Islamic Economics : Basic Concepts, New Thinking and Future Directions [1 ed.] 9781443879200, 9781443874564

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Islamic Economics

Islamic Economics Basic Concepts, New Thinking and Future Directions Edited by

Taha Eğri and Necmettin Kızılkaya

Islamic Economics: Basic Concepts, New Thinking and Future Directions Edited by Taha Eğri and Necmettin Kızılkaya This book first published 2015 Cambridge Scholars Publishing Lady Stephenson Library, Newcastle upon Tyne, NE6 2PA, UK British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Copyright © 2015 by Taha Eğri, Necmettin Kızılkaya and contributors All rights for this book reserved. No part of this book may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the copyright owner. ISBN (10): 1-4438-7456-6 ISBN (13): 978-1-4438-7456-4

CONTENTS

Foreword ................................................................................................... vii Acknowledgements ..................................................................................... x Introduction: Some Considerations on the Methodology of Islamic Economics Studies....................................................................................... 1 Necmettin KÕzÕlkaya Part 1: Rethinking Islamic Economics Revisiting the Foundational Concepts and Thoughts in Islamic Economics: Where Islamic Economics Should Originate in Terms of Theoretical Content ................................................................ 12 M. Fahim Khan Re-Defining Islamic Economics ................................................................ 58 Asad Zaman Islamic Economics and Its Future.............................................................. 77 Abul Hassan How Can “Islamic Economics” Be Possible?.......................................... 102 ùennur Özdemir Part 2: Basic Concepts, New Thinking and Future Directions Human Potential, Wellbeing and Philanthropy: A Philosophico-Economic Inquiry .......................................................... 132 Masudul Alam Choudhury The Role of Fiqh in Islamic Finance ....................................................... 165 Abdulazeem Abozaid

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Contents

Concepts in Islamic Economics Revisited: The Case of Poverty ............ 181 Muhammad Syukri Salleh Islamic Economics Assumptions Revisited: Contemplating the Concept of Scarcity............................................................................ 200 Zakaria Bin Bahari and Amir Wahbalbari The Political Economy of Institutionalism: A Methodological Process Premised on Islamic Texts ....................................................................... 213 Lubna Sarwath Conclusion: Rethinking Islamic Economics ............................................ 227 Taha E÷ri Contributors ............................................................................................. 237 Index ........................................................................................................ 242

FOREWORD

Studies in the field of Islamic economics lose their targets over time. These works conducted on Islamic economics since the 1970s have been co-opted by the existing economic system and have become limited to a large extent, as they are now only concerned with financial transactions. In fact, “Islamic economics” as a concept actually deserves to be conceptualized as an alternative economic system. However, because of the financial and commercial transactions implemented in daily economic life, it diverges from the position that deserves in the end, and the contributions it could make to economic theory are overlooked as Islamic financial instruments become widespread. Muslim economists continue their invaluable studies on this issue despite all of these developments. It has been recognized that a permanent foundation is not likely to be established with regard to the needs of the day so long as these individual studies are not brought together. Although we encounter various conceptualizations, such as “the economy of Islam,” “the Islamic economy,” “Islamic economics,” “Islamic finance,” and so on, it has become difficult to clarify our ideas as to the aim with which these concepts are used, their points of reference, and the kind of power they have. Furthermore, in this chaos, evaluations that do not make any claim with respect to the foundation on which they are produced illustrate that the process of conceptual transformation needs to be scrutinized attentively. Except for studies on Islamic finance, we do not encounter studies that approach the issue of Islamic economics in its totality in our scientific and intellectual world. The reason is that studies in the field of Islamic finance—articles, books, symposiums and so on—are deemed to be a part of Islamic economics and to be a substitute for studies of Islamic economics. Therefore, each concept is shaped in its own depth, and thus, studies of Islamic economics remain unsatisfying. An international workshop titled “Islamic Economics Workshop I: Basic Concepts and Ideas” was conducted to approach the historical course of the debate on Islamic economics and its current effects on our conceptual world. Valuable scholars from around the world presented papers in this workshop. This book is comprised of the papers presented in this workshop. The papers presented in the workshop were negotiated by the respective academicians and were revised and turned into articles by

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Foreword

the authors in consideration of the critiques and contributions made by the guests. These articles, which emphasize the concept of Islamic economics, were brought together with the aim of laying down a firm foundation for our contemporary socio-economic issues, as well as for our traditional intellectual legacy. This book has been divided into two sections. Conceptual and methodological debates are addressed in the first section and issues concerning Islamic economics are approached in the second section. In his article, where he discusses the reasons why Islamic economics has not reached the conceptual and scientific level it should have reached, Fahim Khan claims that the most important reason for this is a lack of vision. Khan claims that Islamic economics needs to be recognized as an independent scientific discipline, and this discipline needs to be developed in terms of its own values. In his article, in which he claims that the Islamic economy needs to be redefined, Asad Zaman divides the field in question into three sections: the micro level, where the individual lives and in which the commands of Allah on economic issues are followed; the meso-middle level, which concerns the immediate community; and the macro level, which concerns the Ummah in general. On the other hand, Abul Hassan evaluates the studies conducted in the field of Islamic economics up to the present day and provides a discussion of the future of the discipline and what could be done methodologically in regards to the field. In the last article of the first section, ùennur Özdemir approaches the issue from a different perspective and discusses the possibilities of an Islamic economy. In the first article in the second section, Masudul Alam Choudhury presents an analysis on human potential, welfare and philanthropy with a methodological and philosophical study. He approaches the issue through an analytical framework and discusses it within the evolutionary economic methodology in order to suggest an alternative developmental approach. Abdulazeem Abozaid deals with financial developments within the context of the relation of Islamic economics to fiqh, which has gained importance at this point. The role of fiqh in Islamic finance is discussed in the article, and it is claimed that, due to the irregularity and lack of organization in jurisprudence, controversial financial instruments have seeped into the system. Muhammad Syukri Salleh’s study emphasizes the need to redefine concepts in an Islamic context and approaches and discusses the concept of poverty in this context. He claims that a redefinition of the concept of poverty would play a crucial role in the eradication of poverty. On the other hand, Zakaria bin Bahari and Amir Wahbalbari’s study approaches the concept of scarcity, which was based

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on classical economics, from the perspective of Islamic economics. Lubna Sarwath’s study, which proposes a different approach and model, emphasizes the need for institutionalization in Islamic economics. She grounds this institutionalization, which she proposed on the basis of tawhid, on the idea that our preferences and material choices are shaped based on our moral consciousness. We hope to make a contribution to the field of “Islamic economics,” albeit a small one. We hope that the future studies will become diversified in such a way as to approach all aspects of economic life, both conceptually and in practice.

ACKNOWLEDGEMENTS

This book was developed out of the papers presented at the “Islamic Economics Workshop I” organized by ILKE Association for Science Culture and Education (øLKE ølim Kültür E÷itim Derne÷i), Scientific Research Society (ølmi Etüdler Derne÷i), and Turkish Entrepreneurship and Business Ethics Association (Türkiye øktisadi Giriúim ve øú AhlakÕ Derne÷i). We would like to acknowledge the valuable effort and support of the organizations and their staff. We would like to extend our appreciation to everyone for contributing to this project and, more specifically, to the authors and reviewers that took part in the review process. Our sincere gratitude goes to the chapters’ authors who contributed their time and expertise to this book. Without their support, we would not have had a chance to complete this book. And finally, we would like to thank the presidents of the organizing associations—Lütfi Sunar, Davut ùanver and ùükrü Alkan—for their contributions and support. Moreover, we would like to thank Süleyman Güder, Muhammed Turan ÇalÕúkan, Senanur AvcÕ, Nuriye Kayar, Kubilay Zekai Ero÷lu and Yusuf Enes Sezgin for their help in the preparation of this volume.

INTRODUCTION: SOME CONSIDERATIONS ON THE METHODOLOGY OF ISLAMIC ECONOMICS STUDIES NECMETTIN KIZILKAYA

Almost all of the scholars who talk about Islamic economy and finance nowadays refer mostly to the Quran and sometimes to the Sunnah. This approach may be deemed to be accurate at first glance when the dominant discourse of our time is considered and evaluated; however, it brings up serious problems when the details are fleshed out. In this study, I will firstly point out these problems in brief and then will proceed to focus on some matters as to how the Islamic economy needs to be approached. To that end, the theoretical framework of the study will be based on Tahsin Görgün’s approach to the nature and meaning of the Quran and the Sunnah (see Görgün 2013), and the Islamic economy will be evaluated on the basis of this approach. To begin with, we need to look at the question of whether the Quran and the Sunnah are the only sources of knowledge for Muslims. This may sound meaningless to some, but for the author of this article, it is very meaningful and important for the subject to be understood. Its importance should be noticed when it is considered that there is an emphasis on the Quran and Sunnah in Islamic studies in general and in studies on the Islamic economy and finance in particular. It should also be considered that this emphasis has been repeated in similar conditions. It may be appropriate to focus on this issue with a question in mind: Is the relation between the Quran and the Sunnah and a Muslim person a relation of subject-object, or is it a relation of a different kind? It is very crucial to give an accurate answer to this question, as it will enable us to determine the reasons for the many problems encountered today. Since the issue is the Islamic economy, a system that was once in operation and was successful to a certain extent, it is clear that there were and still are some sources that nurture this economic system. For this

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Introduction

reason, we need to question what the values of the Quran and the Sunnah as sources were in the classical period, as well as what they mean today. In other words, if the Islamic economy was founded on these two primary sources, and if these sources still exist, why does this field lack a theoretical framework for an Islamic economy today, and why do the attempts to propose one end up failing? The answer to this question, together with the ones posed above, lies in the fact that the Quran and the Sunnah do not hold any meaning for Islamic economists aside from their value as sources of knowledge. To put it in clearer terms, the Quran and the Sunnah are seen as objects in studies conducted on the Islamic economy, and they are referred to as sources of knowledge without any regard for the constituent roles they have played. The possibility for deriving accurate results from these studies diminishes as these two sources, which are the constituent elements of Islamic societies, are objectified within studies on the Islamic economy. Today, the existing economic models and concepts are taken as the basis of studies on the Islamic economy, and the knowledge found in the Quran and the Sunnah is evaluated accordingly. However, the opposite was true when the Islamic economy was being successfully implemented in the past; in this situation, the knowledge in the Quran and the Sunnah would be taken as the basis, and attempts would be made to fit the existing situation into the application of this knowledge. This approach does not indicate that the existing conditions would be disregarded in the classical period; on the contrary, they would be considered at any rate. It will be better to explain this with an example: when the concept of need is analyzed in studies on the Islamic economy, the dominant theories in today’s economy are taken into consideration, and the results obtained based on these theories are taken as the basis. Based on this process, examples of or equivalents of these results are sought out in the Quran and the Sunnah. Within this framework, human needs are deemed to be limitless, whereas the resources are taken as limited, and a theory is constructed accordingly. This approach seems to show a disregard for human beings themselves, as it assumes that the biological needs of humans are limitless and overlooks their fundamental psychological and moral properties. Furthermore, even though economics defines human needs in this way, it is known that economics and economic activities are structured mostly in a way so as to meet the needs of capital, such as profitability, growth, and competition. Certain concepts are sought out in the Quran and the Sunnah based on certain assumptions that are essentially foreign to the model of humans and society that the Quran and the Sunnah aim to establish. Since the basis on which the subject is handled is quite

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foreign to these two sources, the result of this search neither matches these sources nor has a chance to work. The same applies to such concepts as commodity, profit, consumption, income and labor. To determine the meanings of these concepts in the Quran and the Sunnah, the social reality in which these concepts are to be found needs to be analyzed in the first place. For this reason, the meaning attributed to the Quran and the Sunnah needs to be seen as having a different nature beyond their function as sources of knowledge. There is clearly no need to explain how problematic it is to deal with these issues without any regard for, or even without any knowledge of, the classical theories (sects) which emerged within Islamic society. It is quite obvious that the interpretation of such concepts as commodity, profit and benefit based on the meanings provided in the dictionary would lead to misunderstandings, which is the reason why it is even more problematic to disregard the social reality in which these concepts are to be found. If we may put it in classical terms, it may be claimed that the words to be found in the Quran and the Sunnah possess three levels of meaning comprised of their lexical, customary and ecclesiastical (shar‘î) meanings, and therefore the most common and biggest mistake made in studies of the modern Islamic economy is to approach the subject with an understanding different from these three meanings; namely, with the meanings that the modern economy attributes to these concepts. The economic model thus constructed is based on certain concepts that, in terms of their wording (they are allophones), are the same as the concepts in the Quran but that are very different in terms of their meaning and nature. This is the fundamental methodological problem of contemporary studies conducted on the Islamic economy. The main reason is that they provide recourse to the lexical meanings of the concepts found in the Quran and Sunnah (it is not possible to say that this is always done in proper ways, either) and disregard the customary and ecclesiastical meanings of these concepts. As a result, they overlook the social structure that gives life and soul to these concepts, making it quite difficult to consider the results of the studies thus conducted as part of the Islamic economy. This problem applies to all of the concepts that are taken as the basis of studies conducted on today’s Islamic economy. Some studies find that there are similar concepts to those found in today’s economics in the Quran and the Sunnah, and although analyses are made on their lexical meanings, it would be quite difficult to claim that their ecclesiastical and customary truths were also revealed. The reason is that the social reality in which these concepts emerged needs to be considered in the first place. Although very rarely, some studies on the contemporary Islamic economy

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Introduction

try to establish the ecclesiastical truth; however, since they are very far away from the customary truth, they cannot properly present the meanings of the fundamental concepts in the Islamic economy. After all, instead of examining the concepts and issues presented by the existing economic system based on the Quran and the Sunnah, the studies conduct a search in the Quran for the concepts and issues imposed by the existing economic system. As was mentioned above, the fundamental reason for this approach is the fact that the Quran and the Sunnah are regarded as sources of knowledge. This indicates that the perspective of the modern period is completely different from that of the past. In the classical period in which the Islamic economy was used as a system, the Quran and the Sunnah would be approached with the practice (‘amal) of being regarded as central, and this would have a transformative function. As a matter of fact, when the present is compared with the classical period, it is seen that this perspective constitutes the most fundamental difference between the two periods. For this reason, as long as the communication of the Lawgiver to the Muslims remains a source of knowledge and is not turned into practice (‘amal), it will be quite difficult to claim that the proposed, contemporary theories are theories of Islamic economy. To overcome this situation, the Quran and the Sunnah must be seen as existential sources, not merely as sources of knowledge. Starting from this view, it needs to be said that for the Quran to have an effect on the economy as in other fields, it firstly needs to be handled beyond an approach that objectifies it. The Quran needs to be seen as the existential reason of Muslim society. To ensure its applicability in social life, the Sunnah—namely the founding role of the Prophet (pbuh)—needs to be considered. This would only be possible if one submits (ittiba‘) to the Prophet (pbuh), which is the founding principle of Islamic society. Consequently, it is seen that the Quran and the Sunnah are inseparable, and one cannot function without the other (Görgün, 2013: 209-235). For this reason, the people who work today on theories about Islamic economy and finance have no chance to be successful, since they focus on the Quran and propose various assumptions based on certain principles mentioned in the Quran. Hence, they overlook the constitutive character of the Sunnah. In addition, it is not possible to name an economy that claims to rely on the Quran and the Sunnah and be based on them as an Islamic economy, unless the Quran is regarded as the existential reason of the Islamic society and unless submission (ittiba‘) to the Prophet (pbuh) is regarded as the constitutive principle of this society. Having established the position of the Quran and the Sunnah for

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Islamic society and sciences in this way, we have come to the question of the method to be followed by economics as a science. First of all, it would be proper to consider the meaning of sciences in Islamic societies, how the science of economics is related to other sciences, and what this science means on its own. It is possible to claim that the various sciences which emerged throughout history—such as linguistics, hadith, history, Quranic exegesis (tafsir), Islamic jurisprudence (fiqh) and ‘aqidah—have been referred to as methods by Islamic society throughout its existence (Görgün 2013, 228). Economics is a science that Islamic society uses to handle economic problems and through which it tries to solve these problems (in line with the method, the framework of which was given above). For this reason, economics possesses an identity similar to the other sciences. As this is the case, we see that the science of economics is a science with specific premises, as is so with the others (these premises are the principles that emanate from the fact that Islamic society has submitted to the Sunnah). Therefore, it is possible to talk about an economic thought that has certain aspects particular to Islamic civilizations. However, this does not mean that it is a completely different science. Instead, it means that it is a discipline the distinctness of which lies in its submission (ittiba‘) to the Sunnah and its difference from other systems. It is clear that the Islamic economy is not a completely different economic system with all of its institutions and concepts. As people engage in various kinds of commercial relations that have been similar for the most part across all geographies and periods, it would not be accurate to claim that their difference lies in their functions. Economic systems are differentiated not on this basis but on the basis of the different properties they possess. For this reason, the fundamental properties of the Islamic economy that distinguish it from other systems constitute its authentic aspects as well. In other words, what make the Islamic economy authentic are the points on which it differs from other economic systems. For instance, the suggestion of an interest-free economic system is the most important matter in this respect. The negative impact of indeterminacy on the contract may be mentioned within this framework as well. For this reason, even though Islamic economics possesses certain aspects that are similar to other economic systems, considering its sources of inspiration and the differences it presents makes it possible to talk about the existence of a specifically Islamic economy. This brings up the question of certain concepts that are dominant in the contemporary Islamic economy. The leading concepts that are emphasized most or mentioned frequently in contemporary studies on the Islamic economy and finance are concepts such as maqasid and maslaha, which are borrowed from fiqh.

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Introduction

In the vast majority of the studies in question, these concepts are not used properly, and the results obtained based on the meanings attributed to these concepts are not to the point as a result. The reason why these concepts are used more frequently today compared to the classical period is that they establish the grounds so that the Islamic economy, which is a part of the theoretical and practical system proposed by Islamic civilization, may be easily separated from its roots. In other words, these kinds of concepts that are emphasized more in modern times enable the scholars who are interested in the science of economics to think freely without being restricted by the methods proposed in the classical period. This is a mistake made especially by researchers who do not have any idea about the nature of the meaning these concepts possess in usul al-fiqh. These researchers mostly act based on the knowledge they have gained from secondary sources. To give an example of the shift in the meaning of a concept used today, we will briefly mention the meaning attributed to the concept of maslaha—including the maqasid as well—by the classical thinkers, and we will content ourselves by saying that a comprehensive discussion of the subject will be made somewhere else. While defining maslaha, al-Ghazâlî (c. 505/111) mentions the lexical meaning of the concept and defines it as the case in which one affords an advantage and prevents a loss. However, he immediately claims that this kind of maslaha is not the same as the maslaha in fiqh, since this definition was made with respect to the purposes of the human being. Then he claims that maslaha means the preservation of the objectives of Shariah. On the other hand, the goal of Shariah is the preservation of the religion, lives, minds, lineage and property of the people (al- Ghazâlî 1413, 481-482). As it is seen in this example, the concepts of maslaha—and thus, of maqasid—possessed different meanings in the classical period (in which the Islamic economy enjoyed a lively field of application) from the meanings they possess today: while maslaha indicates the objectives of Shariah in one context, it encompasses the purposes of the people in the other. As al- Ghazâlî points out, maslaha may be used only in lexical terms to mean the prevention of harm to gain an advantage, while this definition does not provide a framework to be referred to when the issue is Islamic sciences. For this reason, when maslaha is the issue in the science of fiqh, it does not have this meaning. As will be explained below, if maslaha is mentioned in the science of economics, which is a sub-branch of fiqh, it should not be defined based on its lexical meaning. Instead, the framework provided by the classical theory should be taken as a basis. Otherwise the result obtained will be false, since it will proceed based on a false premise.

