‘religious’ wars had political motives behind them. Political leaders would switch sides and alliances would be made across religious lines on political grounds. At the same time, some of the wars were motivated by religion. The Europeans generalized from their experience to all religion, not understanding that it was specific features of Christianity and its development in Europe that were responsible for their difficulties. The Islamic experience with religion and war has been entirely different, but Muslims trained in the West learn to believe that Islam has also been the source of conflicts and wars throughout history, even thought this is contrary to fact.

Another important consequence of perpetual warfare in Europe has been a mindset that contact between any two groups of people must be hostile. This idea is present in countless works of fiction as well as respectable academic works in Europe. The most recent example is the “Clash of Civilizations” by Huntington. The idea that two civilizations can meet, learn from each other, trade, enjoy benefits of mutual friendship simply does not occur to Huntington and similar scholars in the European tradition. It is assumed that war, conflict and attempts by one to dominate the other must result from contact as this is the lesson of European history. The contrast with Muslim commands for courtesy and good behavior towards those not of our faith could not be greater. The Quran commands us to seek common grounds with the non-believers, to argue with them in the best of ways (kindly, with courtesy and respect) :

وَلَا تُجَادِلُوا أَهْلَ الْكِتَابِ إِلَّا بِالَّتِي هِيَ أَحْسَنُ

Also the Hadeeth state that the Prophet s.a.w himself will be the advocate for the unbelievers in disputes in which Muslims are unjust to the them. European history shows the importance of this courtesy and good behavior. In Europe, warring factions each of which claimed certainty for its own side and killed others without mercy led to a weariness with religion among the masses. This created the basis for widespread agnosticism and atheism in Europe. An illustration of the hatred for religion created by these events is given below:

In November 1793, atheism reached its zenith, with its mockery of the rites of the church. On the tenth of November the commissioners of the Convention dressed up an ass in sacerdotal habit, and loaded it with the symbols of Christianity, and tied the Old and New Testaments to its tail. It was then led in mock procession by two sansculottes bearing a sacred cup, out of which they gave the animal sacramental wine to drink. Arriving at their destination, the crowd piled books of devotion into heaps, and burned them to ashes amid blasphemous shouts. A prostitute was enthroned as the Goddess of Reason, and received adoration from the National Convention..."

Such an event could not be contemplated anywhere in the Islamic world, even today.

4.2 The Rules of War

The extreme cruelty of the religious leaders of Europe to co-religionists with different points of view has left a deep impress on European minds, and continues to influence their worldviews and policies to this day. Alfred McCoy has documented the evolution of the European tradition of torture of heretics (including Muslims and Jews), which started with the Inquisition. He describes the CIA manual for torture (The Kubark Manual) as “the first real revolution in the cruel science of pain in more than three centuries.” This manual describes techniques developed by ‘scientific’ research on mental patients funded by the CIA. These methods, used in Al-Gharaib and Guantanamo Bay, are in stark contrast with Islamic rules for Jihad. Unlike the European idea that “All is fair in love and war,” Jihad is a religious duty, and subject to strict Islamic rules from the earliest times. The most important of these were summarized by Abu Bakr r.a., in the form of ten rules for the Muslim army:

Stop, O people, that I may give you ten rules for your guidance in the battlefield. Do not commit treachery or deviate from the right path. You must not mutilate dead bodies. Neither kill a child, nor a woman, nor an aged man. Bring no harm to the trees, nor burn them with fire, especially those which are fruitful. Slay not any of the enemy's flock, save for your food. You are likely to pass by people who have devoted their lives to monastic services; leave them alone.

Islamic traditions were established by the magnificent precedent of the Prophet s.a.w. who upon the conquest of Mecca, forgave bitter enemies who had caused tremendous harm as well as tortured large numbers of the early Muslims. Many Muslim conquerors have followed this precedent, based on the Quranic teaching to be fair and just even to our enemies:

شَنَآنُ قَوْمٍ عَلَى أَلاّ يَا أَيُّهَا الَّذِينَ آمَنُواْ كُونُواْ قَوَّامِينَ لِلّهِ شُهَدَاء بِالْقِسْطِ وَلاَ يَجْرِمَنَّكُمْ

وَاتَّقُواْ اللّهَ إِنَّ اللّهَ خَبِيرٌ بِمَا تَعْمَلُونَ تَعْدِلُواْ اعْدِلُواْ هُوَ أَقْرَبُ لِلتَّقْوَى

Q5:8 O ye who believe! stand out firmly for Allah, as witnesses to fair dealing, and let not the hatred of others to you make you swerve to wrong and depart from justice. Be just: that is next to piety: and fear Allah. For Allah is well-acquainted with all that ye do.

The idea that the ends justify the means, used to justify torture, mass killing of civilian innocents, and other atrocities in contemporary wars, is a continuation of a long European tradition dating back to the era of religious wars. This idea has never been part of Islam. Ameer Mu’awiyah recalled armies from a surprise attack, planned for immediately after expiry of a peace treaty, when the religious scholars ruled that this was not permissible in Islamic law. Bulgarians temporarily occupied Edirne during the First Balkan War (March 1913) after a siege of six months. Even in dire circumstances with compelling necessity, the ruling of Islamic law that the property of the non-Muslims could not be seized for purposes of defence was obeyed punctiliously by Muslims under siege. No other nation can produce parallel examples.

It was very late in their history that the Europeans came to the realization that there should be rules even in war, and codified them in the Geneva convention. Even now, this convention is honored more in the breach than in observance, and extensive violations are documented for USA, UK, France and other European countries. Fanning flames of hatred against enemies is a common element of their strategy of war; witness the current treatment of Islam in the West. Our current problem is succinctly summarized by a beautiful scene from the movie “The Lion of the Desert”. When a young man insists on mistreating a European captive as revenge for injustices done to Muslims, Omar Mukhtar responds by saying “They (Europeans) are not our teachers.” Unfortunately, we have allowed the West to become our teachers. Colonization by the West has destroyed Islamic traditions and culture, and even the memories of these traditions have been lost in contemporary Islamic societies. Muslims trained in western universities and armies have learnt the lessons of hatred and cruelty to enemies, and have done things which are alien to our traditions and history. In particular, torture of prisoners and murder of innocent non-combatants is against Islamic law. Massive effort is required to throw off the shackles of mental slavery of the colonial era, and recreate the ideals of the Quran as a living reality in Islamic societies.

4.3 Islamic Standards of Justice

The failure of character of religious leaders in Europe was a key element in the loss of faith suffered by Europeans. In particular, it was oppression, cruelty, and injustice against opponents that led Europeans to believe that faith did not suffice as a guarantor of justice, and led them to the development of the “rule of law” as a secular alternative. The European heritage in this area goes back to the era of gladiators, where combat between champions of was used to settle the issue of which of two parties was on the right. The same spirit remains in operation to this day, as several recent high profile trials demonstrates; those with the wealth for expensive lawyers can literally get away with murder, as in the O. J. Simpson case. A panel of lawyers unanimously agreed that a lawyer defending a male client known to be guilty of rape nonetheless is obliged to destroy the reputation of the female victim if this is the best possible defence. All agreed that justice is an incidental by-product of an adversarial struggle between opposing parties.

