Monday, 9 July 2012

Public Finance: Why Did we Miss Creating a Theory


Public finance is the part of Islamic social studies that historically received more attention than any other part of Islamic economics. Detailed discussions of public revenues and public expenditures are available in the classical Fiqh and Fatwa writings. Here again a question arises: Did we fail in establishing a general theory of public finance within an Islamic economic framework? The dust around the idea of whether taxation is permissible or not and under what conditions is not yet settled. Also not settled are the debates of private ownership protection against the government, rights of the poor in the public properties and revenues, the functions of taxes, economic or financial, and the restrictions on the economic role of the government.
The Public Finance area is probably the richest of all sub-branches of Islamic economics, yet most writings in this area are heavily influenced by the Western training of the writers and rarely have direct links to the original sources of the Islamic religion or to the  fundamental classical writings on public finance. We need to develop a general theory of taxation and government in Islamic economics that is based on the sources of knowledge of the Islamic economic system and that looks critically at the classical writings on the subject.
Future of Islamic Economics
Seeing it as a teaching discipline and a job-creating platform in the academia and the research centers, Islamic economics is there to stay and expand. In fact, the amount of accumulated knowledge in Islamic economics warrants a full fledge teaching program that can afford undergraduate as well as post graduate studies and degrees.
However, when we take a closer examination at the existing status of Islamic economics we see a mission unaccomplished. There is a need to set clear demarcation lines between Islamic economics and finance on one hand and Islamic Fiqh, especially the Mu’amalat, on the other hand. There is a need to measure the size of Islamic economics and stop being pretentious and as pointed out earlier in this paper there is also a need for more rigorous research in several critical areas of Islamic economics.
Islamic economics is a new but definitely fast growing field of economics. Its trade mark, the non-presence of interest, is not only unique but also affords it a claim of innovation. It has an integrated institutional structure. All it currently needs is that its promoters should wise up and tighten up their theoretical vigor.
On the applied side, it is certainly incorrect to attribute to Islamic economics any of the claims and ineffectiveness of political leaders and dictators of some Muslim countries. Besides, Islamic economists did not provide any agenda for political economics founded or derived from their branch of human knowledge inspite of the need for such an agenda.
It seems to me that the present generation of Islamic economists is exhausted and already consumed in the activities of Islamic banking and finance that the best it can do is to hand over the torch to a second generation that may carry deeper theoretical analysis and fill the gaps left by our generation.

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