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As explained above, if the ecclesiastical and customary meanings of the concepts are not taken as a basis, and if these concepts are used only with regard to their lexical meanings, grave problems will emerge in Islamic thinking and, consequently, in various disciplines. This is one of the most prominent problems encountered by a large number of contemporary studies on Islamic economy and finance. In addition to false meanings attributed to concepts, various methodological mistakes add intricacy to the debate. Namely, one of the most important matters that is overlooked by academic and professional studies conducted on economic practices and banking is that they do not emphasize the necessity of following a method in this field. In any study to be conducted, either in the contemporary social sciences or in the physical sciences, the approaches that provide a theoretical framework for that study are to be followed. Many scholars overlook the fact that this also applies to the Islamic sciences in similar terms. As it is seen in contemporary studies on Islam, approaches that do not employ a method and theories that are developed regarding issues in the Islamic economy based on these approaches become established rules. These rules then block the real issues or become the biggest obstacles to the adoption of the proper approach. For this reason, if an Islamic economy is at stake, it means that there are certain fundamental constants on which this discipline is based and that it is a science that needs to follow a methodology. Therefore, if studies on the Islamic economy do not follow a methodology and the issues are not studied within the framework of a specific system, it is not possible to see a considerable degree of progress, nor is it possible for the Islamic economy, despite its crucial potential, to become an economic system that may exist on its own. How will this be possible? Whether this question may be answered depends on our ability to determine the role played by the Islamic economy up until the colonization of the Islamic world. In other words, the Islamic world possessed an established economic system of its own until it encountered the hegemonic invasion of the West, and this economic system was being successfully applied in a region in which the most important economic activities of the world were carried out. This illustrates that it is not impossible to implement an Islamic economy or the economic principles it proposes; on the contrary, it is quite possible, and this possibility has enjoyed important success in the past. For this reason, instead of focusing on such concepts as maslaha and maqasid, those who talk about the Islamic economy and finance today need to analyze the dynamics/principles of the Islamic economy (which was once successfully applied as an economic system in the past) and must develop theories

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Introduction

based on their analyses. Other approaches have no chance for success. The studies done by some economic historians illustrate that the Islamic economy as a system had been applied with success.1 Aside from these studies, it is not possible to think that the Muslims who lived in various geographic areas for many centuries did not engage in commercial activities. Thanks to the resources provided to us by historical archives, we know that Muslims engaged in intercontinental economic activities successfully. Therefore, the first thing that needs to be done through studies on the Islamic economy is to analyze the system that was applied in the past and to determine the factors that brought success to the economic system applied by Muslims. Although quite a big issue is at stake here, the right thing to do is to point out some of the reasons for this success, or more precisely, the reasons that established the ground for this success and concluded the subject. As it is known, the Ottoman Empire survived through the economic policies it applied for some centuries, and this continued until the 19th century. The classical approach that the Ottoman Empire relied upon began to change in this century, and this change brought with it the dissolution of the Empire. The economic view of the Ottoman Empire, which was spread across wide continents, was based on three principles— provisionism, fiscalism and traditionalism--which were referred to as the three coordinates by the famous Ottoman economic historian Mehmet Genç (Genç 2000, 43-52). The fundamental source of the main principles of the Ottoman economy was without doubt the religion of Islam. In this context, adherence to the fundamental sources of religion, the theoretical framework of which was given above, defined the traditionalism of the Ottoman Empire. The economic structure of the Ottoman Empire adhered to it for quite a long time and achieved considerable success in this way. However, this situation began to change in the 19th century. It is possible to observe this change through the concept of qadîm (ancient). While the history of the concept of qadîm was not known by anyone until this century, it came to be used to mean “unknown, old-fashioned, and worn out” as of this century (Genç 2000, 92). This shows that the concept was reduced to its lexical truth and came to be perceived in this way. However, even though no serious problem seems to be at stake right now, this approach is an important sign of a change in the mentality of society. Here, the relation of the qadîm with the custom is of a legal nature on the one hand and means undergoing tradition with obedience on the other. Therefore, the qadîm values that determine the commercial ethics and reflections correspond to the founding principles of Islamic society. On the other hand, the emphasis placed on the cedîd (the new) in the 19th century

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when the qadîm came to have a negative meaning indicates that the function of these founding principles for directing the social structure had changed. Therefore, the qadîm came to mean “worn out,” instead of referring to that whose history is not remembered by anyone. In other words, while qadîm used to have a definitive place previously, as of this century, it became a word that is only looked up in the dictionary. For the most part, this is also the case for contemporary studies on the Islamic economy, most of which make various conclusions based on the lexical meanings of certain concepts. Even though studies on treasury, tax and economics are conducted in separate works throughout Islamic history, issues related to economics in particular had been examined within the science of fiqh for the most part. The science of fiqh is a science that belongs to the Muslims due to its properties, and it is one of the most important reasons for the successful application of the economy in Islamic society. Therefore, although some of the researchers who work on the Islamic economy criticize the perspective of fiqh, the theoretical framework through which the Islamic economy should be approached as a discipline cannot be thought of without fiqh. In other words, the Islamic economy, which had been applied successfully in history, may be approached and applied as a system again only if it benefits from the theoretical framework of fiqh. However, this is not enough on its own; the historical practices that concretize this theoretical framework will also provide guidance to the studies on the Islamic economy to a large extent. In conclusion, the approaches of the legal (fiqh) sources, in which the Islamic economy developed as a discipline and found its framework of reference, need to be determined properly in the first place; then, the historical experiences need to be considered. The historical experiences that are overlooked in contemporary studies on the Islamic economy can provide very crucial clues for us to be successful today.

References Al-Ghazâlî, A. H. 1413. Al-Mustasfâ min ‘ilm al-usûl. Vol. II, ed. Hamza Ibn Zuhayr Hâfiz. Medina: Sharîkat Medina al-Munawwarah. Genç, M. 2000. OsmanlÕ ømparatorlu÷unda Devlet ve Ekonomi. østanbul: Ötüken YayÕnlarÕ. Görgün, T. 2013. ølâhî Sözün Gücü, VarlÕk ve Bilgi Kayna÷Õ olarak Kur’ân. østanbul: Külliyat YayÕnlarÕ.

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Notes 1

The study of Abraham Udovitch titled Partnership and Profit in Medieval Islam is only one of these studies.

PART 1: RETHINKING ISLAMIC ECONOMICS

REVISITING THE FOUNDATIONAL CONCEPTS AND THOUGHTS IN ISLAMIC ECONOMICS: WHERE ISLAMIC ECONOMICS SHOULD ORIGINATE IN TERMS OF THEORETICAL CONTENT M. FAHIM KHAN

To Be or Not to Be This paper is based on the belief that there is sufficient basis to claim that Islamic economics needs to be solidified as an independent scientific discipline and that it needs to be discovered on its own merit. This paper does not accept the position that their economics (the conventional economics) is sufficient to help us understand Islamic economics. This belief is based on the following Quranic guidance: “Say, ‘Who provides for you from the heavens and the earth?’ Say, ‘Allah.’ And indeed, we or you are either upon guidance or in clear error.” (The Quran, 34:20)

What We Want to See in Islamic Economics We want to see in Islamic economics a scientific discipline that helps to understand human economic behavior using revealed knowledge about human nature and hence understand the reasons underlying such economic diseases as high incidence of poverty, high unemployment rates, extreme inequalities in the distribution of income and wealth, the rapidly deteriorating environment of the planet, etc. This is our destination, which we cannot reach by treading the path of “their” destination.

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Why We Have Not Yet Reached Our Destination Many reasons have been discussed in the past for why we have not reached our destination. I highlight the following to make my point: Lack of vision about the destination: We all know that present-day (conventional) economics must address many deficiencies regarding the economic problems of humanity. Economics as a social science (through studying a particular aspect of human behavior) is expected to help us understand the nature of economic problems, why these problems arise, how economic agents deal with them, and what role society/economy can play in correcting distortions in the behavior of economic agents to avoid these problems. This is true for us (Muslims), and this is true for them (secular or non-Muslim persons). The starting point for developing the discipline of Islamic economics should be how we realistically perceive the economic problems that human beings (we, as well as they) are facing. Inspired by divine guidance, we have our own perceptions of the economic problems of humanity and how to deal with these problems. These perceptions should be true for us as well as for them. This in turn means there is a need to explain what our perception about the nature and scope of the discipline is. If we call our perception on economic problems and economic activity “our economics,” then we need to present a convincing argument to show that our economics will provide a better understanding of human economic behavior. Lack of vision about methodology: There has been undue obsession about the role of Fiqh (jurisprudence) in developing the study of economics. Economics is the study of a particular aspect of human behavior. Fiqh may guide us only to the institutional framework within which an Islamic economic agent is supposed to behave. But Fiqh cannot give us the scientific basis to study and analyze human behavior. Lack of awareness of developments taking place with respect to theory and practice in the area of economic activities: This lack of awareness makes efforts in the area of theory and practice of Islamic economics redundant and irrelevant not only for the scholars working in the area of conventional economics but also for the Muslims who are supposed to be the beneficiaries of the discipline of Islamic economics. Absence of support for research: Most of the economists interested in developing Islamic economics are working in developing countries where financial constraints and lack of proper research environments do not allow for the devotion of sufficient time and effort for research. Except for a minority of Muslim economists, particularly in the Middle East, the economists in the developing world find it difficult to assign research in

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Revisiting the Foundational Concepts and Thoughts in Islamic Economics

Islamic economics as a top priority in their academic work. The Islamic economists in the Western world not only lack the research environment needed for research in Islamic economics, but also, their research priorities cannot coincide with their work requirements. Absence of lifetime commitment to produce an original scientific work in Islamic economics: This absence is in fact related to the above point. The scholars have to worry first about their own subsistence and the survival of their family and their children, their retirement, etc. They have to worry about providing quality education to their children, and they need financial backup for health emergencies and diseases. While devoting all of their resources to these considerations, there is not much left in life to be devoted to research. They cannot make a lifetime commitment to research. The contemporary Western world takes care of these needs, and hence, scholars can make lifetime commitments to their missions. In the early period of Islam, too, Muslim society had some sort of institutional framework to provide such supportive environments to scholars. Lack of a holistic approach: “Islamic economists” prefer to write on specific topics in Islamic economics rather than analyzing the whole system of beliefs, institutions and activities in the field of economics. This approach will never lead to a complete discipline to be called Islamic economics. At this point, I will further add that we need to develop an Islamic theory of economics rather than an Islamic economic theory. This is not a semantic difference. It is a very substantial and basic difference. This will be discussed in detail later in this paper.

The Subject Matter of Islamic Economics It is too early to relate anything to Islamic economics. It would be desirable to first identify any research we do in the area of economics as “our economics” rather than instantly declare it Islamic economics. Let others call it Islamic economics, if they wish. For us, let it be our economics for the time being. Also, there is no reason why we cannot keep the subject matter of economics in this transition period exactly the same as is conventionally recognized and as has been defined by their economics’ own forefathers (Adam Smith, Alfred Marshall, John Stuart Mill, et al). They called it a “science of wealth” (Smith 1776) or “[t]he practical science of production and distribution of wealth” (Mill 1848). Wealth, in these definitions of economics, means stocks of useful things or things that have value or things that are now known as “economic goods” in the same way as the Fiqh al maal1 defines maal. The subject matter of our economics is also

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wealth (maal). Hence, in terms of definition, we may not generate any controversy about the (conventional) economics and our economics at the level of definitions. The essence and identity will be directly visible when we finally reach where we want to be. Our economics can also be defined as a study of human behavior relating to the attainment of use of material requisites of wellbeing. This, in turn, would also imply studying human behavior in achieving wellbeing in relation to scarce means, which have alternative uses. Hence, we do not have to redefine the subject matter of our economics. The use of the word “wealth” in the early definitions of economics attracted a lot of criticism because of the social connotations attached to the word “wealth,” which was understood as something relating to “richness.” This criticism forced the later generation of economists to abandon the use of the word wealth and instead led them to define economics as “a study of mankind in the ordinary business of Life; it examines that part of the individual and social action which is most closely connected with the attainment and with the use of material requisites of well-being” (Alfred Marshall 1890), or as “the science which studies human behavior as a relationship between ends and scarce means which have alternative uses” (Lionel Robbins 1932). Our economics does not have to hide the real subject matter of the scientific investigation of the economic behavior of human beings, whether it is in terms of the “attainment of use of material requisites of well being” or in terms of the “relationship between ends and scarce means which have alternative uses.” In our framework, it can still be defined as a practical science of production, distribution and use of maal (wealth). The real difference will lie in the details. An underlying feature in our economics will be an institutional framework quite different from the institutional framework implicit in the conventional definition of economics. This is an element that would make substantial difference in our economic analysis. Differences in behavior due to differences in institutions (Wright 1974) may require a change in the framework of analysis, too. The inclusion of institutions in economic analysis will help us later on when we analyze Islamic economics. Another difference that lies in the details of conventional economics and our economics is the concept of wellbeing. While conventional economics aims at studying human behavior relating to the attainment and use of material requisites of wellbeing, and if we agree not to dispute this objective, there will still be a difference as to what the concept of wellbeing means in the two approaches. While conventional economics refers to wellbeing in terms of satisfying wants emerging from instinctive

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Revisiting the Foundational Concepts and Thoughts in Islamic Economics

desires, our economics will refer to wellbeing as arising out of fulfilling our needs. The difference between the “wants/desires” and “needs” arises from the institutional (legal and moral) framework in which an individual behaves and makes economic decisions.2 It is in this context that the role of Islamic law (Shariah) and moral values will be introduced in the analysis of economic behavior. In the background of this discussion on the role of institutions and the distinction in the concept of wellbeing, let us first give the definition of our economics to provide a comparative perspective on the nature and scope of conventional economics and our economics. Our economics deals with the study of that part of human behavior that relates to creation, distribution and use of wealth within the given institutional framework of a society relating to individual wellbeing and socio-economic justice. For those who do not like to use the word “wealth,” the alternative formulations of the definition could be as below: -

A study of mankind in the ordinary business of Life where it examines that part of individual and social action which is most closely connected with the attainment and use of material requisites of wellbeing while conforming to the institutional framework of the society.

Or - It is a science that studies human behavior as a relationship between ends and scarce means, which have alternative uses in the context of individual wellbeing behaving in conformity to the legal and moral framework of the society. It may be emphasized again that our economics, here, does not mean Islamic economics. Our economics is merely an alternative secular approach to economics where we use our knowledge from divine sources to develop a better and more realistic approach to analyzing human economic behavior. This approach, however, will be used later on to study economics in the Islamic system of life (in totality of the legal and ethical frameworks), which in turn may be referred to as Islamic economics. Whether it is our economics now or Islamic economics later, the approach should be scientific. Like conventional economics, we need to complete positive economic analysis first and then continue to normative economics. Our theory of economics should be generic in nature and capable of being applied to any society in the world. This paper later suggests an alternative approach to economic analysis to achieve this objective of uniformity in analysis.

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The Purpose of Developing Our Economics At the outset, I prefer not to talk about Islamic economics, so that all our mistakes and misconceptions that we may develop in discovering our economics may not be ascribed to Islamic economics. I, therefore, prefer to see our current efforts as research in our economics. Economics, as a social science, entails studying a particular aspect of human behavior and is expected to lead to understanding the nature of economic problems, like poverty, unemployment, hunger, extreme economic inequalities, illiteracy, diseases, etc. Why these problems arise and how to deal with them at the individual level as well as at the societal level are essential questions of economics as a discipline. The starting point for developing our economics therefore would be how we perceive the economic problems with which human beings are faced. This in turn means determining our perceptions about the nature and scope of the discipline that we want to call our economics. We cannot have our economics unless we have our own framework of economic analysis to allow us to understand the economic behavior of man.

Desired Features for Our Analytical Framework Let us explore what features we would like to see in our framework of economic analysis. Below, I offer brief, salient features of our analytical framework: 1) Balancing (rather than optimizing) as a key element in human decision making in all its activities; 2) Needs fulfillment (rather than satisfaction of wants) as the main focus of economic activities. (These two elements are positive elements of human behavior on Earth. They are discussed in detail in Section 2.); 3) Rushd (the counterpart of “rationality” in a conventional framework). Our framework of economic analysis will also assume rationality on part of human beings in all their activities, including economic activity and economic decision-making. But our concept of rationality will differ from that of the concept used in conventional economics. In the context of our economics, it would mean sound-mindedness in human decision-making.3 One characteristic of a sound mindset underlying human behavior would be to ensure balanced behavior and would seek to achieve balance

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in the decisions that a human makes relating to different aspects of life. It is balance that we see in the universe everywhere, and human behavior would not be an exception to this universal reality. This would be our definition of rationality. How to express this concept of reality in mathematical equations and inequalities, if required, is something we can postpone at this point. The other characteristic of the sound mindset underlying human behavior would be to seek the fulfillment of needs rather than the satisfaction of wants and desires. Another characteristic of a sound mindset would relate to conforming to legal and moral obligations laid down explicitly or implicitly in the institutional set up of the society. Additionally: 4.

Our framework should not assume away uncertainty.

The details of these and other features are discussed later in this paper.