Again, Islamic teachings stand in stark contrast to western traditions. Muslims are required to bear witness, even if it is against their own self, and kith and kin:

يَا أَيُّهَا الَّذِينَ آمَنُواْ كُونُواْ قَوَّامِينَ بِالْقِسْطِ شُهَدَاء لِلّهِ وَلَوْ عَلَى أَنفُسِكُمْ أَوِ الْوَالِدَيْنِ وَالأَقْرَبِينَ إِن يَكُنْ غَنِيًّا أَوْ فَقَيرًا فَاللّهُ أَوْلَى بِهِمَا فَلاَ تَتَّبِعُواْ الْهَوَى أَن تَعْدِلُواْ وَإِن تَلْوُواْ أَوْ تُعْرِضُواْ فَإِنَّ اللّهَ كَانَ بِمَا تَعْمَلُونَ خَبِيرًا

Q4:135 O ye who believe! stand out firmly for justice, as witnesses to Allah, even as against yourselves, or your parents, or your kin, and whether it be (against) rich or poor: for Allah can best protect both. Follow not the lusts (of your hearts), lest ye swerve, and if ye distort (justice) or decline to do justice, verily Allah is well- acquainted with all that ye do.

Western traditions do not aspire to these high standards; the Fifth Amendment of the US gives people a constitutional right to abstain from bearing witness against themselves. The challenge facing Muslims is to prove the truth of the Quranic teachings by translating it into a living reality in Muslim societies.

5. Conclusions

هُوَ الَّذِي أَخْرَجَ الَّذِينَ كَفَرُوا مِنْ أَهْلِ الْكِتَابِ مِن دِيَارِهِمْ لِأَوَّلِ الْحَشْرِ مَا ظَنَنتُمْ أَن يَخْرُجُوا وَظَنُّوا أَنَّهُم مَّانِعَتُهُمْ حُصُونُهُم مِّنَ اللَّهِ فَأَتَاهُمُ اللَّهُ مِنْ حَيْثُ لَمْ يَحْتَسِبُوا وَقَذَفَ فِي قُلُوبِهِمُ الرُّعْبَ يُخْرِبُونَ بُيُوتَهُم بِأَيْدِيهِمْ وَأَيْدِي الْمُؤْمِنِينَ فَاعْتَبِرُوا يَا أُولِي الْأَبْصَارِ

59:2 He it is who turned out of their homes, at the time of [their] first gathering [for war], such of the followers of earlier revelation as were bent on denying the truth. [1] You did not think [O believers] that they would depart [without resistance] - just as they thought that their strongholds would protect them against God: but God came upon them in a manner which they had not expected, [2] and cast terror into their hearts; [and thus] they destroyed their homes by their own hands as well as the hands of the believers. [3] Learn a lesson, then, O you who are endowed with insight!

The Europeans destroyed their own faith with their own hands, and have suffered tremendously in consequence, as described briefly in the introduction. In this essay, our goal was to discuss the process by which the Europeans lost their faith in Christianity, and to learn lessons relevant to Muslims today.

The humiliation of defeat has led Muslims to a deep seated inferiority complex, exacerbated by Western accounts of their own superiority. To overcome this, it is essential to examine western history from a religious point of view. The secular narration of western history, which is the dominant one, misses crucial ingredients of the story. The failings of religious leaders in the west led to the development of many western ideologies which are directly opposed to religious teachings. By examining these issues, we learn the importance of certain Islamic teachings relating to justice, fairness, unity, tolerance and love for each other as well as all human beings, as a key to maintaining a society of the faithful. Since these secular western ideologies are in wide circulation and being assimilated by Muslims, an examination of their history also serves to expose their roots in anti-religious thought, and protect us from their influence.

The teachings of Islam are at a level of excellence which is much higher than that which the West currently aspires to. As long as they remain on our books and history, but not in the lives and hearts of Muslims, they are a source of embarrassment rather than pride. The challenge which faces the Ummah today is to translate the teachings of Islam into a living reality. We make the struggle to bring this about, with trust in Allah that He will guide us to His pathways. We conclude with the prayer that Allah T’aala may grant us the strong faith which form the basis for His friendship and that He may guide us from the darkness into the light:

اللّهُ وَلِيُّ الَّذِينَ آمَنُواْ يُخْرِجُهُم مِّنَ الظُّلُمَاتِ إِلَى النُّوُرِ

Lecture 8: Legitimization of Pursuit of Wealth

The Pursuit of Wealth

Summary of Tawney is needed for an academic version – do chapter by chapter summary or assign to someone or lookup on net.

1. Introduction:

The transition to secular thought in Europe led to the acceptance of certain ideas which are the opposite of those which have been widely believed both across cultures and throughout history. Among these ideas is the “Invisible Hand” which leads selfish acts by individuals to promote social welfare. This eventually led to the social acceptability, and even desirability, of the pursuit of wealth – once universally condemned. For example, Weber (1930, Chapter 2) writes that the “spirit of capitalism” is the pursuit of wealth as an end in itself, to the point of being “absolutely irrational”.

Our goal in this article is to give a brief sketch of the history of thought which led to this reversal in ways of thinking about wealth, and to discuss some of its consequences, a prominent one among which is the current global financial crisis.

2. The Gradual Transition

The Biblical idea that “love of money is the root of all evil” was widely believed in sixteenth century Europe. It is easy to document the hold of Christianity on the thoughts and actions of all classes of people in all realms of life during this period. The renunciation of the world, embodied in vows of poverty in the priesthood, was widely admired and held to be the ideal. The numerous teachings of the Bible emphasizing other-worldy goals were embodied in the thought and discussions of public and the intellectuals. For example, Tawney (1926) writes that

No one can read the discussions which took place between 1500 and 1550 on three burning issues—the rise in prices, capital and interest, and the land question in England—without being struck by the constant appeal from the new and clamorous economic interests of the day to the traditional Christian morality, which in social organization, as in the relations of individuals, is still conceived to be the final authority. It is because it is regarded as the final authority that the officers of the Church claim to be heard on questions of social policy; and that, however Catholics, Anglicans, Lutherans, and Calvinists may differ on doctrine or ecclesiastical government, Luther and Calvin, Latimer and Laud, John Knox and the Pilgrim Fathers are agreed that social morality is the province of the Church, and are prepared both to teach it, and to enforce it, when necessary, by suitable discipline.

There is no doubt that there were many skeptics and cynics, who denied the validity of religious teachings, accused religious leaders of hypocrisy and practiced and advocated unscrupulous behavior in politics, commerce and society. However, this does not contradict the fact that this was exceptional, and the general public as well as the majority of the elites shared a belief in the validity of Christian moral standards.

For example, Keynes wrote that:

When the accumulation of wealth is no longer of high social importance, there will be great changes in the code of morals. We shall be able to rid ourselves of many of the pseudo-moral principles which have hag-ridden us for two hundred years, by which we have exalted some of the most distasteful of human qualities into the position of the highest virtues. We shall be able to afford to dare to assess the money-motive at its true value. The love of money as a possession — as distinguished from the love of money as a means to the enjoyments and realities of life — will be recognised for what it is, a somewhat disgusting morbidity, one of those semi-criminal, semi-pathological propensities which one hands over with a shudder to the specialists in mental disease ... But beware! The time for all this is not yet. For at least another hundred years we must pretend to ourselves and to everyone that fair is foul and foul is fair; for foul is useful and fair is not. Avarice and usury and precaution must be our gods for a little longer still. For only they can lead us out of the tunnel of economic necessity into daylight” (Keynes, 1930 cited in Skidelsky, 2001).

