Monday, 9 July 2012

Islamic Economic System


In the short history of contemporary Islamic economics, we also encounter two other interesting phenomena: an overstatement of the uniqueness of the objectives of the Islamic Economic system, and a mix up or confusion of principles and tools of analysis.
Driven by a sense of idealism, some of us attribute a special status to the general objectives of the Islamic economic system: Full employment, satisfaction of basic human needs, economic-cum distributive justice, development or improvement in the quality of economic life, economic power, etc. But a closer examination of these objectives indicates us that they are the same for each and all economic systems as usually expressed in their econo-political rhetoric throughout the human history. More specifically, these objectives are also the core objectives of socialism, communism and capitalism even anarchism and all or “isms.” The same also arises with regard to the institutions of market, factors of production and the principle of government intervention whereby some Islamic economists try to draw a so called “Islamic” picture that is very different from the conventional wisdom that is common to other economic systems.
This is not to deny a certain uniqueness of the Islamic economic system. This uniqueness is founded on the principles of Islam as a revealed religion as they strike a balance way of life that is not tilted in either direction. A uniqueness that lies essentially in two things: The explicit acceptance of the Divine Revelation as a source of knowledge and certain detailed pivotal institutions such as the prohibition of Riba (interest), the private-public mix of property/ownership, the spiritual-material mix of success, Zakah, Awqaf, etc. in other words, while the general objectives and the tools of analysis of Islamic economics are the same in economics itself, the some aspects of the institutional setting of the Islamic economic system are different, or the means this system uses to reach the common goals are not exactly the same as in other system the utilitarian capitalist which is generally given the name economics and the utilitarian communist which is dictatorial by definition.
Another important area of uniqueness of the Islamic economic system must be brought out explicitly. It is the moral characteristic of its articulation, on both the principles’ level and the level of the practical rules and regulations. This moral characteristic makes a boundary of the accessible set of actions/decisions/ behaviors of the economic unit. The economic unit in the Islamic system is equipped with the ability to judge possible courses of action on moral grounds, the same way one finds in all societies and systems but to this the Islamic system adds an external screen apparatus that is manifested in the set of morally-based rules of do and dot to do that takes the form of the Shari’ah or the Islamic law. Some of Islamic economists call this characteristic “the moral internal and external screening.” We must realize, however, that the Shari’ah based morality includes items that are not conventionally taken as moral matters such as ‘pork production’ but we must also realize that the contemporary moral standards of the capitalist utilitarian societies is subject to an accelerating dynamism that associate relativity to all conventional morals.
Moreover, the Islamic economists also argue that because of it is sourced out in the Divine Revelation, the Islamic economic system is balanced in a way that brings it closer to the human nature (al Fitrah). Accordingly, you will find in it apparent similarities to certain aspects of other economic systems because undeniably the latter are the product of human mind/experience mix.
Consequently, it is normal that the means to reach the common goals, in the Islamic economic system, include a free market-exchange with emphasis on honoring consensual contracts (some will see it as à la capitalist free market), prohibition of monopoly (à la interventionism), great concern about the satisfaction of the basic human needs and about economic justice (à la socialism) and assignment of a substantial chunk of natural resources to the whole society as represented by its government (à la communism). Add to it all, the prohibition of interest that denies any rewardability to most of the purely financial transactions unless it is formed as means of production and thus deprives them from the functionality that is conventional in the capitalist framework.

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