Can a Framework with Such Features Be Developed? We are not alone in the quest for a different framework that is more realistic in its formulation and more comprehensive in scope. The initial searches have generated some successes, and useful alternative frameworks have come under discussion. But none of them have developed enough to be recognized as independent paradigms. The conventional framework of economic analysis benefited from the science of physics and heavily depended on tools borrowed from mathematics. It is curious: Why has the science of physics been relied upon to develop their framework of economic analysis? Inspired by the scientific methods of natural sciences, economists probably were attracted to using similar methods to make economics as precise as the science of physics. Forgetting that economics studies human behavior, the economists were fascinated by the sophisticated application of scientific methods similar to those of physics for explaining human economic activity. In this way, they probably succeeded in earning economics a higher status among other social sciences. But in the process, they lost track of several economic problems that the science of economics was expected to address. Many economists are critical of depending on physics and mathematics to adopt a framework for economic analysis.4 Economists should have looked towards other social sciences (like sociology, psychology and anthropology), which have a long history in developing methodology for analyzing human behavior. Even among

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natural sciences, biology—in dealing with the study of life (unlike physics, a science studying lifeless bodies)—seems more relevant to studying the particular behavior in human life called economic behavior.5 The relevance of biology for economic analysis stems from the fact that biology is concerned with characteristics, classification and the behavior of organisms. It studies how they react with each other and with changes in the natural environment.6 Biology provides a basis for medical science dealing with the health of the human body. It provides a framework for analyzing living bodies in order to help identify diseases and malignancies in a living body. In the context of economy, we often use the term “economic health of country/society/community.” If the framework for economic analysis is designed along the pattern of biology, it will be more relevant with respect to identifying the economic diseases of a society and how to treat them. Social sciences including the science of economics (while trying to understand human behavior) explicitly or implicitly aim at defining social problems, understanding how they occur, and understanding how they can be treated. In the context of economics, problems are defined at the macro level. Most of these macro problems exist because of problems at the micro level. The framework borrowed from the science of physics does not allow the identification of macro economic problems. Macro economic problems (like poverty, retarded growth and development, ignoring intra and intergeneration equity, etc.,) have to be discussed without reference to their linkages in economic behavior at the individual economic agent level. Malfunctions at the macro level cannot be independent of malfunctions at the micro level. Economic agents must be suffering from certain imbalances that reflect the ill health of the economy at the macro level. With this perspective, the science of economics can borrow more lessons from the science of biology, in terms of methodology, than from the science of physics. We find in biology an analytical framework called Anatomy and Physiology (A&P). This framework divides the human body into different organs. These organs are dissected for the purpose of analyzing their nature and understanding their system. This is called gross anatomy, a counterpart of macroeconomics. A microscopic study of very small structures (cells and tissues) within an organ is microscopic anatomy, a counterpart of microeconomics. Human anatomy is something from which we can learn a lot on how to analyze economics and its components. We can visualize a certain organ system (like the digestive system) as a system of economic behavior that is integrated with other systems (like ethical systems, family and social

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interrelationship, systems of legal obligations, etc.) in overall human behavior in society. Macroeconomics can be developed in a fashion similar to the gross anatomy of an organ, and microeconomics can be developed along the pattern of microscopic anatomy within an organ. Physiology is the study of the functioning of living organisms or their parts (like tissues or cells within organisms). It is different from anatomy, which only describes the organisms and their constituent tissues or cells. Physiological processes are dynamic. Cells change their functions in response to changes in the composition of their local environment. Many physiological reactions are aimed at preserving a constant physical and chemical internal environment. This is referred to as homeostasis. Homeostasis refers to the ability or tendency of an organism or cell to maintain internal equilibrium by adjusting its physiological processes. It is the balanced internal environment of a living body and the automatic tendency of a family system to maintain internal stability to resist change caused by external variation. The most commonly known examples of homeostasis are the temperature and blood pressure of the body, which remain nearly constant or tend to remain constant despite changes in the organism’s activity level or its surrounding conditions and environment. There are self-regulating processes in living bodies for the maintenance of homeostasis. Living bodies have built-in tendencies for self-regulating processes that seek and maintain a condition of balance or equilibrium within their internal environments, even when faced with external changes. (Many ecological, biological and social systems are found to have a system of homeostasis.)7 Economics can learn a lot from another feature of the science of biology. Biology analyzes the structure of a living organism at different levels, like atoms, cells, tissues and organs. At the organ level, various functions are performed, and sometimes these functions are very complex. A group of organs together makes organ systems that cooperate to accomplish a common purpose. Each organ has a different structure suited to perform its function. For example, the digestion system includes organs like the esophagus, stomach, small intestine, large intestine, etc. Each of these organs has a specific function. They all work together to keep food moving through the digestive system, breaking it down properly to absorb it into the blood and providing food for the body’s cells. Different organ systems come together to constitute an organism. The different organ systems of a living organism do not work in isolation. Instead, they work together to promote the wellbeing of the entire body (Marieb 2006). Economists may do a better job if they analyze the economic system and its components by taking an approach similar to that of A&P and biology,

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rather than the approach of mathematics and physics. The terminology of A&P and biology can easily be translated into the terminology of microeconomics, macroeconomics and economy. Terms like survival needs, homeostasis, homeostatic control mechanism, homeostatic imbalance, etc., are some examples. Reconsidering the methodology of economics is not only possible but also may lead the world to improve the discipline of economics on scientific grounds to make it more relevant and realistic for application to any society.

Deviating from the Conventional Approach Before going into the discussion of economic analysis in our framework (the features of which have been described earlier in this paper), let me also explain briefly how it is different from the conventional approach and what substantial difference it would make in understanding the economic behavior of man. The core elements of our economic analysis will include the following questions and concepts: 1. What are the economic problems of man (the nature and scope of economics)? 2. How is wealth created (production and business organization)? 8 3. How is wealth distributed (factors of production and factor market)? 4. How is one’s wealth used for his/her own consumption (consumption and consumer behavior)? 5. How is one’s wealth used to discharge others’ rights to it?9 6. How is wealth exchanged (market mechanism)? 7. Balance in the economy (market equilibrium and socio-economic justice in society). 8. How should the economic wellbeing of man on Earth be measured and improved? It is emphasized again that our economics, here, does not mean Islamic economics. Our economics is merely an alternative secular approach to economics. This approach, however, will be used to study economics in light of our knowledge from divine sources about human nature, human behavior, and human activities within the institutional framework of Islam. This section deals with the first of the eight components of our economics described above by defining the economic

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problem that our economics aims to study. This section thus elaborates only on the nature and scope of our economics.

The Nature of Economic Problems At the individual level, the economic problem asks how scarce means, which have alternative uses, can be used in the context of one’s wellbeing. The notion of wellbeing depends on the worldview and the social setup consisting of the laws and regulations, norms and ethics, and culture and history of the society to which a specific person belongs. All these features are translated into the basket of needs that a society allows its members to fulfill. It will not be pragmatic to assume that needs would be identified only by the individual on the basis of one’s own desires and wants. Needs are determined in the context of the social life of the individual. Wellbeing is a dynamic phenomenon and so is the list of needs that individuals would be looking to meet from the scarce means at their disposal. There is a known hierarchy in the list of needs that relates to their level of contribution to wellbeing. The hierarchy results from the social setup and worldview within which an individual is seeking his wellbeing, and the objective is to keep a balance in pursuit of fulfilling needs. The scarcity of means determines the levels that an individual can aim to reach on the ladder or pyramid of one’s wellbeing. Muslim philosophers in the medieval era have already elaborated on this in detail.10 The point relevant for discussion in this section is that the economic problem at the individual level concerns the meeting of an individual’s needs. Human beings would use their limited means to meet their needs in all aspects of their life in a balanced way. They aim at meeting the needs of the body, of the soul (including religion), of increasing wealth (for various objectives), of enhancing knowledge and reason (to distinguish ‘good’ from ‘bad’), and of procreating. 11 Balance is achieved by first meeting the essential level of needs in all aspects of life so that no aspect of life is ignored, destroyed or erased from the needs of the individuals. Once all aspects of life have been protected at least at some minimum level, attention is then paid to improving all aspects of life beyond merely protecting them from destruction. There may be levels of fulfilling needs beyond protection and improvement. The instinctive aesthetic sense in human beings may require things to satisfy that aesthetic sense. 12 The economic problem then is to determine how to fulfill needs so that there is a balanced improvement in all aspects of life. Sound minded human beings will determine the cut off points in different levels of needs in different aspects of life, as well as know why to refrain from meeting

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second or third level needs when some first level needs still remain to be fulfilled. The guiding principle will be “balancing the needs” and not “maximization of satisfaction.” When it is a question of meeting needs in different dimensions, balancing is the relevant concept.13 This balancing may not be a matter of pure subjective judgment. Why would human beings fulfill needs instead of satisfying wants? This is what brings the role of institutions into economic decision-making and will be a matter of discussion in the next section. We can visualize that, when the day starts, a man may have a list of things he wants, but by the end of the day, he ends up meeting his needs over wants. Throughout the day he may have been putting aside or postponing or ignoring his wants while giving priority to meeting his needs. No doubt some of his wants may be his needs also. It is possible that all his needs are his wants as well, but the reverse may not be true. The less likely the situation where the set of wants are also needs for a person, the higher will be the chance that he shows balanced economic behavior. The bigger the set of wants which are not needs is an indicator of imbalance in economic behavior, which, if not corrected, will lead to economic diseases at a macro level, such as poverty, unemployment, economic instability, etc. This will be a reflection of the fact that economic decisions at the micro level are not being taken with a sound mind. The institutional framework of the society will generate forces to correct this imbalance. If this does not take place, then it means reforms in the institutional framework are needed. A needs-based approach in understanding human behavior is seen in some contemporary thinking, too. For example, Maslow’s (1954) theory of the hierarchy of needs lists five categories: 1) 2) 3) 4) 5)

Physiological needs Safety needs Social needs Esteem needs Self-actualization needs

According to this theory, needs are filled in the order shown above. If physiological needs have been substantially met, then safety needs are addressed. Social needs follow safety needs and self-actualization needs follow esteem needs. Maslow considered physiological and safety needs as lower-order needs, while the other three needs were categorized as higher-order needs. This categorization was made on the assumption that higher-order needs are fulfilled internally (psychologically, spiritually, mentally and relating

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to religious and other beliefs), whereas lower order needs are met externally. Maslow’s theory has been referred to here only to emphasize that contemporary socioeconomic thought considers need fulfillment as a positive behavior and not a normative behavior. It may give us more insight into the economic problem if we categorize needs into the following: (a) (b)

Economic Needs Non-Economic Needs

Economic needs will include: i) Physiological needs to protect all aspects of life and to maintain them and improve living; ii) Economic security needs: for present needs, for future needs, and for the needs of future generations. The former needs, i.e. physiological needs, will be referred to in this analysis as “consumption,” and the latter needs (i.e. economic security needs) will be referred to as “wealth creation.” When economic decision makers (like individuals or households) make decisions about consumption, they will be called “consumers,” and when they make decisions about wealth creation, they will be called “producers.” Producers may create wealth in two ways: a) By renting the assets they own (human or physical) to some one else to create wealth and give them a fixed rent/wage as a reward for benefiting from their assets; b) By using their own assets or someone else’s assets to create wealth. The former, who receive the rent/wage of their assets, will be referred to as “owners,” and the latter, who use one’s own assets or others’ assets, will be referred to as “entrepreneurs.” The above definition gives us three types of economic agents involved in various economic activities: 1) 2) 3)

Consumers Owners Entrepreneurs

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Our economics may not distinguish between those who rent their physical assets and those who rent their so-called “labor.” Dividing human beings into capitalists and labor at the outset of an economic analysis is a violation of human dignity, which no culture allows.

Economic Choices Given limited resources, meeting needs in a balanced way is the most appropriate strategy from the point of the wellbeing of economic agents. Following this approach, we can say that the choice will be balanced if there are no internal and external pressures to change the choice. The nature of these pressures and their effectiveness, relevance and efficiency will be discussed in detail when discussing the Consumer’s Choice, Owner's Choice, and Entrepreneur’s Choice. Here it may suffice to say that these pressures are a part of the social and institutional setup of the society. These pressures will ensure the health of the economy. If the social and institutional set up of a society is satisfied with the economic choices made at the micro level, then there is no economic problem. Economic health is thus a relative concept. Several societies in different parts of the world are labeled as underdeveloped economies by the developed world. The economic agents in these underdeveloped societies face no internal or external pressure to change. The social and institutional setup of these societies puts no pressure on economic agents to change their economic choices. If the economic status of these societies is to be changed, then the social and institutional setup of these societies should be changed accordingly.14 There are multiple choices that the three categories of economic agents in the society mentioned above have to make within the resource constraints faced by them. The choices to be made include: a) The choice between economic or material needs (or lower-order needs, so called by Maslow) and non-economic (or higher-order) needs. This choice is made by each category of economic agents: consumers, owners and entrepreneurs; b) The choice within economic needs (among different categories of needs and the level of each need to be met); c) The choice between present needs and future needs; d) The choice between intergenerational needs. These choices are the subject matter of our economics. The economic problems that these choices pose to the economic agents have a

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perspective different from the perspectives in conventional economics. Though these choices need to be discussed in detail in a separate paper, a brief overview from the perspective of our economics is given below.

Economic Problems Faced by Consumers The consumer's problem is how to devote his limited resources in a balanced way toward meeting needs in all aspects of his life for the sake of his wellbeing. Not maintaining balance would mean wasting resources, which no consumer would like to do with a sound mind. Waste is abhorred in all societies. In this process, he will have to make different types of decisions: (i) He may have some wants that may not be his needs because they do not improve any aspect of his life at any level, and hence, do not contribute to wellbeing. Satisfying such wants would be a waste of resources because needs are unlimited and spending on wants will come at the cost of sacrificing needs. This would mean settling for a lower level of wellbeing than could be achieved with the given resources. The consumer distinguishes needs from wants and decides not to pursue wants and to pursue needs instead. Some wants may, however, be more pressing than needs, and the consumer may succumb to the instinctive pressure to go for wants at the cost of ignoring his needs. Is there a homeostatic mechanism to correct this behavior? How does it work? If the homeostatic mechanism does not exist, where does the homeostatic imbalance lead? These will be some of the issues to be discussed in the context of a theory of consumer behavior in the next section. (ii) The consumer identifies critical, adequate or beyond-adequate levels of needs in all aspects of his life and decides to keep a balanced resource allocation among all aspects of life in maintaining the hierarchy of meeting critical needs first, followed by adequate level needs, and then beyond-adequate level needs. Some needs at the beyond-adequate level in some aspects of life may happen to be more attractive to a consumer than meeting needs in some other aspects of life at the critical or adequate levels. For example, an individual pursues horse riding for entertainment. He may overspend his resources in acquiring beautiful horses and in the process may ignore the education of children or the fulfillment of religious obligations. The homeostatic mechanism may not allow him to sustain this action for long. The internal and external

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pressures generated by the homeostatic mechanism may force him to correct his allocation of resources. What is the homeostatic control mechanism in a society to ensure that consumers remain in homeostasis, and what are the implications if the homeostatic control mechanism does not succeed in putting the consumer back on track with maintaining balance in his spending? These questions compose the subject matter of an Islamic theory of consumer behavior. (iii) The consumer's choice, in the process of meeting his needs, leads to generating the demand for particular commodities in the market. More than one commodity may fulfill any particular need. Some commodities may fulfill all three levels of a particular need (critical, adequate and beyond-adequate levels). How to choose the commodities so that maximum needs are met at the level within the budget constraint will also be the subject matter of an Islamic theory of consumer behavior. This analysis of consumer behavior is made in conventional economics in terms of utility. A needs-based approach, however, would require economic analysis to go one step further by addressing the question, “What if the consumer is tempted to overspend?” This may happen due to several reasons. Overeating is one example. Choosing a commodity that fulfills the critical and necessary levels of any particular need while the budget allows only the meeting of the critical level of that need is another example. The influence of the lifestyle and consumption pattern of affluent members of society on consumers with fewer means (the so-called demonstration effect) is still another example that will affect the choice of commodities that may lead to overspending, and hence, the waste of resources in the context of wellbeing. There may be consumers taking the other side of the behavior: spending less than needed to fulfill a particular need. The failure of the homeostatic mechanism in this case, too, is an economic problem, and hence, a subject of the study of our economics. In the context of the analysis of consumer behavior, our economics would aim at studying the presence or absence of homeostasis in the spending of resources on consumer items. It would also aim at studying the factors causing homeostatic imbalance, which in fact will be reflective of the sort of diseases that, if they persist, may lead to an economy-wide disease, which in conventional jargon is referred to as a macroeconomic problem. Finally, it discusses the relevance of this behavior in creating

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demand for specific commodities in the market. The factors affecting market demand and the laws of demand will be derived in this context.

Economic Problem: Creation of Wealth Why is wealth to be created? Conventional economics answered this question a long time ago, 15 and our economics has no conflict with wellbeing functioning as the motivation for the creation of wealth. Our departure comes from the fact that while wellbeing depends on fulfilling human “needs,” the needs may differ from society to society, time to time, or place to place and may be substantially influenced by the institutional setup and social milieu of the society. The common point, however, is that needs are ever increasing and are doing so at an accelerating rate as they are met,16 hence increasing the motivation to create more wealth. While there is a possibility that critical needs may be limited as they are met, individuals look forward to meeting the necessary “needs” at adequate levels, which would be a larger set than the critical needs. As necessary needs are met, there follows a very large set that would include the needs to be met at beyond-adequate levels. For example, a bare minimum structure to preserve privacy, to protect families from the vagaries of weather, from wild animals, etc., and to serve as a place of rest is a critical level need. Once that level is met, then there is the need to make the structure adequate: to provide separate rooms for each child, to have an adequate kitchen, to have an adequate place or places for washing and bathing, to have an adequate level of furnishing for eating, sleeping, studying, etc. Once an adequate level of housing has been ensured, then there is the need to take housing beyond adequate levels, such as by having a garden, procuring better quality furnishings, expanding the accommodation to have a separate living room, dining room, games room, children’s play room, etc., interior and exterior decoration of the house, and so on. The set will include unlimited needs to be chosen from to go beyond adequate levels of housing. Hence, the need for wealth creation is unlimited. Would an individual always be looking forward in order to create wealth? Not necessarily. Many societies in the world are home to an overwhelming part of their population that have no urge to go much beyond meeting their needs at the critical level. In other words, they are not interested in improving their wellbeing. Human beings who own assets (human capital and/or physical capital) make the basic choice of whether or not to use their assets to create wealth, and if yes, then to what extent. This is a basic economic problem that underlines the human’s economic

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behavior in his activities toward wealth creation. The scope of our economics includes investigation into this economic problem. Some of the questions that need to be raised in this respect include: 1. Whether there is homeostasis in human behavior regarding creation of wealth; 2. Whether homeostasis with respect to the creation of wealth has implications for the homeostasis of human behavior with respect to other economic activities, like consumption, economic growth and development at the individual level and economy-wide level, etc. 3. How homeostatic imbalance in wealth creation can occur, what it would mean for the wellbeing of the individual and for the state of the economy, and, if the imbalance negatively affects the state of individuals and the economy, how can it be cured?

How to Create Wealth Economics identifies the following factors of production that play a role in the creation of wealth: 1. 2. 3. 4.