The crisis caused by openly flaunted moral corruption of a sequence of Popes (which involved living extremely luxuriously, legitimizing bastard progeny, selling pardons for sins to raise money for supporting lavish lifestyles, etc.) has been termed ‘the most momentous event in the history of Europe,’ in The March of Folly by Barbara Tuchman. She has documented how this directly led to the rise of the Protestants, who attempted to preserve their faith while breaking from the corrupt Catholic Church. The Protestants split into several different Christian sects and factions, which fought among themselves as well as with the Catholics. The intolerance of these sects for each other, and battles, carnage, oppression and injustice, all carried out in the name of Christianity, convinced Europeans that religion could not serve as a basis for ordering a society. Even religious leaders realized that social harmony required principles which could be agreed to by all members of the society without invoking controversial and conflicting religious principles. Secular thought developed due to the lack of character among religious leaders of Europe, and aimed at development of higher character by using reason and factual knowledge instead of religion. The Enlightenment thinkers hoped to create a more humane and just society which was free from poverty, wars and social evils of all kinds.

“The more general realization of the role of Capitalism in history has been accompanied by a second change, which, if equally commonplace, has also, perhaps, its significance. "Trade is one thing, religion is another": once advanced as an audacious novelty, the doctrine that religion and economic interests form two separate and co-ordinate kingdoms, of which neither, without presumption, can encroach on the other, was commonly accepted by the England of the nineteenth century with an unquestioning assurance at which its-earliest exponents would have felt some embarrassment. An historian is concerned less to appraise the validity of an idea than to understand its development. The effects for good or evil of that convenient demarcation, and the forces which, in our own day, have caused the boundary to shift, need not here be discussed. Whatever its merits, its victory, it is now realized, was long in being won. The economic theories propounded by Schoolmen; the fulminations by the left wing of the Reformers against usury, landgrabbing, and extortionate prices; the appeal of hard-headed Tudor statesmen to traditional religious sanctions; the attempt of Calvin and his followers to establish an economic discipline more rigorous than that which they had overthrown, are bad evidence for practice, but good evidence for thought. All rest on the assumption that the institution of property, the transactions of the market-place, the whole fabric of society and the whole range of its activities, stand by no absolute title, but must justify themselves at the bar of religion. All insist that Christianity has no more deadly foe than the appetitus divitiarum infinitus, the unbridled indulgence of the aquisitive appetite. Hence the claim that religion should keep its hands off business encountered, when first formulated, a great body of antithetic doctrine, embodied not only in literature and teaching, but in custom and law. It was only gradually, and after a warfare not confined to paper, that it affected the transition from the status of an odious paradox to that of an unquestioned truth.”

The emergence of an objective and passionless economic science took place more slowly than the corresponding movement in the theory of the State, because the issues were less absorbing, and, while one marched in the highlights of the open stage, the other lurked on the back stairs and in the wings. It was not till a century after Machiavelli had emancipated the State from religion, that the doctrine of the self-contained department with laws of its own begins generally to be applied to the world of business relations, and even in the England of the early seventeenth century, to discuss questions of economic organization purely in terms of pecuniary profit and loss still wears an air of not quite reputable cynicism. When the sixteenth century opens, not only political but social theory is saturated with doctrines drawn from the sphere of ethics and religion, and economic phenomena are expressed in terms of personal conduct, as naturally and inevitably as the nineteenth century expressed them in terms of mechanism.

The theory of a hierarchy of values, embracing all human interests and activities in a system of which the apex is religion, is replaced by the conception of separate and parallel compartments, between which a due balance should be maintained, but which have no vital connection with each other.

The intellectual movement is, of course, very gradual, and is compatible with both throw-backs and precockies which seem to refute its general character. It is easy to detect premonitions of the coming philosophy in the later Middle Ages, and reversions to an earlier manner at the very end of the seventeenth century. Oresme in the fourteenth century can anticipate the monetary theory associatd with the name of Gresham; in the fifteenth century Laurentius de Rudolfis can distinguish between trade bills and finance bills, and St. Antonino describe the significance of capital; while Baxter in 1673 can write a Christian Directory in the style of a medieval Summa, and Bunyan in 1680 can dissect the economic iniquities of Mr. Badman, who ground the poor with high prices and usury, in the manner of a medieval friar.7 But the distance traversed in the two centuries between 1500 and 1700 is, nevertheless, immense. At the earlier date, though economic rationalism has proceeded far in Italy, the typical economic systems are those of the Schoolmen; the typical popular teaching is that of the sermon, or of manuals such as Dives et Pauper; the typical appeal in difficult cases of conscience is to the Bible, the Fathers, the canon law and its interpreters; the typical controversy is carried on in terms of morality and religion as regularly and inevitably as two centuries later it is conducted in terms of economic expediency.

It is not necessary to point out that the age of Henry VIII and Thomas Cromwell had nothing to learn from the twentieth century as to the niceties of political intrigue or commercial sharp practice. But a cynical unscrupulousness in high places is not incompatible with a general belief in the validity of moral standards which are contradicted by it. No one can read the discussions which took place between 1500 and 1550 on three burning issues—the rise in prices, capital and interest, and the land question in England—without being struck by the constant appeal from the new and clamorous economic interests of the day to the tradi-tional Christian morality, which in social organization, as in the relations of individuals, is still conceived to be the final authority. It is because it is regarded as the final authority that the officers of the Church claim to be heard on questions of social policy; and that, however Catholics, Anglicans, Lutherans, and Calvinists may differ on doctrine or ecclesiastical government, Luther and Calvin, Latimer and Laud, John Knox and the Pilgrim Fathers are agreed that social morality is the province of the Church, and are prepared both to teach it, and to enforce it, when necessary, by suitable discipline.

By the middle of the seventeenth century all that is altered. After me Restoration, we are in a new world of economic as well of political, thought. The claim of religion, at best a shadowy Claim, maintain rules of good conscience in economic affairs finally vanished with the destruction of Laud's experiment in a confessional State, and with the failure of the work of the Westminster Assembly. After the Civil War, the attempt to maintain the theory that there was a Christian standard of economics conduct was imposible, not only because of lay opposition, but because the division of the Church made it evident that no common standard existed which could be enforced by ecclesiastical machinery. The doctrine of the Restoration economists,8 that, as proved by the experience of Holland, trade and tolerance flourished together, had its practical significance in the fact that neither could prosper without large concessions to individualism.

The ground which is vacated by the Christian moralist is quickly occupied by theorists of another order. The future for the next two hundred years is not with the attempt to reaffirm, with due allowance for altered circumstances, the conception that a moral rule is binding on Christians in their economic transactions, but with the new science of Political Arithmetic, which asserts, at first with hesitation and then with confidence, that no moral rule beyond the letter of the law exists. Influenced in its method by the contemporary progress of mathematics and physics, it handles economic phenomena, not as a casuist, concerned to distinguish right from wrong, but as a scientist, applying a new calculus to impersonal economic forces. Its method, temper, and assumptions are accepted by all educated men, including the clergy, even though its particular conclusions continue for long to be disputed. Its greatest English exponent, before the days of Adam Smith, is the Reverend Dr. Tucker Dean of Gloucester.

Between the conception of society as a community of unequal classes with varying functions, organized for a common end, and that which regards it as a mechanism adjusting itself through the play of economic motives to the supply of economic needs; between the idea that a man must not take advantage of his neighbor's necessity, and the doctrine that "man's self-love is God's providence"; between the attitude which appeals to a religious standard to repress economic appetites, and that which regards expediency as the final criterion—there is a chasm which no theory of the permanence and ubiquity of economic interests can bridge, and which deserves at least to be explored. To examine how the latter grew out of the former; to trace the change, from a view of economic activity which regarded it as one among other kinds of moral conduct, to the view of it as dependent upon impersonal and almost automatic forces; to observe the struggle of individualism, in the face of restrictions imposed in the name of religion by the Church and of public policy by the State, first denounced, then palliated, then triumphantly justified in the name of economic liberty; to watch how ecclesiastical authority strives to maintain its hold upon the spheres it had claimed and finally abdicates them—to do this is not to indulge a vain curiosity, but to stand at the sources of rivulets which are now a flood.

