Economics

Islamic Economics – Part 2: What is Islamic Economics?

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Now that we have a general understanding of what the study of economics is (see part 1 here), we can move on to the big question: what is Islamic economic? To truly answer this question, we have to take a slight theoretical detour into the realm of moral philosophy.

All economic theories — from the classical thinkers to the institutionalists, the Keynesians to the Austrians, the Marxists to the neo-classicalists — have a philosophical under printing. The main/dominant ideology within microeconomics today is what is commonly known as the Neoclassical School, or “Welfare Economics”. From a secular approach, the neoclassical school utilizes a consequentialist moral base: the value of an action (i.e., is it “good” or “bad”) is based purely on the propriety of that action. The concepts then of whether an action is labeled “good” or “bad” are subject to cost-benefit analysis and valued by the consequences of the action. Every action has a certain level of benefit, known to economists as utility, and a certain amount of costs. If the gains in benefit outweigh the increase in costs, the action is “good”; if the gains in benefit are outweighed by the increase in costs, the action is “bad”. Continue reading

Islamic Economics: What’s In A Name? – Part 1: What is Economics?

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Islamic Economics: What’s In A Name?

“Islamic finance” and “Islamic economics” have recently become buzzwords amongst both the Muslim Intelligentsia and blogosphere. In fact, the terms get used interchangeably more often than not. Is there a distinction? Yes. Are they related? Well, yes. To understand more clearly, we have to take a couple steps back.

Part 1: What is Economics?
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An Introduction to Marxism for Non-Marxists by a Former Marxist – Part 3

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Dr. Jerry Hionis

In part two of three of  “An Introduction to Marxism,” I’m glad to welcome back Dr. Jerry Hionis to the site. If you missed part one, you can read it here, for part 2 click here. For more about Dr. Hionis click here.

An Introduction to Marxism for Non-Marxists by a Former Marxist – Part 3

By Dr. Jerry Hionis, Jr.

From a philosophical standpoint, I believe that the Marxist analysis does offer an interesting intersection with standard orthodox Islamic doctrine. Marx holds that the only escape the modern worker has from the exploitive relationship with the capitalist is through defining his/herself through the production of goods and services. Unfortunately this alternative relationship leads to alienation. From an Islamic perspective, the concept of defining oneself by a relationship with another creation is both spiritually inept and, possibly, blasphemous. All creation is subject to change and lacks any concrete definition; that is, all material in the known universe is in a constant state of flux. To define oneself based upon any object or individual that is — at least as a possibility — subject to change, depreciation and/or inevitable destruction, will only lead to spiritual crisis and alienation.

Islam would propose to the worker a more “practical” and spiritually fulfilling solution: to define oneself through a relationship with God. Unlike the capitalist, God does not require humanity to define himself as God. God does not seek profit nor any advantage through the exploitation of labor. Unlike the the good or service produced by the worker, God does not vanish nor can he be taken away from the worker and supplemented by a lesser value. There is no circular relationship and, hence, the identity of the “modern man” — as a creation and worshipper of God alone — is stable.

Baath_Party_founder_Michel_Aflaq_with_Iraqi_President_Saddam_Hussein_in_1988

Baath Party founder Michel Aflaq (left) with Iraqi President Saddam Hussein (right) in 1988

The interconnection between Islam and Marxist economic theory is more complex. Like most religious and nonreligious communities, the influence of post-colonial Marxism on Islam had hit its peak between the 1950s and the late 1960s. The responses to Marx have varied across the spectrum. Some, such as Sayyid Qutb, saw a complete synthesis between the two (although still claiming to have disavowed his Marxist beliefs). Instead of history being defined between the capitalist and working classes, Qutb and his ilk interpreted history as a constant struggle between Islam and those outside of Islam; namely, the proverbial “West”. Ba’thism too embraced socialist though a la Marx via Leninism but supplanted the Islam/non-Islam dichotomy with a pan-Arabist philosophy. The neoclassical and neoliberalism economic movements through the 19080s and 1990s brought Muslim thinkers closer to a more libertarian economic philosophy. Further, many still claim that Islam offers a system that is fundamentally distinct and separate from the two extremes of Communism and Capitalism.

I would argue that Islam: (i) does NOT propose a blueprint for an economic system distinctly different from either capitalism or socialism; and (ii) does NOT completely embrace capitalism and eschew socialism. There are aspects of each that have religious precedent. It is correct to assert that the Sunnah of the Prophet Muhammad (SAW) establishes a proto-”capitalist” criterion but with the understanding that government intervention was necessary when seen fit. In line with what is known as the Big Push or Rosenstein-Rodan model, the Prophet (SAW) was said to have endorsed a system of government coordination, mixed with private investment, to help the extraction of minerals in newly conquered lands. Abu Yusuf, like John Maynard Keynes, saw the need of government to help steer an economy’s growth through various forms of taxation beyond zakat and the jizya.

This is not to say that the ‘Ulema was/is in complete agreement on this issue. While Ibn Taymiyah believed that markets can fail due to malicious intent or some specific unforeseen circumstances (such as floods, droughts, wars and so on), he also believed it to be unGodly to try and interfere with market prices. The famed Andalusian scholar Ibn Khaldun, the originator of supply-side or “Reagan” economics, believed that any economic intervention by the government was ill-advised and, a bit more hyperbolically, even signaled the decline of a civilization.

In the end, markets have never been truly disregarded. The Nobel Prize winning economist (and a personal intellectual hero of mine) Amartya Sen once remarked:

To be generically against markets would be almost as odd as being generically against conversations between people. . . . The freedom to exchange words, or goods, or gifts does not need defensive justification in terms of their being favorable but distant effects; they are part of the way human beings in society live and interact with each other (unless stopped by regulation of fiat). The contribution of the market mechanism to economic growth is, of course, important, but this comes only after the direct significance of the freedom to interchange – words, goods, gifts – has been acknowledged.

In other words, a functioning society and, hence, economy would be just as impossible without markets as it would be without communication. But as we have seen, not everyone would agree with Sen’s sentiment.

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