Land Labor Capital Entrepreneurship

The first three factors of production would not create wealth unless an entrepreneur utilizes them or hires them for the purpose of creating wealth. Our economics may take a different view. Human beings, in their pursuit to meet their needs for their wellbeing, create wealth using the assets that they own. These assets can take the following forms: 1. Human capital (body strength, skills, knowledge, etc.); 2. Physical capital (land, cattle, tools, machinery, equipment, building, etc.). Human beings can use these two assets in two ways to create wealth. Firstly, they can allow someone else to use their assets and receive a rent for their use. Secondly, they can use their own assets and/or someone else’s assets to create wealth. Thus, there will be only two broad categories of factors of production:

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a) b)

Hired factors of production; Entrepreneurial factors of production.

When human beings lease their assets, they are the owners of the hired factors of production and claim a rent on the use of their assets. The rent is normally fixed in terms of per unit of time.17 Human capital and physical capital both can serve as hired factors of production. All human beings can be potential entrepreneurial factors of production, whether they own only human capital or only physical capital, or both. After the decision of whether or not to create wealth, the second decision is how to create wealth: whether by serving as an owner (leasing one’s assets and receiving a predetermined fixed rent against the fixed predetermined usufruct to be provided by the leased assets) or by serving as an entrepreneur and benefiting from all of the wealth created over and above the rents paid to hired factors of production? What determines whether a human being should work as a hired factor of production or as an entrepreneurial factor of production? Why would human beings prefer to work for others and not take up their own activities to create wealth? Why would entrepreneurial factors prefer to pay fixed rent by hiring the assets of others instead of inviting them to join the entrepreneurial activity and share the gains and losses with them? These are the questions that our economics should be addressing before discussing the organizational form of creating wealth and determining the rent for the hired factors of production.

Organizational Structures for the Creation of Wealth Society’s institutional setup influences the decision of how to create wealth. Some religions, for example, prohibit renting money or monetary capital. Adherents can only work as entrepreneurial factors of production and not as hired factors of production. Some societies may not allow human beings to lease their physical capital/human bodies. They are allowed to lease their human capital. The decision of how to create wealth therefore has to be studied in the context of the specific institutional and social setup of a society. Our economics may provide a framework to help study the institutional set up of a society and its influences on human behavior with respect to how to create wealth. This discussion will be undertaken in the context of Property Rights Theory, Transaction Cost Theory, Agency Cost and Information Cost Theory, and other recent developments in the area of institutional economics. A discussion on how to measure the policy implications of changes in institutional setup on the

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economic behavior of different economic agents and their impact on wellbeing is also a subject of our economics.

Economic Problems Faced by the Owner Once a decision has been made by an owner of assets (physical or human) to receive rent rather than work as an entrepreneurial resource, the own faces the below choices: 1. How much from the owned assets to be leased (the individual may receive rent on assets that have a multiplicity of uses, and all uses may not yield income in the form of rents to be received as assets) can be put to use for meeting some of the owner’s own needs? 2. For what type of use are these assets to be leased, as human beings have dignity, and they are also socially, morally and/or legally responsible for ensuring that their assets are put to proper use? 3. For what price are they to be leased? In the case of human beings leasing their human capital, the issue involves more than mere compensation for the disutility of leisure. Here is the issue of foregoing wellbeing by sacrificing the alternative needs for which one's assets could be utilized. If this were not the case, then we would not find such a large proportion of the working age population out of the so-called “labor force” in countries labeled as developing and in labor-abundant countries. If human beings are sitting idle while some of their needs remain unfulfilled, then this is a reflection of homeostatic imbalance, which, in turn, reflects economic disease at the individual level. The institutional setup determines what choice set the owners of human resources and physical assets face in order to use these resources to fulfill their needs and improve their wellbeing. The supply of factors of production is discussed under this topic. The\is framework will allow us to understand the supply curve of any particular resource, however, defined such as unskilled labor, skilled labor, professional worker, land, capital goods, etc.

The Economic Problem Faced by the Entrepreneur The entrepreneur’s economic problem is more complex than that of other economic agents. The entrepreneur puts all of his resources as well as those hired or borrowed from others into some project that he thinks

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will create wealth for him. Entrepreneurs emerge from the decision of how to use human resources by deciding not to lease their assets to someone else and instead to generate their own economic activity. Once an individual has decided to be an entrepreneur, the following economic choices have to be made: a) Out of numerous potential projects, which project should be selected? b) What should be the mix of one’s own and others' assets? c) What mode should be used to employ others’ assets (human and physical capital), and how much should they be rewarded or paid for them? The entrepreneur is confronted with maintaining a balance in a very complex and uncertain situation. The entrepreneur’s choice will determine the market demand for various factors of production. The market for particular factors of production, however defined, will be a subject of discussion under this topic.

Equilibrium and Balance The equilibrium in factor markets, however, requires a special discussion in our framework of economic analysis and, therefore, needs to be discussed along with the equilibrium in commodity markets. Our framework of economics does not stop at determining how equilibrium is achieved in consumption and production factor markets and commodity markets. Our economics goes one step further and also determines whether the equilibrium is reflecting balance in the market. Equilibrium between supply and demand may always exist, but it may often not be balanced. Equilibrium in consumption is always there according to modern economics. They only study the conditions of equilibrium.18 Equilibrium in monopoly conditions or in any other form of imperfect situation obviously does not reflect a balanced equilibrium because it involves exploitation of human beings and waste of resources, both of which violate considerations of wellbeing, which are the sole purpose of organizing economic activity in a society. The absence of imbalance beyond what can be corrected by the homeostatic control mechanism in human behavior is not a sign of healthy economic behavior and/or a healthy economy.

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Economic Diseases Economic choices pose economic problems with which individuals and economies are confronted and to which they must find a balanced solution. Human beings tend to find a balanced solution to a multifaceted problem. Making economic choices is a part of balanced decision-making. Society requires balanced decision-making and helps individuals in this respect by developing appropriate institutional, education, legal and regulatory frameworks. A multiplicity of factors and forces is, however, always present in society to disturb the balance. Though individuals possess a homeostasis control mechanism relating to their behavior in all aspects of their life, society also builds up a homeostatic control mechanism within the institutional framework to help individuals to restore the balance if it is disturbed. If the homeostatic mechanism within individual behavior and within the institutional setup of the society is weak and fails to restore the balance, this would lead to a permanent imbalance in behavior, and if it is not treated and cured by the individual himself or by the society, then this imbalance may grow unhindered and become a disease. The nature of the imbalance determines the nature of the sickness. Our economics aims at understanding different economic diseases at the individual level as well as at the societal level by identifying factors responsible for them and suggesting treatment of the diseases through such instruments as institutional reforms, educational reforms, etc. An overview of selected examples of economic diseases is given below. These diseases will be discussed in more detail in the discussion of the behavior of different economic agents and the economy.

Economic Diseases at the Individual (Micro) Level Our economics will be primarily concerned with identifying different types of homeostasis in making the above-mentioned choices and understanding the homeostatic control mechanism to achieve this homeostasis. The secondary concern will be about the homeostatic imbalance, i.e. the situation when homeostatic control mechanisms fail to bring homeostasis when the environment changes. These will be the microeconomic problems that will need to be treated before they become chronic diseases in the sense that important economic needs are continuously being ignored and starting to spread economy-wide, creating sicknesses and diseases at the macro level, and hence, destroying the economic order in the society.

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We define economic disease as the failure of the control mechanism to generate balance in any economic aspect of human life. The failure of the homeostatic mechanism always occurs within human beings. This failure, however, leads to economic diseases at the micro as well as macro levels. The consequences of the destruction of the economic order will spill over into other aspects of life, creating social disorder, moral disorders, legal disorders, etc. The nature of homeostatic balances as well as imbalances and resulting disorders will be the subject of some other paper. A few examples, however, are given below.

Waste in Consumption Neither in conventional economic jargon, nor in conventional discussions on economic analysis, do we hardly find the term “waste in consumption.” There is a concept of “waste from consumption,” which is different from waste in consumption. Waste from consumption is a social problem (affecting the environment), but it is not the subject of the discussion here. The concern in our economic analysis relates to waste that refers to more resources, more time, more energy, etc., spent in meeting a need than was really adequate. This is the layman perception of waste in consumption and production that is missing from the conventional economic analysis of human behavior despite it being so prevalent in all societies. The concepts of “waste from consumption” and “waste from production” (referred to in discussions on environment) refer to materials that are not the primary productions (to be in demand) but are the products or material for which the consumer (or worker or entrepreneur) has no use. Our economics, however, recognizes this type of waste, too, in its scope, and it will be discussed later in this chapter under the heading “Economic Problems of Society.” Here we only point out that waste in consumption is a subject of study within our economics. By indulging in continued waste in consumption, the consumer will be slipping away from homeostasis. He cannot continue as such. Internal forces will come into action to compel him to avoid this waste of resources in his consumption patterns in order to allow him to meet his unmet needs. All societies abhor waste. All individuals instinctively try to minimize waste. If an individual, for example, is throwing in the garbage too many half eaten breads, some explicit and implicit pressure from inside or from within the family or from the neighborhood will force him not do so. It is similar to the reaction of a family or neighborhood when a child in the house wastes food by throwing it away. It is possible that a certain waste becomes a common phenomenon in a certain neighborhood, so that waste

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is no longer recognized as waste. In such a case, forces capable of maintaining homoeostasis may become weak, and the economic problem may spread widely across society, creating social problems. For example, those facing hardship in meeting their critical needs may feel frustrated by the waste of others, and hence, it may create class conflict. Such waste has implications for growth and development (to be discussed in a later section in this chapter). How to identify waste in consumption? • • •

Theoretically, it is the instinctive homeostasis mechanism in human beings that identifies what is waste and what is not. This mechanism requires Rushd (irrespective of religious injunctions). Waste will occur if a consumer is fulfilling his needs in one aspect of life even beyond an adequate level while even the critical needs remaining in another aspect of life remain unmet If the instinctive homeostasis mechanism is not identifying waste, then institutional arrangements have to be utilized or created in order to arrest this tendency.

Waste in Production In conventional economic jargon, “waste in production” is not discussed. What is discussed is the optimization of profits and costs. The maximization of profit, being the objective, correspondingly means the minimization of cost, which could be taken as avoiding all waste. But the maximization of profit means the minimization of cost only under perfectly competitive market conditions. In any other market conditions, profit maximization may not mean minimization of cost, and resources may be used beyond what is “really” adequate. The question of “was the production ‘really’ needed by the market, or has such a good been produced only to create its own demand using advertising campaigns” can be considered as an example of waste in production. Producers in our economics are entrepreneurs (not managers). Conventional economic theory recognizes entrepreneurs but does not discuss at length their role in production decisions. The entrepreneur’s key role, in our economics, is in the following: i) Perceiving a productive activity needed by society; ii) Bearing the risk and putting at stake his efforts and assets (wealth).

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His objective is to create more wealth to meet his present needs at all levels and in all aspects of his life (including social, self esteem and other needs discussed earlier): a) b) c)

his economic security; his own future needs; his future generation’s needs.

He may also create wealth to contribute to the development of society, to meet needs of less privileged members of society, to contribute to specific causes at the national level or global level, etc. The first source of waste in production will result from the entrepreneur’s decision to produce goods or services neither needed by the entrepreneur himself nor by the society, neither by present generations nor by the future generation. How can it happen or not happen? We will discuss it in detail in another paper. If it happens, then it will be reflective of an economic problem. Our economics starts with the premise that there is a homeostatic control mechanism in place in the economic system that will be triggered when an imbalance occurs regarding entrepreneurial decisions to produce goods and services that are really not needed, or if they are needed, that have a low priority compared to other needs that are more pressing. The entrepreneur’s decision process, therefore, will be to list all the projects that he has the capacity to start and rank all these projects according to their contribution to wealth creation. As a first step, the list will be reviewed from the point of view of the needs for the society, because there will always be some formal (legal) or informal pressures preventing him from producing something not needed by society. From the remaining list then he will start choosing the projects that make the highest contribution to his wealth. A further level of screening will then occur with respect to his needs, as mentioned above (his present economic security, his own future consumption needs, the needs of future generations, his non-economic needs along religious, social, or philanthropic lines, etc.) There will be different factors affecting his choice of projects for meeting each of these needs. These factors will be discussed in detail in a paper on entrepreneur behavior.

Gambling Gambling is generally abhorred. Societies usually have institutions to enforce bans on gambling altogether in the society or to restrict it

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considerably because of its consequences on an individual’s economic life and an individual’s wellbeing. Gambling implies loving risk and taking risk for the sake of it, which cannot qualify as a human need. The tendency to gamble is a microeconomic problem. It is a desire to make money without getting involved in any real economic activity. All societies like to restrict this tendency so as to allow balanced resource allocation to meet needs. The risk lovers can define and create any uncertainty to gamble. The tendency to gamble on whether a football team will win or lose, or on whether it will rain or not, or on a lottery based on random numbers, etc., if not arrested in time, finally encourages informal and formal institutions into existence to facilitate gambling on artificially created risks. The desire to gamble can hardly be justified as a human need in any society. The desire to gamble initially shown by risk lovers may spread through society, and even neutral and risk-averse economic agents may also fall into the trap of gambling. This is why there are initiatives found in all societies that aim to restrict gambling tendencies, and societies generally look down on those who are heavily involved in gambling. It is an economic disease that societies and communities would always like to see treated. Gambling is, however, considered a social disease. Economics does not recognize this as a disease or an economic problem, neither at the individual level nor at the societal level. As discussed earlier, uncertainties are inherent in this world, and risk has to be taken in all economic activities to materialize economic gains. Overwhelming risks in any economic activity or fulfilling any need can distort resource allocation and create imbalances in the individual’s economic behavior. All societies, being aware of such uncertainties and their role in distorting economic choice, try to develop institutions to distribute risk in economic activities from those who cannot afford to bear it to those who can. This is done in the interest of promoting production and trade. A market of forward contracts for agricultural commodities whose prices are highly volatile is one example of an institution that came into existence to distribute risk from the producer to the trader. Since risk is a cost in economic activities, societies are keen to develop institutions for sharing and distributing risk in economic activities. But such risks are liable to be misused by those who love to take risk and give in to their desire to gamble. For example, futures markets, which developed on the basis of forward trading, are institutions originally meant to distribute risk. But the fact is that gamblers took advantage of these institutions and found them convenient for satisfying their desire to gamble. The situation now is that those “who are

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trading in [futures markets] are typically speculators, those who hope to make a profit by exercising their trading acumen.”19 Similarly, the use of stock markets has slipped away from its original purpose, and minute-tominute quotations of stock prices have led the market to serve the purpose of gamblers. Since economists are not concerned with gambling (considering it a social disease), such institutions easily become a tool for gamblers. Some individuals’ desire to gamble leads to the misuse of such institutions for the purpose of gambling, even though these institutions were otherwise developed to meet the economic need of distributing and reducing risk in economic activities. Various institutions, originally developed to manage certainty in economic activity, always have the potential to provide opportunities to satisfy the desire to gamble. Our economics considers gambling as an economic behavior leading to an economic disease that will only distort resource allocation. This part of our economics is concerned with ensuring that the economic institutions keep economic behavior away from indulging in such non-economic activities as gambling.

Waste of Human and Physical Capital Individuals cannot waste their human and physical capital because they are instinctively motivated to meet their needs. But what if an individual’s needs in some aspect of life remain unfulfilled even at a critical level, but he is found using his human and/or physical assets to meet some other needs at a higher level? Then this is a waste of resources. Homeostasis in human behavior cannot allow him to waste his resources. If he is doing this, then the proper homeostatic control mechanism is not in order. In the context of several traditional societies, particularly those living in rural areas, substantial human resources of working age are reported as underemployed, disguised employed, or voluntarily unemployed. Such individual behavior leading to such waste of resources is reflective of a homeostatic imbalance in human behavior by deliberately passing over priority needs. Such behavior needs to be considered an economic disease and needs to be treated. The following scenarios are possible, in our economics, with respect to the waste of human capital: (a) Individuals cannot find opportunity. They are willing to avail any opportunity that will help them in meeting their needs. Absences of opportunity will lead them to use their human capital for something that has lower priority on their list of needs (or may not even be a

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need). This is a situation that is referred to as involuntary unemployment. It is involuntary waste of resources owned by human beings. (b) The opportunities are available, but the individual is unable to avail them because of some other needs. The available jobs may destroy the self-esteem of the individual, adversely affect his family’s social status, or affect fulfillment of other needs. The individual finds his needs fulfilled by not working. If he is doing it according to his own prioritized needs, then this is not unemployment in any sense (neither voluntary, nor involuntary, nor disguised). If he happens to be spending his human resources not according to the priority of needs, and some needs are bypassed, then this may be corrected by the homeostatic control mechanism. However, it is possible that the needs pursued by the individual may not match the society's perception about the individual's needs. Then there is waste of resources in our economics (while conventional economics will see it as a problem of unemployment, poverty, etc.). This only requires proper institutional measures to bring the individuals' behavior in line with society's priorities. (c) Individuals are oversleeping or are lethargic. The situation is similar to overspending on some needs, as discussed earlier for waste in consumption. Overspending is a waste of resources due to which several of one's needs may remain un-met despite the reality that he has the capacity to meet those un-met needs. Such behavior is a reflection of imbalance in the allocation of resources toward different needs. Such a phenomenon is observable in several parts of the world. This may happen due to the absence of a proper homeostatic control mechanism to force an individual to maintain balance. His homeostatic mechanism that is responsible for maintaining a balance in the allocation of his time is weak. The absence of internal and external pressures to maintain homeostasis may result from the fact that most of the members of a community may be doing the same or may not be considering it as a sickness. The same discussion is relevant for all resources human beings own. In our economics, the unemployment, underemployment, disguised unemployment, and underutilized assets all have one name: “waste of resources in the ownership of human beings.” If it persists, it is an economic disease and needs to be treated. If left untreated, it may generate several social complications, like poverty, economic backwardness, criminality, etc.

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Economic Diseases of the Society (Macroeconomic Problems) Harmony in the economy and advancement towards higher levels of economic wellbeing require that: 1) All of a society’s members maintain a balance in making all their economic choices leading to improvement of their wellbeing; 2) Society has developed a set of institutions to form a homeostatic control mechanism to ensure that an individual’s economic decisions do not disturb harmony in the society. Homeostatic control mechanisms may allow the society a dynamic adjustment process in response to any change in environment in a narrow range. Societies normally resist radical changes in their environment. Rapid widespread influences (caused by external or internal factors) on economic behavior may lead the homeostatic central mechanism to fail to maintain homeostasis, and society may face economic diseases of different types requiring treatment from the economic planners and policy makers of the society. The nature of economic sicknesses at the macro level can take various forms. Some of them are recognized in economics as a part of macroeconomic analysis, but many remain unrecognized. They are studied outside economics despite being problems of the economy. Incidences of poverty, economic development, sustainable development, and rural development are some examples. The reason for studying such economic diseases outside economics is that the linkages of economic behavior with other aspects of human behavior are not recognized in conventional economic analysis. In our economics, such diseases in the economy are recognizable as a part of economic behavior that fails to maintain homeostasis in meeting human economic needs. The reasons for these diseases are recognizable within the analytical framework of our economics, and prescriptions to treat the diseases are also discovered within the framework.