In nearly all cultures and religions, and for most of history, greed, avarice and pursuit of wealth have been considered harmful and evil. Taoist philosopher Chuang Tzu writes: “Do not race after riches, or you will let slip the Heaven within you,” and similar sentiments can be found in nearly all scriptures. Children are reprimanded for selfishness, and taught share toys, cooperate, and be generous in nearly all cultures.

Modern Europe replaced the Biblical sentiment that “Love of money is the root of all evil,” by the wisdom of Bernard Shaw that “Lack of money is the root of all evil.” Many historians and philosophers have described the process by which wealth gradually came to be prioritized over other social considerations. In this essay, we will discuss some aspects of this historical change, and the incalculable damage it has done. Pursuit of wealth, luxury, and hedonistic lifestyles is being promoted by powerful media and this message is eagerly being absorbed by our youth, which bodes ill for the future. Creating an awareness of this broad historical perspective provides an essential basis for resistance to the onslaught of modernity, which threatens many of our precious traditions.


In the much despised “dark ages” of Europe, it was widely believed that “Love of money is the root of all evil,” as the Bible states.

It is not necessary to point out that the age of Henry VIII and Thomas Cromwell had nothing to learn from the twentieth century as to the niceties of political intrigue or commercial sharp practice. But a cynical unscrupulousness in high places is not incompatible with a general belief in the validity of moral standards which are contradicted by it. No one can read the discussions which took place between 1500 and 1550 on three burning issues—the rise in prices, capital and interest, and the land question in England—without being struck by the constant appeal from the new and clamorous economic interests of the day to the tradi-tional Christian morality, which in social organization, as in the relations of individuals, is still conceived to be the final authority. It is because it is regarded as the final authority that the officers of the Church claim to be heard on questions of social policy; and that, however Catholics, Anglicans, Lutherans, and Calvinists may differ on doctrine or ecclesiastical government, Luther and Calvin, Latimer and Laud, John Knox and the Pilgrim Fathers are agreed that social morality is the province of the Church, and are prepared both to teach it, and to enforce it, when necessary, by suitable discipline.

Interminable and bloody religious warfare in Europe led to the emergence of a secular system of thought which repudiates religion as a basis for social organization. In a secular society, it is necessary to find some alternative to religion as a basis for collective action. Starting from the assumption that the society is composed of individuals with different religions and irreconcilable conflicts, European political thought emphasized the diversity of human goals and the primacy of freedom to choose. Wealth was seen as an essential component of freedom, as it allows individuals to do whatever they desire. Thus the pursuit of wealth became a social goal and a means of obtaining maximum freedom in a secular society. The attempt to turn a vice into a virtue was initiated by Mandeville, whose famous “Fable of the Bees” described how production stops when bees decide to give up greed and become honest and virtuous. Adam Smith similarly argued that it was the selfish motives of the baker that delivered bread on the tables. Arguments that pursuit of wealth was socially acceptable and produced public benefits led to a gradual but radical alteration in the fabric of European society.

Early thinkers saw clearly that wealth was merely a means to an end, but considered it a necessary intermediate step to advance towards desirable social goals. Sociologist Max Weber writes that the “spirit of capitalism” is the pursuit of wealth as an end in itself, to the point of being “absolutely irrational”. Keynes wrote that the “accumulation of wealth” is a distasteful human quality, and even a disgusting morbidity; nonetheless, we must pretend that “foul is fair” so as to get out of the tunnel of economic necessity. Leading European philosophers (Capitalist, Communist and Socialist) were persuaded that the solution to all problems of mankind lies in the accumulation of wealth, and sufficient wealth would bring about heaven on earth. Later thinkers lost sight of the larger goals, and began to think of pursuit of wealth as a desirable goal in and of itself. Nobel prize winner Milton Friedman and followers very explicitly argue that businesses should only pursue profits and should not pursue socially beneficial goals. This reversal of priorities, and placement of money over social concerns has had tragic consequences in all domains of human existence. We will only be able to sketch of few of these in this brief essay.

Recent research on the classical question “Can money buy happiness?” has led to conclusions familiar to the ancients but startling to the moderns. It has been conclusively established that social relations play a decisive role in determining happiness. In contrast, after basic needs are provided for, money is of very little importance in creating a sense of well being and satisfaction with life. Many books like “Loss of Happiness in Market Economies” document the fact that tremendous increases in wealth have not led to corresponding increases in happiness in the West. Studies of terminal patients in hospices show that nearly all regret paying too much attention to careers and wealth, and wish they had given more time to family, friends and social relations. The idea that sufficient wealth would lead to improvements in all dimensions of human existence, and a Heaven on Earth, has turned out to be wrong.

The idea that poverty leads to crime is being replaced by the understanding that the crime of neglecting the poor and the oppressed, and legitimizing pursuit of wealth without regard to social concerns, is what leads to widespread poverty. According to recent surveys, 38 million households experienced hunger and food insecurity in the USA in 2006. This was not due to lack of wealth in the USA. Several trillion dollars have been spent on bombing Iraq back to the stone ages, when just one trillion dollars would provide health care for the 47 million Americans and make college feasible for every American student. Just the interest on a trillion dollars would, according to the World Bank, eliminate starvation and malnutrition or provide primary education for every child on earth.

The sentiments of Shylock, who was ready to take a pound of flesh in search of profits, were once abhorrent to all. Now however, the spirit prevailing on Wall Street is that all is fair in pursuit of profits. Books like “Liar’s Poker: Rising through the wreckage of Wall Street,” describe how deceiving friends and faithful clients for profits is not only commonplace but praised behavior. The current global financial crisis has been correctly attributed to greed by many who have studied the causes carefully. The spirit of the Islamic Law that one must describe any known defects in merchandise to be sold has been forgotten by Muslims and is unknown to those who promulgate the reverse ideology in the form of “Let the buyer beware.”

The worship of wealth has also transformed education into a means of acquisition of wealth, instead of the reverse. We have lost sight of the idea that education is a means of enlightenment, intellectual and spiritual transformation, and a path to wisdom. The sentiment of earning a profit from the misery and illness of mankind would have been considered despicable by our ancestors, but is now widespread among medical students. Instead of asking what kind of knowledge will be of most value to society, student ask about which degree will bring the highest salary. Both humans and knowledge are degraded when they are viewed merely as tools to make money (as in the economic concept of ‘human capital’).

At this time, we have the cultural resources to be able to battle these modern ideas which threaten to destroy valuable social institutions. It is essential to protect the family from the destruction caused by loose sexual mores. It is essential to teach our children to take more pleasure from serving and helping others than from the pursuit of luxury. The message of fidelity, virtue, nobility, heroism, and self-sacrifice is present in our tradition and literature, but is under severe attack from western media which glamorize and promote hedonistic lifestyles. We need to take an active part in this battle for the hearts and minds of our youth. I hope that this essay will serve as a part of the effort that is needed.


Skidelsky, Robert (2001) Keynes and the Ethics of Capitalism, Paper presented at Boston College,Chestnut Hill, Maynard Keynes, CW, IX, pp. 329 - 331, from Economic Possibilities for our Grandchildren (1930)

Tawney, R.H. (1926) Religion and the Rise of Capitalism, New York: Harcourt, Brace & World, Inc.

Lecture 9: The Evils of Interest

Interest and the Modern Economy


Can the modern economy function without a market for interest-based credit? This question has acquired some urgency in the wake of the recent Shariat Court ruling banning interest in Pakistan. Some pundits have pronounced that great harm will result from the banning of interest2. Actually, such pronouncements are based on a lack of understanding of

both the modern economic system, as well as the nature of the Islamic prohibition of interest. As we hope to demonstrate clearly below, the modern economy can function very well, indeed better in some ways3, with a prohibition on interest rate payments of the Islamic type.

Some Common Misunderstandings

Many people believe that modern economics demands that there should be no restrictions on the functioning of markets. Clearly, this is not the case. Every society, in accordance with its values, imposes restrictions on the functioning of certain markets. Thus we do not allow markets to function in illicit drugs, gambling, prostitution, slavery, etc. Moreover, even though we know that illegal markets do function in these goods and services, no one advocates that just because markets exist they should be allowed to exist. Until quite recently, in conformity with Christian teachings against usury, Christian-modern societies did not allow markets for interest- based credit. It is only with the progressive crisis of faith in Christianity that such markets have come to be permitted, and are now seen to be normal.4

Muslims have not suffered any such crisis of faith, and continue to view these markets as morally reprehensible. It is therefore entirely "modern" to Muslim societies to have laws that reflect their values.

A major misunderstanding regarding the prohibition of interest that such a law will make it impossible to earn a return on capital. As consequence, investments will dry up and the growth of the economy will be reduced or eliminated. In fact, as we will show below, Islamic law provides for a number of permissible alternatives to interest, and hence allows for earning a return on capital. The economic function which the interest rate performs can be fulfilled without using the particular form which it takes in modern banking. This may seem surprising since the opposite is frequently asserted in the popular press, but this point is well

1 The authors are Managing Director, Arshad Zaman Associates (Pvt.) Ltd., Economic & Financial Consultants based in Karachi and Professor at the Lahore University of Management Sciences, respectively.

2 For example, H. Alavi writes that the ban on interest rate is a “threat to the stability and viability of the Pakistan economy,” in an article in Dawn on 9 Feb 2000. Unfortunately, instead of providing the economic basis for his statement, Alavi writes mainly about principles by which the Quran should be interpreted, stepping far outside his own field of specialization.

3 For example, M Khan (1986) has shown that interest based credit increases the risk of ranking crises. Our

results below support this conclusion, though the mechanism producing crises is different in our paper. Also, Presley and Sessions (1994) have shown hat mudarabah financing enhances capital investment because of its efficiency as a revelation device, relative to conventional interest based finance.

4 Even so, until recently the majority view has been that governments should intervene to keep these rates low. It is only in the last 30 years or so that this majority view has been assailed. Here too, with the financial crises of

the last two decades (and more), a significant backlash is building up.

understood by economists. For example, one of the current leading texts macroeconomics, Obstfeld and Rogoff (1996), states that in the presence profit-sharing or other arrangements,

‘the ban on ... interest ... would not interfere with the efficiency of the economy’.

There is no reason to suppose that investment will decline under switch to the Islamic system. While implementation of the Islamic Law eliminates returns on risk-insulated fixed returns (on credit), it brings into existence other types of return not only on entrepreneurial capital but permissible credit-like transactions. For example, Islamic law permits profits on the purchase and re-sale of goods with a mark-up (murabaha), which banks can use to fulfill the businessman's need for credit to finance the purchase of assets. This is a very common mode of financing in the Islamic banks and financial organizations that have been created. This method is virtually risk free and creates an instrument for credit very similar to conventional interest-based loans. At the other end of the spectrum, we have Islamically permissible common stocks, which have high returns and risks5. The point is that while the mix of financial instruments available would change in an Islamic system, they would not differ much in functionality from the mix currently available in a modern economy.

A third misunderstanding concerns the critical role of credit in nature of modern investment and business spending. Contrary to popular misconception, the majority of funds which finance business needs in USA, for example, is raised as equity (and not loans) on the open market (that is, common stocks, which are perfectly permissible under Islamic Law). Kester (1986) lists debt-to-equity ratio for major categories of business in USA and Japan, and shows that most of these ratios are substantially below unity, so that (Islamically permissible) equity financing is much more prevalent than (interest-based and prohibited) debt financing. This amount of debt would be reduced even further were it not for the artificial tax advantage of debt-based financing in these countries (since interest payments can be written off). As a practical matter, equity financing is widely used and has many advantages over debt-based financing, listed in many texts on corporate finance—see for example, Ross, et. al. (1995). These advantages are also discussed in a later section of this paper.

A fourth misunderstanding relates to the critical role of bank credit in supporting the prosperity of Pakistan. We must realise that while Pakistan is a new state, it is one of the oldest economies in the world; pre-dated only by modern Iraq and Egypt. For several thousand years of its existence, interest-based credit has been against the law in Pakistan. It is only in the last 50 years that interest-based bank credit was introduced in the economy, and its consequences are the stuff of current newspaper headlines. While there are complex reasons that account for the present crisis in banking (and non-bank financial intermediaries), no one can deny that a link between bank credit and the returns on the commercial undertaking that it financed would have been a good thing.

Finally, the degree of change required is commonly over-estimated. In fact, during the process of Islamisation under the Zia regime, banks have already rewritten their lending procedures to come into apparent conformity with Islamic Law. Thus, in principle, interest- based transactions have been replaced by those based on murabaha (markups and transactions costs), leasing, and some musharaka, all of which are permissible under Islamic Law.

5 For a thorough discussion of the range of Islamically permissible instruments and also justification of why certain types of transactions are permitted while others are not, see Usmani (1998). Also, as shown by Khan and Mirakhor (1989), the IS-LM framework macroeconomic analysis would work almost exactly as it does in a conventional economy.

Appearances are deceiving, however, and only the form of the transactions have changed, with no change in the underlying transaction.

Unfortunately, for inexplicable reasons, foreign transactions have been effectively excluded from the Shariat Court ruling. Since the government is the largest player in the market for credit, and interest-based foreign borrowing is its mainstay, as a practical matter, there is unlikely to be any change in the banking system already prevailing in Pakistan. Changes will occur only if there is an attempt to bring about real change in the form of the underlying transaction rather than the nomenclature being used to describe the transaction. Finally, it is unclear whether the executive body of the government will move to implement the Shariat Court ruling in detail,’ or whether they will be satisfied with the nominal implementation that is already in existence.

The present paper is concerned with the issues that will arise if Pakistan moves towards a genuinely Islamic system, as opposed to one which is Islamic in name and appearance only.

Debt Versus Equity Financing for Business Needs

Although there are many details, at a broad level we can categorise business needs for funds into two categories: working capital and investment. Working capital is needed for example when a business buys goods, often on credit, with the expectation of getting money from selling them. When credit from the original seller is not available, short term interest based loans are frequently used for financing the holding of inventory. The Islamic alternative here is Murabaha. Instead of taking a loan from a bank to purchase goods, the bank purchases the goods and resells them to the business at a profit. This profit takes the place of interest. For longer term loans for investment purposes, the Islamic alternative to an interest-based loan is Musharka, where the bank becomes a silent partner in the enterprise. A share of profits replaces interest as the gain on capital. In both cases, abstracting from complexities, we can model the Islamic transaction as being equity based — the return paid to the bank has some relation to the earnings generated by the business. The earnings of the business is a random variable (for inventories, because the timing of sales is random and hence the present discounted value of the resulting cash stream is random). In both Islamic instruments, some of this uncertainty is passed on to the lender. The alternative instrument is debt-financing, where the business must pay a fixed return regardless of its own performance. In this section we consider the question of financing business activities from the business point of view: Will businesses prefer debt financing to equity financing?