Unemployment In our framework, the concept of work force is different from the labor force concept. Labor force means that all the population at a working age shows a willingness to be economically active. In other words, they are either reporting themselves as working or looking for a job. The concept

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of labor force does not make reference to the need to work but refers only to the utility of leisure and disutility of foregoing it. By working, an individual is assumed to be foregoing his leisure. The utility of leisure therefore is an underlying concept in the labor supply. Our framework classifies the work force in three categories: a) b) c)

working; looking for work; potentially available for work whenever the need arises.

The recognition of last category resolves one of the puzzles that conventional economics often tries to resolve. The puzzle is why the unemployment rate reported in Labor Force Surveys is lower in many developing and poor countries than that reported for many developed countries. See the table below: Table 1: The Unemployment Rate in Selected Underdeveloped and Developed Countries Country Unemployment Rate (2005) European Union 9.4 % France 9.9 % 11.6% (1995) Netherlands 6.6 % 7.1% (1995) USA 5.1 % 5.6% (1995) UK 4.7 % 8.6% (1996) Australia 5.1 % 8.5% (1995) Japan 4.4 % 3.25% (1995) Azerbaijan 1.1 % Burma 5.0 % Nigeria 2.9 % Thailand 1.8 % 1.5% (1993) Uzbekistan 0.7 % 0.4% (1995) China 9.0 % 2.8% (1994) India 8.9 % Pakistan 6.6% 4.8% (1994) Source: CIA, The World Factbook, “Unemployment Rate”20 This is usually attributed to the lack of reliability about official statistics in developing countries, or due to a large part of disguised

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unemployment reported. However, if we compare the data over time, the effect of these two factors should remain the same. But we see that China’s unemployment rate is reported to have increased from 2.8 per cent in 1994 to 9 per cent in 1995. This period of accelerated growth in China showed an increase in unemployment. The case of Pakistan displays the same trend. There are several other developing countries that have shown increased unemployment rates over time despite registering respectable growth in the economy. The explanation rests somewhere else and not in disguised unemployed or the unreliability of official statistics. This is more easily explained if we consider need as a basis of labor supply decisions. As need increases, more and more individuals who previously did not need to look for a job are now looking for jobs. Unemployment has micro dimensions as well as macro dimensions, both having roots in consumers' choices. In the conventional economic framework, unemployment occurs when labor, a factor of production, is not being fully utilized due to the unavailability of suitable jobs. It is defined as a situation where people who are willing and able to work cannot find employment. In our framework, we would define economic work force instead of labor force. Employment, in our framework, would mean the time or number of hours that the consumer is economically active in order to earn the desired resources to meet his needs (and it posits that the consumer succeeds at completing the work accordingly). Homeostatic balance with respect to employment would mean that any exogenous factor might increase or reduce the amount of time that individuals are required to be economically active to meet all their needs within the time constraint, but since it will disturb the balance in their needs, the forces will soon come into action to help them restore their balance. Assume that an individual is economically active for t hours per week at the current expected income of $w per week, which would ensure him the fulfilment of a balanced mix of needs necessary for his overall well-being. Unemployment would mean inability to find work for the number of hours that an individual has earmarked to earn desired resources. This would be an involuntary unemployment, in conventional economic jargon. In our framework, this will, however, be a situation that will call for homeostatic adjustment, as it only reflects imbalance in human behavior at some level. In our framework, it would be a homeostatic imbalance reflecting only the lack of sound mindedness in making this choice. It is possible that an individual having no work available to provide him the needed resources has no choice but to accept work that, despite his capacity, fails to yield him the required expected resources needed, either

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because return on his work efforts is less than what he expected in the market or because of inadequate use of the time he has decided to spare to being economically active. He agrees to accept the work probably because the resources generated by the work are required to meet essential needs and cannot be postponed or ignored. In a conventional framework, this is called disguised unemployment, but in our framework this too will be a homeostatic imbalance, the roots of which lie in the economy at the macro level and not in the economic decision-making of the individual.

Waste of Entrepreneurial Resources A sickness related to disguised unemployment and voluntary unemployment can also be called waste of resources. Societies in the initial stages of development do not have enough employment opportunities to employ the vast human resources available as workers. The scarcity of jobs becomes acute if workers are looking for jobs of their choice. In the presence of a scarcity of jobs, why do human resources opt for looking for a wage-paying job rather than initiating their own activity to create wealth? In other words, why do the human resources not take up entrepreneurial initiatives if wage-paying jobs are not available? The answer lies in the lack of resources that could be put at stake by the entrepreneurs in the activities that they envisage for creating wealth. This becomes more curious when there are enough resources concentrated in a few hands looking for deployment in economic activities on rent basis rather than used as stake in entrepreneurial activities. (Financial capital is one such example, which would prefer to be advanced on an interest basis rather than put at stake in risk-bearing opportunities to create wealth). This imbalance would not persist if there were an appropriate homeostatic control mechanism, in the form of institutional arrangements, which would force the capital resources to be deployed in entrepreneurial activities and motivate surplus human resources to come up with feasible projects to attract these capital resources. When human resources are wasted in waiting for a wage-paying job, entrepreneurial resources vested in human beings, by nature, also get wasted. A continued waste of potential entrepreneurial resources vested in human beings is an economic disease in society that may generate such consequences as poverty, extreme poverty, and economic backwardness.

Waste in Distribution It is reported that about half of all the food produced worldwide ends

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up going to waste due to poor storage and transport methods as well as due to irresponsible retailer and consumer behavior. According to a report based on the study by the London-based Institution of Mechanical Engineers, the world produces about four billion metric tons of food a year, but 1.2 to 2 billion tons are not eaten. In developed countries, like Britain, efficient farming methods, transport and storage mean that most of the wastage occurs through retail and customer behavior. Retailers produce 1.6 million tons of food waste a year as they reject crops of edible fruit and vegetables because they do not meet exacting size and appearance criteria. According to the study, “thirty percent of what is harvested from the field never actually reaches the marketplace (primarily the supermarket) due to trimming, quality selection and failure to conform to purely cosmetic criteria.” Of the food that does reach supermarket shelves, the customers end up buying more than they need and may throw away 30-50 per cent on various grounds. The same report said that in Britain, about 10.2 billion pounds worth of food is thrown away from homes every year, with one billion pounds worth being perfectly edible. By contrast, in less developed countries, wastage mostly happens due to inefficient harvesting and poor handling and storage, in addition to the wastage arising out of the discarding of the bulk of prepared food by affluent members of society. According to the report, losses of rice range from 37 to 80 per cent of their entire production, totaling about 180 million tons per year. “This level of wastage is a tragedy that cannot continue if we are to succeed in the challenge of sustainably meeting our future food demands” (TVNZ 2013). But strangely enough, conventional economics does not include this issue in the mainstream of their analysis.

Extreme Poverty Poverty in our economics is the name of not being able to meet critical and necessary needs in all aspects of life. Inability to meet critical needs denotes extreme poverty. If, in a society, some individuals' critical needs remain unfulfilled, and if this trend persists, then it is an economic disease, because it reflects the absence of a homeostatic control mechanism. The system is allowing the individuals to live with their critical needs not met. Society has to treat this disease and develop institutions that not only take the people out of extreme poverty but also ensure homeostasis with respect to critical needs.21

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Poverty In our economics, poverty is a situation when human beings are hardly meeting needs simply at a critical level and do not have the resources to meet needs at an adequate level in different aspects of their lives. We may classify poverty into the following categories: 1. Involuntary Poverty: When people are hardly able to meet their needs at a critical level only and are unable to meet any of their needs at an adequate level. 2. Voluntary Poverty: Consumers may assign some of their needs lower priority despite having capacity to meet them at higher level. This may particularly be the result of the inability of human beings to distinguish their needs from their wants. In this situation, a person may remain happy with his economic condition and spend most of his resources on meeting his needs at a lower level while enjoying fulfillment of his wants. Many developing countries are witnessing this category of poverty prevailing in their population. Alleviating such poverty requires correcting human behavior and economic choices beyond simply making physical or human capital available to impoverished individuals. The institutional setup in society is not strong enough to make individuals realize how to prioritize their needs and allocate resources accordingly. 3. Potential Poverty: Individuals may have enough resources and they may be meeting their needs at even beyond-adequate levels, but they may be ignoring their self-development needs. In a dynamic society where everybody else is making efforts at self-development, such a group of individuals may lag behind, and they are likely to drift into poverty if they do not correct their priorities regarding their needs, i.e. by avoiding waste (e.g. not spending more than needed on their needs, not spending on items that are not their needs, and placing items of self-development at the right priority level in their list of needs). The demonstration effect of their imbalanced behavior may distort the priorities of individuals in their neighborhoods, and the snow balling effect may lead to, on a wider scale, waste of resources as well as greater incidence of poverty over time. This will be allowed to happen only if there is an absence or weakness of appropriate institutions responsible for maintaining homeostasis.

Development Why are certain societies developed while others remain underdeveloped? Our economics may suggest that a major explanation lies in the economic behavior of human beings. Human behavior has implications for self-

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development at the micro level as well as for the development of society at the macro level. It is possible that societal institutions affecting human behavior, particularly those related to balancing the fulfillment of individuals’ needs and distinguishing them from wants, are not helpful for making human beings realize needs for development as a part of their (and their future generation’s) wellbeing. Hence, they may fail to allocate resources to meet needs that relate to their development. To develop and reach a higher level of wellbeing is an instinctive desire. Human beings instinctively like to devote part of their resources to needs, which may not contribute to their wellbeing now but may improve their wellbeing later. But this need may be ignored because of some peculiar characteristics of the cultural and institutional setup in which an individual is living. Furthermore, even if an individual is willing to work to improve his wellbeing, some features of the institutional setup may not allow the opportunity to do so. For example, there may be a cloth weaver working on a traditional spindle and weaving machine. He knows he has the aptitude to work on a more sophisticated machine and make more income. His allocation of resources enables him to save money to purchase the machine. But this money is not enough; or the machine may not be available (it may need to be imported from abroad); or the individual needs to acquire training to use such a machine, and training facilities are not available. These obstacles require collective action to develop institutions that will enhance the capacity of individuals to develop themselves, and hence, to contribute to the development of society. If members of society do not collectively visualize this economic need of the society, then it is reflective of an economic sickness at the societal level.

Socio-Economic Injustice Human beings differ with respect to their human capital and with respect to their capacity to create wealth. Some people therefore are less privileged than others in meeting their and their family’s needs. Some may not be able even to meet their needs at a critical level in such aspects of life as physical survival, capacity to understand and reason, procreation, etc. These people are needy people and need the help of others to meet their needs at least at a critical level, if not at an adequate level. When the proportion of poor people is small in society, they are normally taken care of by other, more affluent members of the society. Human beings are, by nature, kind to each other and like to help when needed. This is a human instinct. Human beings cannot see fellow beings in trouble or see them

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continue to suffer and not be able to meet their needs at a critical level or adequate level. All societies and all religions teach human beings to take care of less privileged members of the society. It is the responsibility of society’s homeostatic control mechanism to maintain harmony in the society. However, when the incidence of poverty increases and more and more people fall into poverty (and their proportion becomes large), the affluent section’s spirit to help falls short of the need, and poverty may lead to increasing starvation and disease. At this stage, a society not only faces a sickness in terms of hunger, starvation and disease but also faces class conflicts, social unrest, crimes, violence, and the destruction of institutions, leading to anarchy and the disintegration of society. Poverty may occur because of differences in human capacities to create wealth, but class conflicts, crimes, violence, social unrest, etc., result due to man-made factors that reflect gross socio-economic injustices in society and society’s inability to correct them The denial of opportunities to some members of society to create wealth and improve their economic condition is a result of the economic system. Society allows institutions to develop in a way that deprives certain sections of society of their entrepreneurial potential or denies those not having capacity to create wealth the opportunity to share in the wealth created by others. The creation of wealth is the combined effort of human capital and of existing wealth, which includes physical capital (and human capital). If a society allows existing wealth to circulate among already wealthy sections of the society, a large section of human capital will not have access to physical capital in order to create wealth for them and improve their economic status. They will have no option but to wait for someone (from the wealthy sections) to hire their human and physical capital, and hence, help them meet their needs. If affluent sections of the population who control most of the wealth are in the minority, the bulk of the human resources keep waiting to be hired, and thus, run deeper into poverty. The previous section on the waste of entrepreneurial production has already discussed why this happens. Another set of factors contributing to the sense of deprivation among particular classes in society is the shrinking tendency of affluent people to help have-nots meet their needs at least at the critical level, if not at the adequate level. Thus, whatever efforts they may make to create wealth from whatever resources they own will be used up in meeting their critical needs, leaving nothing for them to use for improving their and their future generation's economic status. Both of these factors—the absence of access to means to create wealth and the weak spirit of affluent members of society to meet the critical

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needs of poor sections of society—have roots in the economic behavior of human beings in the absence of appropriate institutions and of a homeostatic control mechanism to correct human behavior in order to improve socio-economic justice in the society.

Sustainable Development and the Pollution of the Environment If a consumer is balancing his needs and spending his resources according to a certain perspective of his wellbeing and self-development, his behavior is based on a certain perception of sustainable development. As human beings move away from fulfilling their needs and move toward satisfying their wants (either because of institutional changes or because of increasing affluence, or for other reasons), the Rushd of the consumers gets corrupted and matters like environment, sustaining development for the future generation, etc., fade into the background. Since sustainable development is needed for the wellbeing of all, the role of the institutional framework is to serve as a watchdog with respect to the factors working against sustainable development. This framework should include taking steps to put adequate institutional provisions in place and develop a homeostatic control mechanism to ensure that choices are made that are consistent with the requirements of sustainable development. Affluent members of society can easily slip away from pursuing prioritized needs to satisfying various unnecessary wants in a way that results in adverse implications for the environment. The demonstration effect from the affluent section of society is strong in influencing the economic choices of the rest of society. The sustainable development risk will be higher in societies that have highly skewed income distribution. Like poverty, highly skewed income distribution is also an economic disease that would need to be treated. The solution will lie in institution building.

Markets in the Economy The markets system in an economy, whether free, controlled or regulated, is meant to perform functions similar to what the circulatory system performs in the human body. If this system malfunctions, the whole body will malfunction, and if the system functions well, the whole body functions well. The same is true for the relationship between markets and the whole of society. Understanding the markets system thus requires going beyond the economy. As Lindblom (2001, 5) suggests, “You will not gain any insight into market-system scope by postulating something

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called the economy, which then defines the scope. Think society, not economy.” Competitive free markets are suitable for ensuring efficiency, as conventional economics concludes, but markets are needed to streamline the production and distribution of goods and services to all consumers, entrepreneurs and workers to meet their needs. In this perspective, what is needed is to understand the entries and exits of goods and services, the access and exit of economic agents in and out of the market in the context of meeting the needs of all members of society, and the freedom and regulations through which the legal and moral frameworks of society govern the entry and exit of goods and services into and from the market. Our economics will study the markets system of a society with respect to the condition that all goods and services needed by the society are produced and distributed to all those who need them, just as A&P studies the function of the cardiac system in circulating blood and oxygen to all parts of the body. Our economics may take a similar approach to explore how markets work. The discussion will go beyond the conventional analysis of equilibrium conditions. It will explore the balance in the markets and their role in helping individuals achieve a balanced allocation and distribution of the resources of the society. Our analytical framework will also help us analyze the negative (or positive) effects—through advertising campaigns or marketing strategies —that markets may impose on the economic choices of consumers, the owners of resources, and entrepreneurs. Markets can also thrive on such diseases as gambling (sometimes referred to as non-productive speculation in the market). Markets may develop different types of blockages and hurdles for entrepreneurs and owners of resources on account of uncertainties inherent in supply or demand or prices of certain goods and services. Markets can be visualized as an important and effective part of the homeostatic control mechanism and can be used to correct imbalances in economic behavior, which can potentially lead to economic diseases. Using an A&P-type framework, we can consider the marketplace as the heart of the economy, and the channels of access to and distribution from the markets can be considered as blood vessels in the economy. This will help us identify the nature of the balanced distribution of goods and services in the economy and see if there is some sort of homeostasis in the market that will help restore balance if any short run changes in the equilibrium conditions happen to disturb the balance in the market. With goods and services being carriers of need fulfillment properties (like blood being the transporting fluid), the market system channels human needs to

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and from economic agents to make the changes, just as the cardiovascular system carries nutrients, oxygen, hormones, etc., to and from tissue cells. The analogy of the market system with the cardiovascular system may seem superfluous at this stage, but a more detailed discussion in the chapter on markets will reveal that such a framework can provide useful insights into the role of the markets system on the economy as well as on the economic behavior of consumers, workers and entrepreneurs. Such an approach can help identify economic diseases in society that may result from the malfunctioning of the market system. On the other hand, elements can be identified in the system that can serve as shields against invasions from diseases that goods and/or services, owners of resources, or entrepreneurs may transmit through the market. Taking this A&P-type approach can also lead to understanding the conditions that would or would not allow markets and market systems to play their role in cleansing the economy as well as reforming the economic behavior of economic agents.22

Macroeconomics: Economic Balance in Society Public Policy and Welfare Economics When the economic behavior of individuals malfunctions, society is exposed to economic diseases that need to be treated, and the wellbeing of individuals and society declines. If society is not able to take care of the disease and treat it, then it may require the state to intervene in the form of public policies that will develop institutions to reform individuals' economic behavior in order to improve wellbeing (at the level of the individual) and social welfare (at the societal level). This requires the social desirability of various policy alternatives, which in turn requires the comparison of changes for the wellbeing of individuals. This requires value judgment on the part of policymakers. It is now generally accepted that conventional economics does not provide any basis for value judgment. Hence, it is not possible to make interpersonal comparison. Using an A&P-type framework for economic analysis can help overcome this problem. For an A&P analysis, the objectives of the functioning of each organ system in the context of the survival of the overall body are already known. No judgment at any stage of the analysis is regarded as normative, despite the fact that the terminology of good health, malfunctioning, imbalance, etc., may in any other context be regarded as value-loaded terminology.