From a purely practical point of view, equity based finance is typically more common than interest-based finance in the US and Japan, as shown in Kester (1986). This shows that businesses tend to prefer equity based financing. This is in spite of the fact that debt based financing is advantageous due to tax laws in the US and Japan which permit businesses to write off interest expenses, but not dividend payments. Without this tax advantage, the proportion of equity financing would be even higher than it currently is. There seems no reason to suppose that completely eliminating interest based loans would cause any distress to businesses.

From a purely theoretical point of view, we have the Modigliani-Miller Theorem (1958,

1964). According to this theorem, it is economically equivalent whether business financing is done using common stocks (which is the Islamically permissible form of financing) or bonds (which are interest bearing and hence banned). Thus, at least for the purposes of financing

business activity, theory recognises no difficulties with switching to purely Islamic forms. Critics have argued that the M&M Theorem fails to hold when real world complexities are taken into account. Taking these complexities into account actually favours equity based financing over debt based financing for many reasons (See Ross et. al. (1993) and Jensen & Smith (1986) for a discussion). The fundamental issue which emerges is that the value of a firm is equivalent to its stream of incoming payments. All claims on the firm must be paid out of this stream. Equity based finance is co-ordinated with this stream, while debt based finance is externally prescribed. In bad times, interest payments must continue at the same rate, while equity based payments are reduced. Due to this, the probability of bankruptcy and financial distress are increased when debt based financing is used6. Since this issue is critical to some of our arguments to follow, we spell it out further in the next paragraph.

Consider a situation where a business has a random stream of earnings. For simplicity, suppose that it will earn $1000 with probability 90 per cent and $100 with probability 10 per cent. Then the expected earnings are $910 and so, on the average, an interest repayment of $200 will be well within the capability of the business. However a fixed liability of $200 will cause the business to go bankrupt (or go into financial distress) about 10 per cent of the time in this scenario. If this same $200 is repaid as a 22 per cent share of returns, there will be on the average the same repayment to the lender ($220 in 90 per cent of the cases, and $22 in 10 per cent, averaging out to $200). However the probability of bankruptcy or financial distress is reduced to zero.

Other than tax advantages (which are artificial, in the sense that they merely re- distribute income and are not net gains to the economy), there is basically only one situation where businesses will prefer debt-based financing to equity based financing. That is when the public perception of their returns is lower than what the businessmen know it will be. In such a situation, the public/banks will demand a greater share in equity than the equivalent payment in debt. Instead of seeing this as a problem with equity financing, one could equally well view it as a problem of informational asymmetries. The problem could be resolved by sharing information in such a way that common perceptions emerge. It should also be possible to solve this problem using more complicated sharing rules instead of a flat percentage.

Overall, we can conclude that business will not be fundamentally affected by a complete ban on interest rates. On the whole, there will be favorable effects due to reductions in probabilities of financial distress and bankruptcy. These may be counterbalanced to some extent by problems arising due to informational asymmetries. These are small effects, and should not have much overall impact on the big picture.

Effects of Transition to Islamic Law on Banks

Naive faith in the workings of "the invisible hand" leads to the belief that whatever

practices are in existences are necessarily optimal. The ease with which multiple equilibria arise in modern game-theoretic formulations has led economists to reconsider such

6 On this, see also Mohsin Khan (1986): "...the Islamic system may well turn out to be better suited than the interest-based banking system to adjust to shocks that can lead to banking crises. In an equity-based system shocks to the asset positions of banks are immediately absorbed by changes in the nominal values of shares (deposits) held by the public in the banks. Therefore, the real values of assets and liabilities would be equal in all points of time. In the traditional banking system, since the nominal value of deposits is guaranteed, such shocks can cause a divergence between real assets and real liabilities. and it is not clear how this disequilibrium would be corrected..."

comfortable assumptions. In models with mutiple equilibria, historical circumstances determine the one which is arrived at, and there is no guarantee that the best equilibrium will be selected. In addition, economics as a whole is well equipped to analyse marginal changes, but shifts from one equilibria to another bring into play big changes which we are ill equipped to analyse.

The mere fact that interest-based loans exist is not enough to show that their existence is necessarily an optimal way to organise business and banking. Since interest is banned in Judaism, Christianity and Islam, there have been many periods in history where interest has not been used. The illusion that current times are the best and most sophisticated has always been present throughout human history. This has led certain authors to suggest that in the

'primitive past' economic affairs were simpler and thus interest could be avoided. A serious study of history disabuses this naive idea — historical studies show that sophisticated and complex business transactions were conducted in many periods of history, including the Khilafate Usmania, which had its own version of a global economy.

Current organisation of banks appears curiously inefficient from an economic point of view. We have large banks which make small (relative to the banks assets) loans to diverse businesses, each of which has random returns. If the bank accepts return based repayment (as in Islamic system), then, since the bank has a diversified portfolio, the laws of probability guarantee that its return will show much less variability than the returns of individual businesses. This will reduce the overall risks in the system, since the banks will absorb a portion of the risk of the individual investors. If instead the bank demands fixed repayment on loans, this will increase the risks faced by the individual investors (leading to higher probabilties of business failure and financial distress). Since the banks portfolio is large and diversified, it is more efficient for it to bear (smaller) risk; instead, the interest based system magnifies risk for the individual investors who are already more vulnerable. Given the apparently greater efficiency of the Islamic type system, why are banks not organised along these lines? One answer could be that historically banks have offered fixed interest rates to depositors, creating a fixed set of liabilities. It is easy to construct formal models where banks, having a fixed stream of liabilities, would require fixed stream of payments from borrowers to be able to meet their liabilities, and would be hurt by a transition to the Islamic system. However, for the system as a whole, it would be optimal to make a transition to the Islamic system where banks would obtain profits which are based on business outcomes and would also pay depositors a random, return-based amount. There is a tradeoff made in this transition: the risks to businesses are passed on, in a much attentuated form due to diversification, to the consumers, who will now have random returns on their deposits. We will return to a more detailed discussion evaluating the costs and benefits later in this


Effects of Interest Ban on Consumers

As just discussed, the consumers would face a more variable stream of returns on deposits. There would be compensation in the form of reduced risk of bank failures, as we will show later on. In an Islamic society, practicing Muslims would face no loss from this transition as the consumers would prefer a variable rate of return. Their option is to keep money out of banks which leads to zero returns, or invest it directly, which consumers are ill-equipped to do. Serious Muslim investors do obey the law, thus depriving the economy of money which may be useful in increasing investment and hence the growth of the economy. Thus there is a distinct possibility of growth in available funds for investment following a move to Islamise

the banking system. Even Europeans have become aware of the vast potential of attracting the funds of Muslim investors, and are creating instruments to tap into this fund. The Islamic Dow-Jones average and FTSE index, as well as several funds which invest in only Islamically permissible instruments have recently been created. This leads to the possibility that the creation of a truly Islamic banking system may actually attract foreign investment from Islamically minded investors, instead of reducing it, as has been suggested by several opposed to the move.

Another issue of importance to consumers is the financing of loans for consumer purchases, such as houses and cars. These can easily be handled via the instrument of Murabaha, where the bank purchases the item, and resells it to the consumer on installments for a profit. Muslim groups have already implemented schemes of this kind in the USA and Canada, showing their feasibility. See website for one such group, legal and economic feasibility studies, and other relevant statistics. If the transaction runs smoothly to completion, there are virtually no differences between it and the conventional interest based financing (other than the artificial tax advantage of the interest based loan). In case of default, the Islamic method appears superior. It would save the banks some portion of the legal costs currently spent on repossession from recalcitrant consumers and resale, since they would have title to the assets.

Effects of Interest Ban on Government Finances

Unlike businesses, governments finance a wide range of activities (education, infrastructure, public goods, military) which are not directly renumerative. Thus it would be difficult for them to take loans which would be financed out of future revenues. Can governments function if they are denied access to interest based loans, currently widely used by all governments all over the world?

Contrary to what may be supposed, David Ricardo showed that the government can always replace financing via debt by financing via taxation (or vice-versa). This proposition has come to be known as the Ricardian Equivalence Theorem. For our purposes here, more important than the debate over the validity or failure of Ricardian Equivalence in practice7 is that it expresses a fundamental and important insight: Government borrowing must sooner or later be repaid by taxes, since this is the only source of government revenues. Under perfect foresight, infinitely long living consumers are indifferent between government financing from taxes and that from loans, since they realise that eventually they will repay the loans in the form of higher taxes. Failure of Ricardian equivalence results from the short horizons of consumers, and lack of equality of discount rates applied, among other possibilities.

We do not mean to suggest that governments should replace borrowing by taxation; this is not politically feasible. What is important to realize is that borrowing is not a new and different instrument for financing; it is fundamentally a method for pushing taxation forward onto later times. Governments are happy to do this, since they can borrow and later the government will be saddled with the debt. Consumers are also willing to do this since they discount payments by future generations. Thus there is a large measure of lack of responsibility and foresight, as well as long range planning, which encourages the government tendency to finance via debt rather than taxation. This shows that banning of interest based debt will encourage responsible government, by not giving them the option of

7 See Han-Yung Jung's (1994) Ph.D. Thesis for an empirical evaluation and references to the literature.

saddling future governments and unborn generations with debt. This by itself may well be of great value and welfare increasing. As documented by Ferraro and Rosser (1994) the Third World currently owes more than 1.5 trillion dollars to the First World and the annual net flow from the poor countries to the rich countries has been over 50 billion dollars in the past decade8.

The conventional view is that the government borrows for the development of projects which enhance productivity. The increased revenues from the additional productivity would be used to pay back the loans without imposing any debt burden on future generations. If the conventional view is true, then borrowing to repay interest on previous loans should be very rare or nonexistent. In practice, a large number of new loans go towards financing interest payments on previous debts, showing that sufficient additional productive capacity was not generated due to the earlier loan. The evidence supports the alternative view that corrupt governments borrow for private benefits. In this case, later generations and governments are saddled with a debt burden without any compensating benefit in the form of productivity gains due to improved infrastructure. A ban on interest protects future generation from the corruption of earlier governments by denying these governments the possibility of taxing later generations by creating debt. This is clearly of great benefit in a country such as Pakistan, where no one denies the deep corruption in government. However such a ban may also have the effect of preventing productive investments by the government, which may not be able to finance them. Thus we need to find a way to allow the government to finance genuinely valuable and productive projects, without allowing them to borrow in an indiscriminate fashion. Islamic law and heritage does allow a number of options, all of which can accomplish this goal of discrimination. It is important to note that the government and the powerful elite would be expected to resist these alternatives since a responsible government would take away the easy opportunties for windfall profits enjoyed by those with easy access to loans which need not be repaid by individuals but will be paid by the public in the future.

Islamically permissible ways of financing projects without taking interest based loans depend on the nature of the project. For revenue generating projects such as power generating dams, it would be best to finance out of the revenues of the project. If the project revenues are insufficient, this a clear indication of the economic nonviability of the project. Projects such as highways and bridges could, in principle, be financed from tolls to be paid. Such forms of finance may prove insufficient for various reasons. In these cases, the beneficiaries from the projects should be taxed. Roads increase land values, and the owners should be taxed. Similarly beneficiaries from other development projects should be made to contribute to the projects. There is an example of Khalifa Umar in which he asked everyone to put in a day of work in building a road. Creative financing like this will reduce corruption, get the people involved in the development project, overcome resistance to government revenue collection since the benefits will be directly visible, and encourage greater participation in the government. Certain projects, such as educating the poor, cannot be paid for either out of revenues generated out of the project or by the target population (since it is too poor, and the benefits too diffuse and long range). In such cases, the Zakat fund can be employed and also appeal to public donors may be made. The tremendous success of public charities such as Edhi trust shows that there is no lack of willingness of the public to participate in good projects. Resistance to paying taxes and supporting government projects arises solely from

8 Each year seventeen million children die from the combined effects of poor nutrition, diarrhea, malaria, pneumonia, measles, whooping cough, and tetanus, diseases that are rarely fatal in the developed countries. One in twenty of these impoverished children dies before reaching the age of five. A large proportion of these deaths is attributable to the burden of debt repayment faced by the poorer countries.

well-founded suspicions of corruption in the government. To the extent that banning interest will force the government to reduce corruption in order to be able to win the confidence of the public and attract funding for its projects, this will be a change all to the good.

Another important beneficial effect of preventing the government from taking interest based loans will be the freeing of capital for domestic investment. It has been widely observed that when the government issues bonds paying high real interest rates, the public invests in them in preference to productive interest. Peter Farkas (1998), mentions that one of the reasons for the collapse of Russian industry is that the lucrative returns available on financial markets led to reduction of capital available for productive investments. In this connection, Mehra and Prescott (1985) have shown that the U.S. treasury bills in the last century have payed a real interest rate of around less than 1 per cent. This 1 per cent could be regarded as compensation for inflation risk. This leads to the possibility that a genuine risk free government bond could be financed at zero per cent interest rate in real terms. A credible and honest government should be able to obtain financing for its legitimate projects by issuing Islamically permissible indexed bonds at zero per cent interest. Such a policy would also not compete with private sector needs for financing productive investments.

Some General Effects of the Prohibition of Interest

We have considered the effects of banning interest based loans on consumers, banks, business, and government, separately. In this section we consider some global effects which could be expected from the Islamic law. Several socially beneficial effects would result from such a ban.

Financing for superior investment prefects: Since banks are effectively insulated from the outcomes of business in the system of interest based loans, they lend on criteria different from the intrinsic merit of the investment. Potentially very good investments would be passed up if the investor does not have enough collateral to guarantee repayment in case of an unfavourable outcome. If return to banks is based on investment outcome, as under Islamic law, we may expect that the mix of investment projects financed would shift towards the more profitable and hence the economically more valuable projects. As a practical matter, the rate of failure of new business startups in the USA is close to 70 per cent. This high rate is partly due to the fact that banks are willing to finance poor projects if they have sufficient collateral to ensure that they will be repaid. Such a high rate of failure inflicts large deadweight losses on society. It seems likely that if banks take greater interest in outcomes, these losses can be reduced.