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Since our framework of analysis takes a similar approach, an interpersonal comparison can also be conceived. Each society has a specific worldview. Under any specific worldview, need-based objectives of human activity can be objectively defined for a specific society. The same can be used as the basis for interpersonal comparisons, judgments on changes in social welfare, and criteria for selecting a policy option. The hierarchy of “needs” in broad categories can be defined and would be the same for all individuals who share the same worldview and objective of life. The hierarchy, however, may derive authority from external sources such as parliament, religion, etc., as the society may prefer. When an overweight individual consults a doctor for advice and when the doctor advises what food items would be good for him to eat and what would be bad for him, he will not be making a value judgment or an ethical judgment. His advice will be positive advice, and acting upon the choice of the doctor will be a positive action. In the same analogy, if the economy has a monetary system that creates economic diseases like concentration of wealth in the hands of a few, unemployment, etc. (all of which have adverse implications for the wellbeing of society), policymakers might seek the advice of economists to further strengthen their monetary policy. They will then reduce waste, because it is an unhealthy thing. Our economics may provide an A&P-type framework that makes the economists’ value neutral (like a physician) when judging the economy and economic behavior in view of economic objectives consistent with the worldview of society and the institutional setup of society. An important contribution of this approach, which is centered on the concept of fulfilling needs in a balanced way to enhance human wellbeing, is that it makes interpersonal comparison of needs possible, making the welfare analysis practical and understandable. From Our Economics to Islamic Economics: The Relevance of Our Framework for Islamic Economics. The above discussion outlines an alternate framework for economic analysis without reference to Islam or Islamic economics. This framework has been developed with two objectives: (a) The conventional framework of economic analysis is narrow in scope and does not allow us to understand economic behavior in a more comprehensive and realistic manner. It is not relevant for analyzing the economic behavior of a society with any worldview.

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Our framework outlined above is capable of making distinct economic analyses of societies with different worldviews. (b) Our framework outlined above can allow the making of a scientific analysis of economic aspects of an Islamic system of life not only in order to present a scientific analysis of economics in an Islamic system of life but also to draw conclusions as to how to manage an economy on Islamic economic principles.

Using the Theory for Prediction Purposes Will we be missing anything if we adopt the above theory? It is claimed that (conventional) economics helps to predict human behavior in economic aspects. Will our theory also be applicable for prediction purposes? It has already been explained that the translation of needs into demand and supply for commodities is a part of the analytical framework outlined above. The framework will not only be able to make the predictions that the conventional theory claims, but it will also have two distinct features: 1) The prediction will be based on more realistic assumptions about human behavior and will also take into account the built-in mechanism in human behavior to maintain balance. 2) Since commodities’ demand and supply display direct relationships to the level of need being met, this will, therefore, help predict changes in the wellbeing of people in society, a phenomenon that concerns all policymakers but for which they get no help from economists.

Is the Conventional Theory of Economics Completely Irrelevant? I do not agree with the Islamic economists who say we can take from conventional economics whatever does not conflict with our beliefs. This would mean we believe in their economic philosophy and differ only in details. We are not in the business of finding the devil in the details. Even though need is the driving force for consumer behavior, the instinctive desires may in many cases remain a factor in consumer choice. The conventional analysis of consumer behavior may still remain valid in all such situations where instinctive desires—and not the “needs”—are the driving force. The conventional theory may still remain valid for studying unusual, undesirable and unhealthy patterns in consumer behavior. It will

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still be relevant for studying what may be called the dark side of human nature: the consumption of alcohol and drugs, markets of pornography, money spent on illicit and abnormal sex activities, resources spent on criminal activities, the economics of (professional) beggars, the economics of prostitution, the consumption of goods abhorred by society or prohibited by law, the waste of money on entertainment, games and gambling, the excessive use of resources on glamorous sports and entertainment, and all such behavior that cannot be analyzed in the needbased framework described above. The conventional utility-based approach will provide a more suitable and convenient framework that can analyze such behavior. The utility-based framework may not be irrelevant for the analysis of such aspects of human behavior where needs and utility overlap. It has been mentioned earlier that some needs may appeal to instinctive desires as well (e.g. some level of food, some level of clothing, some level of housing, etc.). For such aspects of human behavior, it may not matter whether we are applying a utility-based conventional approach or a needbased approach described above. However, there are several needs that may not appeal to instinctive desires but still have to be met (e.g. education, religious obligations, things needed by society in general, etc.). Regarding meeting these needs, instinctive desires put up resistance, but instinctive desires have to be overruled. In such cases, only a needs-based approach is relevant, and a utility-based approach will not make much sense. However, since these two aspects are not separable, the application of a utility-based approach even to an aspect relevant to it may not provide a complete picture of consumer behavior.

Testing Our Theory The final question is whether the above theory would be testable. Will we be able to attain the required data, and from what source? Going into such detail will make this paper go beyond acceptable size for a workshop. To conclude, I will give a very brief account of how the theory can possibly be tested. The main source of empirical data will be based on household surveys. All countries have a good system of collecting and maintaining statistics by conducting household surveys. They are also standardized. This is enough to apply the theory and make predictions with respect to needs fulfillment, balancing behavior, and wellbeing. Many countries, including several Muslim countries, have an elaborate network for compilation and collection of statistics on different aspects of

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society. This network can conveniently be utilized to develop data needed for the purpose of Islamic economic analysis using our framework. Household income-expenditure surveys, for example, are being conducted in many countries at regular intervals. These surveys can serve as the most powerful tools for the type of analysis we need in our framework; the questionnaires for these surveys, though, may need to be modified appropriately. Ironically, the surveys that currently are being conducted are not based on the conventional theory of economics. They mostly aim at determining the fulfillment of present and future needs of the population as well as the needs as identified by the planners and policymakers according to some objective criteria (not according to the wants of the population). These surveys will become more fruitful if conducted with an applied theory, as explained in this paper. Such surveys can provide ample information for our analysis, particularly the data that is needed to measure parameters for our economics. The statistical tools—like laws of normal distribution, econometric techniques applied to cross sections, and time series data collected from such surveys—can help generate fairly good measures of estimates of deviations. Developing and applying such tools will be a matter of research. Another source of data that can help in measuring or describing various aspects of adherence to or deviation from the norms of behavior would be what are known as “opinion surveys.” They are good tools for measuring people's perceptions on phenomena. These perceptions are often not otherwise measurable because of being qualitative in nature or value-based, or because people may not like to reveal exact information. For example, if we want to know how much water, electricity, food, etc., is being wasted in households, it may be difficult to determine and identify waste on the basis of the amounts used or consumed. But people do have some perceptions and are willing to reveal whether or not they are making any waste in their household; whether or not their neighbors are indulging in waste; and whether or not their community on the whole is wasting resources.

References Ahmed, Habib. 2002. Theoretical Foundations for Islamic Economics. Jeddah: Islamic Research and Training Institute. Al-Abbadi, Abdus Salam Dawood. 1974. Al-Milkiyyat fi al-Shari’at alIslamiyyah-Tabee’atuha wa Wazeefatuha wa Qayuuduha: Dirasat Muqaranah bil Qawaneen wan Nazm al-Wadiyyah (in Arabic). (Ownership in Islamic Law: Its Nature, Functions, and Limitation: A

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Comparative Study with the Conventional Law). Amman: Makataba al Aqsa. Al-Shatibi, Abu Ishaq. Al-Muwafiqat: The Book of Maqasid Shari'ah (Objectives of Islamic Law). Khan, M. Fahim. 1995. Islamic Futures and Their Markets. Jeddah: Islamic Research and Training Institute, Islamic Development Bank. Kolbe, Robert. 1988. Understanding Futures Markets. 2nd edition. London: Scott Forman and Company. Lindblom, Charles E. 2001. The Market System: What It Is, How It Works, and What to Make of It. New Haven & London: Yale University Press. Marieb, Elaine Nicpon. 2006. Essentials of Human Anatomy & Physiology. San Francisco: Pearson/Benjamin Cummings. Marshall, Alfred. 1890. Principles of Economics. 8th ed. (1920). London: Macmillan and Co., Ltd. Maslow, Abraham. 1954. Motivation and Personality. New York: Harper and Row. Mill, John Stuart. 1848. Principles of Political Economy with Some of Their Applications to Social Philosophy. Boston: C.C. Little & J. Brown. Robbins, Lionel. 1932. An Essay on the Nature and Significance of Economic Science. 3rd ed. (1984). London: New York University Press. Rothbard, Murray N. 1956. “Towards a Reconstruction of Utility and Welfare Economics” in On Freedom and Free Enterprise: The Economics of Free Enterprise, edited by May Sennholz. Princeton, N.J: D. Van Nostrand. Reprinted in The Logic of Action One: Method, Money and the Austrian School (1997). London: Edward Elgar, 211255. Smith, Adam. 1776. Wealth of Nations. Edited by C. J. Bullock. Vol. X. The Harvard Classics. New York: P.F. Collier & Son, 1909-14. TVNZ. 2013. “Up to Half of World’s Food Goes to Waste, Report Says.” ONENEWS. January 11, 2013. http://tvnz.co.nz/world-news/up-half-sfood-goes-waste-report-says-5316465. Wright, N. 1974. Understanding Human Behaviour. New York: BPC Publishing Limited.

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Notes 1

Fiqh al maal is that part of the understanding of Islamic laws and regulations that deals with the maal, and maal is defined as anything that has a capacity to fulfill a human need, has a value, and can be owned and possessed. See Abbadi (1974, 172-180) for a discussion on the definition of maal. 2 When we will switch over the discussion from our economics to Islamic economics, we will refer to the following two verses to distinguish the concept of wellbeing in the two approaches: “[A]nd do not obey one whose heart We have made heedless of Our remembrance and who follows his desire and whose affair is ever [in] neglect… …know that they only follow their [own] desires. And who is more astray than one who follows his desire without guidance from Allah? Indeed, Allah does not guide the wrongdoing people” (The Quran, 28:50) and “So is one who pursues the pleasure of Allah like one who brings upon himself the anger of Allah and whose refuge is Hell? And wretched is the destination” (The Quran, 3:162). 3 In the context of Islamic economics, it would mean right-mindedness, for which the Quran has used the term Rushd, and the rational man is referred to as Rasheed. 4 The economic thoughts of these economists are pooled under the title “Heterogeneous Economics.” Some criticism has been discussed in this chapter. 5 Biology also studies the social behavior of animals. Economics only has to go a step further—to introduce choice and decision-making—to develop a framework for economic analysis. 6 This also includes the study of changes in organisms over a generation. 7 In sociology and psychology, we may find “stress homeostasis,” referring to the tendency of the individual or population on the whole to stay at a certain level of stress, often generating artificial stress if the natural level of stress is not enough. 8 This is the subject matter of a subject that is being referred to as New Institutional Economics, and our economics can benefit considerably from this subject. 9 In the secular context, this refers to charity. In the Islamic context, however, it has a specific and distinct meaning that is reflected in institutions such as Zakah and Ushr (compulsory levy on income and wealth), Awqaf (voluntary institutions to promote social development), Infaq (voluntary spending to meet the needs of have-nots), Nafaqat Wajibah (obligatory responsibility to take care of the needs of defined relatives), etc. Some other societies may have their own institutions to require that individuals have to take care of the needs of those who do not have many resources. This is, therefore, considered to be an independent topic in our economics, as it has substantial influence on individual economic behavior depending on the role that society requires these institutions to play in the individual’s economic activities. 10 See the discussion on the thoughts of these philosophers in the context of economic choices in Khan, M. F. “Economics of Fiqh,” in the proceedings of a workshop edited by Habib Ahmed (2002). 11 According to Shatibi, anything that promotes Nafs (body), Maal (property), Deen (religion), Aql (reason) and Nasl (procreation) is a human need.

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12 Shatibi has defined three levels of fulfilling needs. They are the critical level (Dharooryyat), the adequate level (Hajyyat), and the beautification level (Tahsinnyyat). 13 It is only in the context of the single dimensional concept of utility where maximization of satisfaction may make sense. 14 See World Bank Report (2000) on Institutions for further discussion in detail. 15 Alfred Marshall (1890) justified the acquisition and creation of wealth as a means for attaining human wellbeing. 16 Maslow’s (1954) discussion on human motivation gives a detailed perspective on ever expanding human needs. 17 Economics distinguishes between wages and rent because of the distinction it makes between human beings who work as so-called labor and human beings who are capital providers. For the purpose of our economics, they are both rent. There is no point in distinguishing between the two at the outset. When the question of determining the mix of hired human factors of production and hired physical factors of production will be discussed, an appropriate distinction will be made at that point. 18 We all know that there may be too many Pareto optimal equilibrium situations, but which one of them is balanced is a question that is left to value judgment. In our framework, balanced equilibrium is endogenously determined. 19 See: Kolbe (1988, 4) According to Kolbe: “In fact more than 99 percent of all futures contracts are closed by reversing trade rather than through making or receiving delivery process.” 20 See: https://www.cia.gov/library/publications/the-world-factbook/. 21 In the discussion on Islamic economics, the homeostatic control mechanism will be explained by the fact that Islam provides institutional arrangements that do not let society face a situation of extreme poverty. 22 This brief description of the cardiovascular system in a text book by Marieb (2006) will show the analogy: “The primary organs of the cardiovascular system are heart and blood vessel using blood, as the transporting fluid, the cardiovascular system carried oxygen, nutrients, hormones and the substances to and from the tissue cells where exchange is made. While the blood cells and chemicals in the blood help to protect the body from such ‘foreign invaders’ as bacteria, toxins and tumor cells. The heart acts as blood pump, propelling blood through the blood vessels to all body tissues…” and “The role of Lymphatic system is complimentary to that of the cardiovascular system. Its organs include lymphatic vessels, lymph nodes and other lymphoid organs such as the spleen and tonsils. The lymphatic vessels return fluid backed from blood to blood vessels, so that blood can be kept continuously circulating through the body. The lymph nodes (and other lymphoid organs) help to cleanse the body and hence the cells involved in immunity” (4).

RE-DEFINING ISLAMIC ECONOMICS ASAD ZAMAN

“This is the Book; in it is guidance sure, without doubt, to those who fear Allah; Who believe in the Unseen, are steadfast in prayer, and spend out of what We have provided for them.” —The Quran, 2:2-3

Preliminary Story (From the Masnavi of Mawlana Jalaluddin Rumi: “The Elephant in the Dark”) Some Hindus bring an elephant to be exhibited in a dark room. A number of men touch and feel the elephant in the dark and, depending upon where they touch it, they believe the elephant to be like a waterspout (trunk), a fan (ear), a pillar (leg), and a throne (back). The sensual eye is just like the palm of the hand. The palm has not the means of covering the whole of the beast. The eye of the Sea is one thing and the foam another. Let the foam go, and gaze with the eye of the Sea. Day and night foam-flecks are flung from the sea: Oh amazing! You behold the foam but not the Sea. We are like boats dashing together; Our eyes are darkened, yet we are in clear water. Different ways of perceiving reality can lead to contradictions in appearances. Learning to resolve these contradictions—including by learning to put together apparently conflicting descriptions into a coherent picture of reality—is one of the essential aspects of the teachings of Islam.

Introduction More than ten different definitions of Islamic economics, some of which conflict with others, are available in the scholarly literature; see, for example, Siddiqui (2011). The object of this paper is to offer a new definition of what Islamic economics is and to explain its implications. This definition is broader than the others and offers room to fit all of the

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others into its folds, just as the different aspects of the elephant all fit into one large picture. The most important aspect of this definition is that it is directly based on Islamic concepts and does not mix Islamic and Western ideas, unlike all other definitions of which I am aware. My definition is as follows: Islamic economics is the effort or struggle to implement the orders of Allah pertaining to economic affairs in our individual lives (micro), in our communities (meso), and at the level of the Ummah (macro). In order to understand this definition, we must unpack it. There are many components of this definition that are directly opposed to methodological assumptions built into the foundations of social sciences in general and economics in particular. It is most important to understand that Islamic economics is about the struggle to establish the Deen (religion) in the domain of economic affairs, as ordained by Allah (swt).1 The struggle or effort to establish the Deen is a form of worship, as all acts of a Muslim should be, since we were created only for worship. This is an action-based definition, which is very strongly opposed to Western conceptions of what social science should be.

Contrast 1: Differing Theories of Knowledge Allah (swt) promises in the Quran (29:69) that “those who struggle (in) Us, We will show them our pathways.” This means that the knowledge that we need will be generated in the process of the struggle to establish Deen. This is a very dynamic and experiential view of knowledge. It stands in direct contrast to Western theories of knowledge derived from secular perspectives, discussed briefly below. Western theories of knowledge came into being as a result of the attempt by secular thinkers to discredit Christianity and make reason the prime basis for knowledge. The theories of the Enlightenment thinkers prevailed and currently dominate thought. The currently dominant philosophy of knowledge defines knowledge as true and justified belief. Iman is the Islamic belief in the unseen. However, the secular conception of knowledge requires that humans must be able to provide a justification based on reason and observable evidence for their belief. The philosophy of logical positivism spells this out more explicitly. Justification must be based on observable facts and logic; personal experiences are not permissible. For a more detailed discussion, see my paper “Logical Positivist Methodology and Islamic Economics,” which shows how the logical positivist methodology is incorrect, and how it is in conflict with Islamic principles.

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In fact, the vast majority of human knowledge is based on experience, which is unique and personal. My knowledge of how to drive a car and how to speak a language is based on my personal experience. This cannot be reduced to beliefs and is also not based on facts and logic. The positivist restriction of human knowledge to that based on facts and logic is far too narrow. Similarly, knowledge as true and justified belief is also too narrow. Western conceptions of knowledge emerged during a battle of secular forces against Christianity and were designed to support secular ideas against religious ones. This is why they are insufficient to explain Islamic economics. In Zaman (2013c), I have explained this issue in much greater detail. Human knowledge is largely experience-based and is unique because every individual has unique experiences. The process of the struggle against injustice develops certain spiritual capacities within us that cannot be communicated via textbooks and theory. This is the knowledge that is of vital importance. This knowledge was created within the hearts of the companions of the Prophet Muhammad (pbuh)2 and led to a revolution in the world. Islamic knowledge consists of all three types of knowledge— epistemic, technical and Hikma (practical wisdom)—and is an inseparable mix of the three.3 Unlike the idea that the normative and positive can be separated and studied in isolation, Muslims believe that all forms of knowledge support each other and cannot be fully understood in isolation. Since Islamic theories of knowledge are entirely different from Western theories, Islamic methods of teaching and learning cannot be the same. The Prophet Muhammad (pbuh) was sent as a teacher, and he was the best of teachers. It follows that Muslims must pattern their educational methods and theories on his methods. A discussion of some of the key differences and contrasts is provided in Zaman (2012a).