Better utilisation of information: Since banks finance many projects, they have potentially valuable information to share with investors. A typical new business startup may be a first or second effort, whereas the bank is likely to have made loans to several similar businesses. Under conventional interest-based financing backed up with collateral, the bank has no real incentive to share its information — it is guaranteed a fixed return in any case. In the Islamic system, the return to the bank depends on the return to the investor and hence the bank will have a great incentive to ensure that the new investor has the best possible information for planning. Realising that small investors have relatively poor information available, many government agencies have tried to fill the vacuum and provide relevant information. However a financially interested party would obviously do a better job of providing this service.

More opportunities for the poor and better income distribution: The current collateral based system for financing business effectively locks the poor out of participation in the economic activities of the nation as a whole. Schemes like ROSCA (committees in local terminology) show creative efforts to get access to finance by those who are ineligible to borrow from banks by conventional criteria. Banning interest should have the effect of allowing for greater access by the population to finance, and hence lead to a better income distribution.

Maintenance of Independence and Sovereignty: The use of debt as a tool for control is ancient. Blaisdell (1929) shows how the Ottoman Empire was subjected to European influence by the use of debt. In modern times, the IMF and WB interfere with sovereignty on all fronts. Substantial pressure can be brought to bear on indebted countries to formulate policies contrary to the national interest. It is no longer denied even by the WB that its policies have generally caused much harm to the poor. Motivated mainly by ensuring repayments, IMF structural adjustment programmes have generally been harmful to nations which have adopted them. It is quite interesting to note that nearly all the IMF/WB debt has been contracted by interim governments in Pakistan, which were not responsible to the people, and did not look forward to future repayment. Representative governments as well as responsible military leaders have generally avoided binding the country to debts which would adversely affect the future.

Avoidance of Debt Crises: As we have argued, interest-based loans lead to irresponsible borrowing and lending. This in turn leads to banking crises from time to time as fixed obligations cannot be met from a payment stream which is random and variable. Such crises inflict tremendous hardships and costs on all segments of society, but most of all on the poor. For example, Ferraro and Rosser (1995) details the current debt crisis facing the world and the hardships inflicted on many parties by this crisis. If the world as a whole moves towards an non-interest based system, it seems likely that such crises could be avoided.

Justice: As Tawney (1926) and others have noted, the divorce between issues of morality, ethics and justice on the one hand and material affairs, economics and business on the other hand, was effected over the period of sixteenth and seventeenth century in Europe. Things have proceeded so far that Milton Friedman (1997) feels no discomfort in arguing that "Profits should be the only business of business,' even if these profits lead to deaths9. Thus it sounds strange to modern ears to bring up issues of ethics and justice, on the basis of which interest has been banned for such a long period in the common heritage of mankind. The issue is that reward should only be given for productive behaviour. It is on this principle that lotteries and gambling are banned in Islam, since the winners gain without having done anything productive. Similarly the mere ownership of capital is not considered a productive act (much as capitalists may wish to convince us otherwise). It is to counter these ethical considerations that justifications were offered for interest in terms of the "rewards for waiting' etc. in early European debates on the issue. As a silent partner in a business enterprise, a capitalist is entitled to reward for the risk he takes. The risk-free reward embodied in interest is not just, since the capitalist gets it without doing anything productive — mere ownership not being considered a productive activity.

9 See Friedman vs. Alameda (1997). Alameda discusses a case in which Chevrolet decided to manufacture defective Pintos knowing it would lead to about 700 deaths on the basis of profit loss considerations showing that an immediate recall and correction of defect would be more expensive than the eventual liability suits resulting from the deaths. Friedman counters by saying that all moral judgments are relative and subjective and hence businesses should not get involved in making moral decisions, but just pursue profits.


We have made a detailed examination of the institution of interest and shown that prohibiting it would not lead to discernible difficulties for modern institutions. In many different ways, the resulting changes would be beneficial as a whole to society. The question that naturally arises in the mind of a skeptic would be that if the interest-based system is so inefficient, why has it continued for so long?

As far as the private sector is concerned, in the USA and Japan, it seems likely that businesses would finance close to 100 per cent of their needs by equity based methods if it were not for the tax advantage of interest based loans. Thus a law favouring interest based financing is responsible for the persistence of interest. In the public sector we have listed many reasons why irresponsible governments and corrupt politicians would favour the use of interest based loans over alternative Islamically viable instruments. The fact that debt allows manipulation of the other party creates an incentive for the powerful to use interest based debt as a tool. When the powerful of the world have reasons to prefer interest based loans, we need look no further for a reason for its prevalence.


Alameda, 1997 'are Profits the only business of business? NO," in Taking Sides: Clashing Views on Controversial Issues, 8th edition, edited by T.R.Swartz and FJ. Bonello, McGraw-Hill, NY.

Peter Farkas, 'The Collapse of Russian Industry", Working Paper # 97 of the Institute for World Economics, Hungarian Academy of Sciences. Fi- ll 24 Budapest, Kallo Esperes V. 15. Dec. 1998.

Vincent Ferraro and Melissa Rosser, 1994 'Global Debt and Third World Development", in World Security: Challenges for a New Century, edited by Michael Klare and Daniel Thomas, St. Martin's Press, New York, pp. 332-355.

Milton Friedman, 1997 'Are Profits the only business of business? YES," in Taking Sides: Clashing Views on Controversial Issues, 8th edition, edited by T.R.Swartz and F.J. Bonello, McGraw-Hill, NY.

Jensen and C. Smith, 1989 The Modern Theory of Corporate Finance, McGraw Hill, NY


Jung, Han-Yung, Bayesian Tests of the Ricardian Equivalence Proposition, Ph.D. Thesis, Johns Hopkins University, 1994. UMI number 941994.

Kester, "Capital and ownership structure: a comparison of US and Japanese manufacturing corporations," Financial Management 15 (Spring 1986).

Mehra and Prescott, "The interest premium puzzle", Journal of Monetary Economics, 1985. Mohsin Khan, Islamic Interest Free Banking: A Theoretical Analysis, IMF Staff Papers (33)

1/1, March 1986, pages 1-27.

Mohsin Khan and Abbas Mirakhor, The Financial System and Monetary Policy in an

Islamic Economy, Journal of the King Abdulaziz University, 1, 1989, pages


F. Modigliani and M. H. Miller, "The Cost of Capital, Corporate Finance, and the Theory of

Investment," American Economic Review 48, June 1958, pp.261-297.

F. Modigliani and M. H. Miller , "Corporation Income Taxes and the Cost of Capital: A Correction," American Economic Review 53, June 1963, pp. 433-43.

Maurice Obstfeld and Kenneth Rogoff, 1996, Foundations of International Macroeconomics, MTT Press, page 273 footnote 5.

Blaisdell, 1929, European Financial Control in the Ottoman Empire, Columbia University

Press, New York.

Stephen Ross, Westerfleld and Jordan, 1993, Fundamentals of Corporate Finance, Irwin, NY.

R. H. Tawney, 1926, Religion and the Rise of Capitalism, Harcourt, Brace, and Co., NY.

Muhammad Taqi Usmani, 1998, An Introduction to Islamic Finance, Idaratui Ma'arif, Karachi, Pakistan.

Lecture 10: The Normative Foundations of Scarcity


[1] See Hodgson quote earlier. In his book entitled The 100:A Ranking of the Most Influential People in History, historian, Hart, ranks our prophet Mohammad as the single most influential person in all of human history.

[2] Source: “Statistics on poverty & food wastage in America” by Samana Siddiqi, available at

[3] This includes the burying of living children. In context of the confession by Susan Smith that she put her two children in a car and drowned them in John D Long Lake circa 1996, it was reported that more than a 1000 similar cases occur every year – see, for example, “Mothers who kill their children.”


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