Contrast 2: Neutrality and Detachment Not Permitted by Islam According to Western conceptions, social science should be based on observing human beings and societies and discovering laws of motion that govern the economic processes in such societies. The goals of science are to observe and describe and to find patterns that allow prediction and explanation. The scientist is a neutral and detached observer who should not interfere with the process under examination. This is dramatically opposed to Islamic views. As can be clearly seen, there is a large amount of injustice in the economic affairs of human beings all over the planet. Islam does not allow humans to observe

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injustice as a neutral and detached observer. If humans see something wrong, then humans must struggle to change it. If this is not possible, then humans must speak out against it. If even this is not possible, then at least humans must feel it in their hearts, and this is the least degree of Iman. That means that if someone remains neutral and detached in observing injustice and violations of the orders of Allah, then he does not possess even the least bit of Iman. So Muslims cannot use the methodology of Western science, which requires neutral and detached observation. This supports the idea that Islamic economics must be defined as a struggle to bring about economic justice. It cannot be defined as a passive activity involving detached observation of the world in the Western way, because such detachment is not permitted for Muslims.

Contrast 3: Transformative versus Normative/Positive The failure to understand that Islamic economics is about an active effort to change the world has also led to a misunderstanding of the normative/positive distinction. Islamic economists has opposed homo economicus and has proposed a homo Islamicus instead. When the world is seen in descriptive terms, it seems that human beings are closer to homo economicus than homo Islamicus. It follows that Islamic economics is not useful as a description of the world. Similarly, people have argued that there is no point in describing Islamic economics as an economic theory that would apply to Islamic societies, because no such societies are in existence anywhere in the world. According to logical positivist philosophy, normative statements are meaningless. If this approach is taken seriously, then most of the Quran is meaningless, since Islam consists largely of normative statements. Actually, as I have argued elsewhere—see, for example, section 3.4 of Zaman (2009)—Islam is transformative. It consists of a struggle to change the world into an ideal form. There are two elements in such a struggle: x First, it is necessary to describe an ideal form for the world, because it creates the goal towards which Muslims must strive. It is not necessary that the goal should be achievable. x Second, Muslims work to achieve that ideal. An important and central component of Islamic economics is the answer to the question, “How should we work to bring about the necessary progress?”

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For example, the Prophet Muhammad (pbuh) is the ideal example for Muslims. His character serves as a model and a goal for Muslims’ efforts. Muslims know in advance that they can never be like him, but this does not make the model invalid. Exactly like this, even if the homo Islamicus is perfect, and no one can be like him, this does not make him useless. Descriptive accuracy is not desired in setting up ideals. Rather, it is important for Muslims to set a direction for their struggles, just as following the North Star allows humans to steer in the right direction, even though they can never reach the star.

Mistake 4: Conventional Economics is also Transformative Conventional neoclassical economics claims to be a positive science. That means that it is accurate descriptively. This idea has been widely accepted by Muslim economists. Some of them are embarrassed about the lack of descriptive accuracy in Islamic economics as well as the nonscientific status of normative theories of Islam. Others have tried to argue that Islam is also descriptively accurate by showing that the Quran also describes man as selfish and greedy and with desires for consuming luxuries, etc. So Quranic theories are similar to neoclassical theories. This is a severe misunderstanding of both neoclassical economics and of the Quran. The claim that economic theory is positive is incorrect. Neoclassical economic theory is not descriptively accurate. See Karacuka and Zaman (2012) for a long list of cases where utility maximization fails. Similarly, the failure of profit maximization by firms has been documented in many papers; see section 5.2 of Zaman (2012b) for a list of references. Similarly, Saglam and Zaman (2012) and also section 5.3 of Zaman (2012b) show that demand and supply curves are not well-defined, influence each other, and cannot be used to determine equilibrium prices, contrary to the claims of economic theory. In fact, neoclassical theory posits a normative ideal: a world of “perfect” competition. Everyone acknowledges that this world does not exist; it is an idealization. The theory is based on zero transaction costs, full information for everybody, no externalities, and a long list of assumptions, none of which hold in the real world. It is asserted that such a world is perfect and generates maximum wealth in the most efficient manner. Then economics consists of strategies on how to remove market imperfections, distort tariffs and taxes, monopolies, externalities, etc. Thus, the goals of economic theories are also transformative, although they are not stated to be such.

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In fact, most of the social sciences consist of this type of theory: descriptions of an ideal state and prescriptions of how to change situations to bring about that ideal state. However, since physical science is not like this, and since social science was patterned along the lines of physical science, it adopted an inaccurate methodology for its purposes.

Mistake 5: Misunderstanding the Quran There has been some debate among Muslim authors about whether or not Islamic teachings are compatible with the neoclassical economic theory of selfish and maximizing behavior by consumers, as well as greedy profit maximization by producers. Some have argued that Islamic teachings also describe human beings as utility maximizers, using Quranic verses like: 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 [to return to]. (The Quran, 3:14)

In fact, this verse is not meant as a description. Rather, it is describing a weakness, and tendency within man to covet the luxuries of the world. At the same time, the Quran is warning Muslims to not succumb to these temptations. This is a normative position. However, Islamic understanding of normative approaches is not like the Western understanding of the normative. The normative is a method for self-transformation. The Quran is telling Muslims that if they resist these temptations out of obedience to Allah, then they will earn the nearness of Allah, and that this is the best of goals. [We have] shown him the two highways [of good and evil]? (The Quran, 90:10)

The verse shows that man is free to choose between good and evil—he is not compelled to obey his bad tendencies. When the companions of the hellfire will complain about how Shaitan (the devil) led them astray, the devil will say that he only made suggestions, and they were free to choose. So this ayah (verse) may be considered as a part of Islamic microeconomics. It teaches Muslims that within their Nafs (ego) there are temptations, and it teaches them how to fight these temptations by turning toward a higher goal. By acting on this advice, Muslims can implement

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the orders of Allah and achieve inner transformation, which is one of the goals of Islam. In general, the Quran is a tool for the transformation of Muslims’ selves, communities and the world. The main instrument for this transformation is the process of Amr-bil-Maaroof and Nahi-Anil-Munkar,4 which is the distinguishing feature of this Ummah of Muslims. The Quran contains complete and perfect guidance on how to carry out this struggle for transformation. Some aspects of this guidance will be discussed below.

Contrast 6: Islamic Microeconomics—Consumer Theory Whereas Western microeconomic theory holds that human welfare comes about by fulfilling all wants and desires, Islam holds that the opposite is true. Islam encourages the fulfillment of legitimate needs and the suppression of idle desires. This teaching is perfectly summarized in the following Quranic verse, which encourages us to fulfill our needs but also to avoid waste: 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. (The Quran, 7:31)

It is said that economic theory is descriptive, not prescriptive. In fact, many studies show that microeconomic theory affects behavior. That is, when people are taught that rational people maximize their selfish consumption—and that this selfish maximization and greed leads to the best outcomes for society via the “invisible hand”—then they start to behave in this way (see Kirchgässner 2005). Thus, the supposedly objective description becomes a normative ideal of rationality that people try to achieve. Many cases can be cited of people who are inclined to be sympathetic and kind but restrain their impulses toward charity and goodness because they learn that this is not rational behavior. Islamic microeconomics consists of describing ideal behavior for consumers and then struggling to achieve this ideal personally for individual selves and promoting such behavior in the society as a whole. There are a very large number of behaviors that consumers are supposed to display. As noted earlier, the most fundamental is that of fulfilling needs but avoiding excessive and wasteful spending. Simple lifestyles are strongly encouraged. Note the contrast with the widespread promotion of spending on luxury items required by a capitalist economy. A second point of contrast is that Islam encourages generosity: spending on others for the sake of Allah is recommended in more than one hundred verses of the

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Quran. This is again in stark contrast to capitalism, which promotes savings, investment and the accumulation of private wealth, as opposed to the circulation of wealth and distribution of wealth to others. Islam also provides us with the tools to achieve these transformations and changes as required. For example, the Quran states: [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.” (The Quran, 3:92)

This is one of the tools to achieve piety: if Muslims spend of that which they love, this will increase their piety. This is a method to reduce their love of material goods and also to make them prefer generosity to greed. Note the stark contrast with the principles of Western economic theory. Instead of consuming what is loved (which would clearly maximize utility), people are encouraged to give it away to others. This is an illustration of a transformative statement: it shows how to achieve a desired goal. This statement is not positive, and it is not descriptively accurate; most people do not behave in this way. It is also not normative, in the sense of describing an ideal. Rather, it is action-oriented: it tells the subject what to do in order to develop certain desirable characteristics. In this brief essay, it would not be possible to develop the full Islamic consumer theory, which would require a book or several books. Rather, the goal is to provide an initial sketch and to delineate the sharp and dramatic contrasts between Islamic consumer theory and Western microeconomics. Somewhat more detail is available in Zaman (2013b, Section 6.4).

Contrast 7: Islamic Microeconomics—Producer Theory Conventional economic theory hypothesizes that businesses are concerned solely with the bottom line. Maximizing profits and accumulating money are the goals. This is actually not true, empirically. Many studies show that business owners have different types of goals. Many are service-oriented, while others derive satisfaction from technical proficiency. In other words, as the Quran (92:4) states: “Verily, [the ends] ye strive for are diverse.” It is also true that there was a very strong campaign in the West to make this a reality. That is, MBA programs all over the world trained business leaders to look only towards making profits. Friedman (1970) argued that since businesses worked with other people’s (stockholders’ and investors’) money, it was actually immoral for them to concern

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themselves with anything other than profits. Providing social services and caring about other human beings were actively discouraged. People were taught to be cold and callous and to sacrifice human lives in the pursuit of profits. Many researchers have documented the inhumane actions of large corporations; see, for instance, the documentary movies of Michael Moore (Roger & Me and Capitalism: A Love Story). Perhaps the most powerful testimony is given by Harvard MBA professor Zuboff (2009): I spent a quarter-century as a professor at the Harvard Business School, including 15 years teaching in the MBA program. I have come to believe that much of what my colleagues and I taught has caused real suffering, suppressed wealth creation, destabilized the world economy, and accelerated the demise of the 20th century capitalism in which the U.S. played the leading role.

Weber has stated that the spirit of capitalism is the pursuit of wealth for its own sake, to the point of being irrational. Islam offers a dramatically different perspective on motives for production. Firstly, making money for its own sake is not permitted: “But as for all who lay up treasures of gold and silver and do not spend them for the sake of God— give them the tiding of grievous suffering (in the life to come)” (The Quran, 9: 34). Thus, accumulation of wealth is only permitted when it is meant to be spent for the sake of Allah. Secondly, the primary motive for production is service, not the making of profits. Making money in order to provide a service is permissible and pleasing to Allah: “The provider is blessed, and the withholder is accursed” (IbneMajah 2238). This Hadith (saying of the Prophet) means that Allah blesses those who trade with the intention of serving people by providing for their needs, while those who withhold essential goods with the intention of profiting by providing them at a high price are accursed. The Islamic spirit is to make money in order to serve the community. This is exactly the opposite of the idea that we should provide services in order to make profits. In fact, Adam Smith’s idea of the invisible hand promotes this misconception: that we strive for personal profits and that the society will benefit automatically, because to make profits we will be forced to provide a service. Since the effects of actions depend on the intentions with which they are done, this is not an acceptable idea from the Islamic point of view. Zaman (2012c) shows that Adam Smith’s theory of the invisible hand fails to hold in practice. When Muslims earn money in order to spend it for the sake of Allah, they earn the blessing of Allah and barakah (blessings) in their Rizq (provisions). The honest traders will be in the company of the pious on the

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Day of Judgment, while the pure profit seekers are accursed. It would take a full-length volume to provide full details and documentations of these claims regarding the ethics of production in Islam. I pause to clarify one issue that sometimes creates confusion among Muslim readers. Some readers think that the goal of providing service to the community means that one cannot earn money for oneself, but this is neither correct Islamically nor humanly feasible. In fact, as I will detail shortly, the Muslim community is knit together as a brotherhood. My first responsibility is to provide for myself and all of my dependents. Earning money for this purpose—and spending it on my primary responsibilities of feeding, clothing, housing and ensuring the health and education of my family and anyone who is dependent on me—is counted as spending for the sake of Allah, and thus, as worship. In fact, this is also service to the community, because the community has the responsibility of taking care of all of its members. If I do not earn for myself, I will be a burden on the community, so providing for my own needs is also a service to the community. Simultaneously, after having provided for my own needs, the excess should be spent on others who are needy within the community and not saved or accumulated, as in capitalist societies.

Contrast 8: Islamic Meso-Economics—Cooperation The spirit of capitalism encourages cutthroat competition. It is supposed that the law of the jungle will promote the survival of the fittest and that this is the key to improved efficiency of production. There is substantial empirical evidence showing that these ideas are false. Today, big businesses routinely use dirty tactics to drive small competitors out of business and argue that this is justified because cutthroat competition benefits society by creating efficient business via survival of the fittest. Similarly, they exploit laborers and pay them sub-minimal wages and argue that this leads to the generation of wealth, which benefits society. However, as the Zuboff (2009) quote cited above shows, these claims are not borne out in practice. The consequences of these jungle tactics have created massive inequalities. The powerful grow ever more rich and powerful, and wealth has become concentrated in the hands of a very few at the top. Stiglitz, in The Price of Inequality (2012), has documented the increase in inequality along with the massive social problems it has caused. Just one illustration is the massive amount of crime that is a direct consequence of inequality and injustice. A fabulous amount of money is spent in safeguarding huge amounts of money from the have-nots, and the ratio of prisoners to citizens is the highest in history in the United States.

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More money is spent per prisoner than is spent on the education of children. All this is completely opposite of Islamic teachings. Islam shows people the pathways out of the jungle and shows them how to live as humans. Islam teaches people how to transform the base and evil characteristics of human beings into good ones. It teaches people to learn how to cooperate instead of competing with each other. It teaches greedy and selfish people how to be kind and generous. It teaches enemies how to be friends. .

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; and ye were on the brink of the pit of Fire, and He saved you from it. Thus doth Allah make His Signs clear to you: That ye may be guided. (The Quran, 3:103)

This verse shows the transformative effect of the teachings of Islam. It shows that if Muslims work in the appropriate ways, then they can change the basis of society from a competitive one to a cooperative one. The great benefits of doing so are obvious; some of them have been spelled out in my essay on “Islamic Approaches to Fundamental Economic Problems.” The core message of this paper is that Islam is transformative. The Prophet Muhammad (pbuh) came and his teachings changed the world forever. Historian Hart (1992) ranked him as the single most influential man in all of human history. What we need to learn is how? What is the method by which the hearts of enemies and rivals can change and become united in love? Again, it is impossible to cover the full range of the teachings of Islam on this issue. I just sketch one important element that is among the core teachings of Islam and which is completely absent from conventional economics.

Building Communities Conventional economic theory subscribes to the principle of methodological individualism. This means that to study the behavior of society, it is sufficient to study individual behavior. Since society is an aggregate of individuals, aggregating the behavior of individuals will allow people to understand social behavior. That is why there is no concept of community within conventional economic theory, which deals with individual behavior only. Grouping occurs at the level of the nation, which can impose laws, control the money supply, and carry out other

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actions that concern the entire collection of individuals within the nation. There is no intermediate-level grouping, such a neighborhood or other local community. Methodological individualism is incorrect. There are many ways to show that group behavior cannot be reduced to or predicted from individual behavior. In chemistry, the behavior of compounds cannot be understood from the properties of the atoms that compose them. One of the main insights of the institutional school of economics is that institutions—which are collections or groups of individuals—matter over and above individuals. That is, identical individuals will have different economics under different institutional structures. One of the key messages of Islam is that Muslims must learn to cooperate and act as brothers toward each other. The Ummah is like one body; if any part is hurt, the whole feels the pain. Building up this Ummah requires building communities. One of the most fundamental communities is the neighborhood. In particular, the neighborhood is a natural community that is emphasized in Islamic teachings. In a Sahih (authentic) Hadith from Bukhari and Muslim, the Prophet (pbuh) is reported to have said that Jibraeel (as)5 kept emphasizing the rights of the neighbors until Muhammad thought that the neighbors would also be given a right of inheritance. The mosque serves as a central meeting point, where neighbors can come together five times in a day. It would be natural to expect a community feeling to develop from this meeting place. However, today the form remains but the spirit is gone, as stated by the poet Iqbal: “The sounds of the call to prayer (azan) ring, but the spirit of Bilal RA 6 is gone.” Vital neighborhood communities are the building block of the unity of the Ummah, just as the cell is the building block of the human body. How communities can go a long way toward resolving the economic problems of scarcity is discussed in my paper on the “Normative Foundations of Scarcity.” Briefly, economics deals with scarcity at the individual level. However, if a community is aware of its responsibilities toward each other, then as long as the community has enough resources in the aggregate, the community can care for all of its members. Islamic teachings state that Muslims’ prayers are not acceptable if they have more than enough to eat while their neighbor is hungry. Studies of Islamic society show that communities play a vital role in providing all sorts of social services. Health, education, food and many other needs are provided for the whole Ummah at the level of the community, without any government interventions. Thus, it would be an important function of

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Islamic economics to attempt to protect communities and strengthen and rebuild communities where they have been weakened or destroyed by the forces of modernity.

Cooperation versus Competition: Guilds Whereas Western economists idealize cutthroat competition among firms as a means to efficiency, Islam teaches the spirit of cooperation. Islamic traders were able to spread Islam far beyond the boundaries of the Islamic empire by their adherence to the Islamic spirit. Their honesty, cooperation and spirit of service were in great contrast to the commonly prevailing trading ethics represented by the motto “let the buyer beware.” In an atmosphere where the firms are out to exploit the consumers, competition is a good thing. If the firms collaborate to exploit the consumers, they will have much greater power and can do much greater damage. However, the situation is quite different in a society where the producers are motivated by the spirit of service and are obedient to the requirements of the Shariah (Islamic law). In such situations, it is natural to have communities of producer band together to help each other in providing service. In Islamic history, guilds of producers have played a very important role. The guilds were responsible for providing a service to the society and could be called into account for failure to provide it to all. They were responsible for quality control, internal policing, maintaining standards of service, and other aspects of professional conduct. The guilds of Al-Andalus were famous for the quality of their products, innovations, and efficiency in production (see Vadillo n.d).

Contrast 9: Islamic Macroeconomics— Ummah versus Nation Western macroeconomics is based on taking the nation-state for granted as the fundamental economic unit. However, Islamic teachings are strongly against the idea of dividing mankind by creating allegiances on the basis of national groupings. The Quran states clearly that: O mankind! We created you from a single [pair] of a male and a female, and made you into nations and tribes, that ye may know each other [not that ye may despise each other]. Verily the most honoured of you in the sight of Allah is [he who is] the most righteous of you. And Allah has full knowledge and is well acquainted [with all things]. (The Quran, 49:13)

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It is very important to understand that the nation-state is a recent invention of the West and not a natural grouping of human beings from time immemorial. Has this invention been a good thing for mankind? There is strong evidence that it has been extremely harmful. Huge numbers of wars have been caused by the hatred generated by these groupings of mankind into nations. The idea of allegiance to the nation, and hatred and contempt for those not belonging to it, has unfortunately become widespread and has penetrated deep into human thought. The terrible effects of a failure to think of humanity as a single brotherhood descending from a common father can easily be documented: 1. The combined military budgets of the world amounted to 1.62 trillion dollars in 2010. This amount is enough to meet the needs of food, clothing, housing, education and basic health for everyone on the entire planet. 2. The twentieth century has been the bloodiest in human history, with the death toll due to wars far exceeding 100 million. Much of this can be directly attributed to the European idea of uniting people into nations and encouraging patriotism and loyalty to nations. In the aftermath of World War II, Toynbee (1951, 205) 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.

In the past, Muslims were successful in building unity at the level of the Ummah. Travellers through the Muslim world have often recorded their experience of the hospitality and courtesy mandated by Islamic law (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…” It has been documented in “A Peace to End All Peace” that Muslims were divided into nations as part of the divide and conquer strategy used so successfully against Muslims by the British. Similarly, when portions of the Ottoman Empire were assimilated by Russia, the Muslims were divided into nations like Uzbeks, Cossaks, Azeris, etc. These nations were supplied with a history, a culture, tribal dresses, customs and languages. All this was done deliberately and explicitly in order to break up their

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unity within their primary identity of Islam. Russians were afraid of a Muslim revolt if Muslims remained united in Islam. Similarly, the Turks were taught to be nationalists and be Turkish first and Muslims later, against their wishes. The Quran warns us to remain united, or else we will be defeated: And obey Allah and His Messenger. And fall into no disputes, lest ye lose heart and your power depart; and be patient and persevering: For Allah is with those who patiently persevere. (The Quran, 8:46)

Islamic economics is not about passively observing the world but rather about actively trying to change it for the better. The concept of the nation-state is abhorrent to Islam, and Islamic teachings offer Muslims the higher ideal of unity within the Ummah as one body. Presently, such unity among Muslims is very weak. How can Muslims work to change this situation for the better? Islamic macroeconomics should be concerned with strategies to improve economic unity among Muslims. There are many steps that could be contemplated, such as creating a free trade zone among the Muslim countries and allowing easy, unrestricted travel between them. In fact, Islam provides Muslims with an institutional basis for creating unity. The mosque, with five daily congregational prayers, is meant to create unity within a neighborhood. The Jum’a (Friday congregation) prayer is meant to combine a large number of such communities on a weekly basis. Eid-ul-Fitr (the holiday ending the fasting month of Ramadan) is meant to create unity on an even larger level. Eid-ul-Adha (the feast of the sacrifice) gathers representatives from the entire Ummah in one place. Muslims need to creatively and imaginatively utilize these functioning institutions to create unity among each other, as mandated by Islamic teachings. The West created and invented the nation-state, a concept with a lot of potential for violence. This capacity for violence, and the simultaneous weakness, decay and rot within the Islamic world, permitted the West to conquer the world. The present Islamic revival taking place throughout the world needs to show that cooperation, unity and love are stronger than hate, enmity and warfare. The ancestors of modern day Muslims were successful in demonstrating such a model in the past. Although neglected in European history, and forgotten by Muslims, the accomplishments of their ancestors in creating a global civilization are slowly receiving the recognition that they deserve (see, for example, Goody 2012, and Morgan 2008). Muslims need to rise to the challenge facing them currently and show the world the way out of the morass it currently is in.

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Contrast 10: Focus on Process, Not Outcomes There are many areas where the principles of Islamic economics are dramatically in conflict with those of Western economics. A more extensive (though still incomplete) list of conflicts is available in Zaman (2012b). For present purposes, I content myself with listing these ten major differences. The tenth one is Islam’s strong and clear focus on process rather than outcomes. It is my experience that many Muslims have difficulty understanding this issue, even though it has been explained very clearly in the Quran and Hadith in many different contexts. Economic theory is “consequentialist”; it evaluates an economic program or policy, and it looks at the outcomes that result from the policy. It is not concerned with the process by which the program or policy works. Islam takes the opposite view and focuses strongly on the process, not the outcomes. The motto of “it’s how you play the game and not whether you win or lose” characterizes the Islamic view. I have put forth very high and demanding ideals. Practical people often question these ideals and argue that these are unachievable. This is a mistake and a misunderstanding due to outcome-based thinking rather than process-based thinking. The issue is not whether or not these ideals can be achieved. The issue is how Muslims can struggle to achieve them. The struggle itself is desired, while the outcome is entirely in the hands of God. If Muslims undertake the struggle to create excellence according to Islamic ideals within their own selves and societies, then they have accomplished what was demanded of them. Achieving the outcomes is not required of them at all. I provide some examples to illustrate this principle, which is dramatically opposed to the methodology of conventional economics. It is not the consumption bundle that concerns Muslims; it is how it was acquired (by halal or haram—permissible or impermissible— methods) that is of concern. I explain the Islamic focus on process, rather than outcome, by citing some examples. Like all prophets, Prophet Mohammed (pbuh) was ordered to spread the teachings of Islam. However, he was also told that guidance rested entirely with Allah. Thus, the struggle to spread the Deen is required, but achievement of the desired outcome is not. Some of the prophets will have large numbers of followers, while others will have few or even none. Yet all will be judged as successful, because they struggled for the establishment of the Deen. Once this principle is understood, then the objections of idealism and impracticality don’t hold any weight. Muslims strive for ideals while knowing in advance that the ideal is unachievable. Muslims strive to model their conduct on the excellent and ideal model of

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their Prophet (pbuh), while knowing in advance that they will never be able to achieve this excellence. It is this struggle that is demanded of Muslims and not the outcome. Islamic economists must strive to create an economic system based on principles of harmony, brotherhood, cooperation, caring for the weak and oppressed, and providing for justice and equity for all. We do not know whether or not we will succeed. We recognize that there are large numbers of forces arrayed against us. The capitalist system has succeeded in creating a massive amount of inequalities—billions of poor, hungry and miserable people together with a few wealthy billionaires. Injustice, oppression, wars to provide profits to multinationals, environmental damage on a world-threatening scale, and many other disasters caused by capitalist economic theories have been documented by many books and articles. Our goal in this struggle is to be counted among the people who are striving for justice, whether or not we succeed. There were many companions of the Prophet (pbuh) who prayed that they might die in the process of the struggle, and indeed the desire for martyrdom is one of the signs of Iman. Similarly, we must struggle to establish economic justice so that we might fulfill the conditions of the following ayah: Say: Lo! My worship and my sacrifice and my living and my dying are for Allah, Lord of the Worlds. (The Quran, 6:162)

References Friedman, Milton. 1970. “The Social Responsibility of Business Is to Increase Its Profits.” New York Times Magazine, September 13; reprinted in Contemporary Issues in Business Ethics. Edited by Joseph DesJardins and John J. McCall, 8-12. 3rd ed. 1996 Belmont: Wadsworth. Goody, Jack. 2012. The Theft of History. Cambridge: Cambridge University Press. Karacuka, Mehmet and Asad Zaman. 2012. “The Empirical Evidence against Utility Theory.” International Journal for Pluralism in Economics Education 3(4), 366-414. Kirchgässner, Gebhard. 2005. “(Why) are Economists Different?” European Journal of Political Economy 21(3): 543-562. Malcolm X. with Alex Haley. 1965. The Autobiography of Malcolm X. New York City: Grove Press. Morgan, M. H. 2008. Lost History: The Enduring Legacy of Muslim Scientists, Thinkers, and Artists. National Geographic.

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Saglam, Ismail and Asad Zaman. 2012. “The Conflict between General Equilibrium and the Marshallian Cross.” Koc University ERF Working Paper 1219. http://eaf.ku.edu.tr/en/workingpapers. Siddiqui, Shamim (2011). “Defining Economics and Islamic Economics.” Review of Islamic Economics: Journal of the International Association for Islamic Economics 15(2): 113-142. Toynbee, Arnold. 1951. Civilization on Trial. Oxford: Oxford University Press. Wolfe, Michael. 1998. One Thousand Roads to Mecca: Ten Centuries of Travelers Writing about the Muslim Pilgrimage. Tennessee: Grove Press. Zaman, Asad. 2013a. “Logical Positivist Methodology and Islamic Economics.” Paper presented at 2nd International Conference on Islamic Economics and Economies of Muslim Countries, Kuala Lumpur, Malaysia, January 29-30. https://sites.google.com/site/azamanpublications/ie/methodology/logic al-positivism. —. 2013b. “Islamic Approaches to Fundamental Economic Problems” in Handbook on Islam and the Economy, edited by Kabir Hassan and Mervyn Lewis. Cheltenham: Edward Elgar Publishing. (Forthcoming). https://sites.google.com/site/azcurrentresearch/home/islamicecon/islam. —. 2013c. “Deification of Science & Its Disastrous Consequences.” Paper presented at IIIE, IIUI, May 2012. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2260052. —. 2012a. “Principles of an Islamic Education.” Lecture 1 of a textbook on Islamic Economics under preparation. https://sites.google.com/site/zamanislamicecon/lectures. —. 2012b. “An Islamic Critique of Neoclassical Economics.” Pakistan Business Review, April. https://sites.google.com/site/azcurrentresearch/home/islamicecon/crit. —. 2012c. “Death of a Metaphor: The Invisible Hand.” International Journal of Pluralism and Economic Education. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2094930. —. 2012d. “The Normative Foundations of Scarcity.” Real-World Economics Review 61: 22-39. September 26. http://www.paecon.net/PAEReview/. —. 2012e. “Crisis in Islamic Economics: Diagnosis and Prescriptions.” Journal of King Abdulaziz University: Islamic Economics 25(1), April/May. —. 2009. “Islamic Economics: A Survey of the Literature.” Islamic Studies 48(3): 395-424.

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Zuboff, Shoshana. 2009. “The Old Solutions Have Become the New Problems.” Bloomberg Business Week, July 2. http://www.businessweek.com/managing/content/jul2009/ca2009072_ 489734.htm.

Notes 1

Subhananu wa ta’ala, meaning “may He be glorified and exulted.” Sallallahu alayhi wasallam, which means “peace be upon him.” 3 Aristotle classified knowledge in three different types: episteme (scientific), techne (skill and crafts) and phronesis (wisdom). 4 Ordering for acknowledged virtues and forbidding from sin. 5 Alayhi salam, which means “upon him peace.” 6 Radhe Allaho-ann, which means “may Allah be pleased with him or her.” 2

ISLAMIC ECONOMICS AND ITS FUTURE ABUL HASSAN

Introduction Economics was never conceived as an isolated phenomenon, and Islamic economics remained primarily an integral part of the united social and moral philosophy of Islam until the beginning of the twentieth century. On one hand, Muslim intellectuals were aware of the impact that secularism and its natural corollary, the compartmentalization of knowledge, have had on the social sciences in the Western world. These intellectuals were convinced that any such dichotomy between the secular and sacred sciences in the Islamic method is untenable. In this regard, key figures of the Islamic reformation movements of the twentieth century played a role. For example, Nursi (1878-1960), commonly known as Bediüzzaman (Mardin 1989), inspired the people of Turkey with “mânevî jihad” (jihad of the word and positive action). Additionally, Sayyid Mawdudi (1903-1979) of Pakistan, Sayyid Qutb (1906-1966) of Egypt, and Baqir al Sadr (1931-1980) of Iraq sought to reconcile Islamic teachings with the ideas and concepts of socio-economic development in society. One important motivation for developing specific Islamic views on the economy was the conviction that Islam was not taken seriously by people and was regarded as rather benighted and incompatible with modern scientific views. The Muslim world was once a global economic power for several centuries. Currently, it is passing through a crucial phase in its history. When the global Muslim Ummah (community) lost its leading edge in knowledge and technology, its economy went to shambles, and its political power was eclipsed. The lowest point was the abolition of what was left of the symbolic Khilafah, or Caliphate, (under Ottoman Islamic rule) in 1924. This was the context in which a number of Islamic luminaries/Islamic economists all over the world asked themselves the crucial question of what had gone wrong with the global Muslim ummah and its economic and political power. Against this backdrop, Islamic reformers like Nursi, Mawdudi, Qutb and al-Sadar came up with positive responses to steer Muslim society out

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of the quagmire it had stepped in. These luminaries recognized that human beings are moral beings; therefore, the basic questions about economics are moral questions. They not only explained at length the economic teachings of the Quran and Sunnah, but they also tried to define the economic problems of man in the broad context of its total existence and civilization. They also spelled out in reasonable details how these problems can be solved through an integrated approach by taking care of the moral and material dimensions of economic life simultaneously. Their main contributions rested in expounding upon and explaining the philosophy of Islamic economics in clear terms. Although these scholars were not economists in the professional sense, their writings on economic issues have led to an economy that has come to be described as Islamic economics. The worldview and vision of modern man and society through which Islamic intellectuals have penned the Islamic way of life and its economics system need to be understood clearly. Most expositions of Islamic economics begin with the elaboration and conglomeration of Islamic teachings pertaining to economics drawn from the injunctions of the Quran and Sunnah. Studies in Islamic economics then compare and contrast the corpus of religious norms and economic teachings with the fundamental tenets of capitalism and socialism to discern an independent existence for Islamic economics, which may be separated from the two overriding philosophies of social and economic organization (Chapra 1979; Mannan 1982a). In this way, the very notion of Islamic economics begins with the nature and attributes of “homo Islamicus” and the limitations and responsibilities that characterize its terrestrial activities (Zaim 1978; Zaman 2005; Asutay 2007a; Farooq 2011). In economic terms, the theomorphic (man as vice-regent of God on Earth) quality of homo Islamicus implies that the concept of equilibrium, which can be seen as the harbinger of social harmony and material happiness on Earth, is inevitably intertwined with the Islamic doctrines of Tawhid (unity) and adl (equity or justice), which guide man’s spiritual yearning. Hence, economic activity in an Islamic context is encouraged in tandem with the spiritual progress of the society of Muslims and its consistent individuals. In due course, Islamic economics represents a systematic effort by Islamic scholars/economists to take a fresh look at the entire economic problem, including the methodology of economics, with a view of coming up with fresh solutions to old and persisting problems. This approach is still in its early phases of growth. It is true that Islamic economists have a long way to go, but there is no doubt that a movement has started in this direction from the middle decades of the twentieth century.1 Since then,

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thousands of books, journal articles and pamphlets in many languages have been published in an attempt to establish the separate identity of the discipline. The main contribution of these Islamic economists/intellectuals has been explaining the philosophy of Islamic economics, its methodology, and the major contours and institutions of an Islamic economic system as part of the Islamic way of life (Alatas 1997; Naqvi 2003; Mohamedy 2011; Ahmed 2002; Ahmad 2011). These are the most ground breaking contributions of Islamic economists, and they represent a vision that constitutes an important element of the discipline of Islamic economics. In studies of Islamic economics, concerted attempts have been made by Islamic economists to theoretically relate moral conduct to economic institutions and practices. While Islamic economic thinking presents an ideal of development that is based on an Islamic philosophy of life, it is beset by a number of problems as far as empirical theory is concerned; consequently, Islamic economics cannot yet present itself as a global alternative development theory. As an ethical theory of development, Islam offers an alternative to modernization and dependency, as well as a philosophical foundation for Islamic economic theory. However, as an empirical theory, the so-called Islamic economic theory remains within the fold of neoclassical discourse in terms of its theoretical concerns and methodology. The main purpose of this paper is to examine the current situation of Islamic economics studies and to take a fresh look at their future. The layout of the paper is as follows. In the subsequent section, the philosophical foundation of Islamic economics and its empirical theory are amply discussed to critically examine studies of Islamic economics at the intellectual level and subsequently examine the discipline’s role in active social institutions. The third section addresses the role of man in society, Islamic political economy in the open market operations, main causes of existing economic problems, and what possible solutions the Islamic economists can offer. The fourth section considers the future prospects of Islamic economics. The final section is reserved for conclusions.

Philosophical Foundations of Islamic Economics and Empirical Theory Progress in the development of Islamic economics as a discipline started with development of economic theories under the scheme of “Islamization of knowledge” during the 1970s. The Islamization of economics was an extension of this intellectual movement and is in fact considered to be one of its most important pillars (Haneef 2007). In due

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course, Islamic economics presents an ideal of development that is based on an Islamic philosophy of life. It is raised as an alternative vision of development; subsequently, various policy options have been suggested, such as Islamic Banking and zakah. What is presented as Islamic economics is in fact composed of ethical theories of production, distribution, price, and so on (Rahman 1980). The exception to this includes works on Islamic banking and zakah. Generally, when Islamic economists discuss the traditional categories of economics such as income, consumption, government expenditure, investment and savings, they do so in terms of ethical statements and prescriptions and not in terms of analysis and empirical theory (Rahman 1980). First and foremost in the discipline is the application of ethical principles, derived from what is seen as divine law, i.e. Shariah. Shariah is, after all, a system of duties. These duties rest on a few basic principles: Tawhid, brotherhood, fair remuneration of labor, redistribution of private wealth, etc. (Choudhury 1986; Naqvi 2003; Chapra 2000; Zaman and Asutay 2009). Islamic economists elaborated these principles in the following way: Tawhid and Brotherhood. Tawhid is oneness of God. It has also been interpreted as the unity of God and His creation, implying “equality” of all men (Valeri 1997). Tawhid and brotherhood bear on the way people treat each other in light of their relationship with God; in other words, they bear on social justice. Man as God’s vice-regent on Earth is charged with the obligation to use his resources in a religiously sound and morally correct way. Fair Remuneration of Labor. The remuneration of labor should be commensurate with the character and the amount of the work done. The available resources belong to God, and those who expropriate an income that is too high, given this principle, are guilty of excess (Mawdudi 1999). Redistribution of Private Wealth. The right of a society to redistribute private wealth is an essential part of the system. Efforts to improve the quality of life include employment creation, the institutionalization of zakah, and the equitable distribution of income and wealth through tax policies, charity, inheritance laws, the prohibition of usury and speculation, etc. (Rahman 1980). Following is a brief review on the major elements contributed by Islamic economists as well as Islamic Shariah scholars so far in the area of Islamic economics.

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Zakah The above items are general principles, but zakah is a specific duty. In most Muslim countries, zakah is voluntary, but in some countries— including Pakistan (since 1979), Sudan (since 1983), Saudi Arabia, Yemen and Malaysia—it is an obligatory tax. In Pakistan and Saudi Arabia, not only individuals but also companies are subject to zakah levies (Sadeq 2002; Kuran 2006). In Indonesia, laws enacted in 1999 empowered the government to regulate zakah. Therefore, it is no longer a private affair of individual Muslims (Lubis 2004). In Morocco and Oman, zakah contributions are completely left to the individual consciousness of the people; however, Jordan is somewhere in between. There is a Zakah Directorate under the Ministry of Religious Affairs, but local Zakah Committees are also allowed to raise and distribute charitable funds (Benthall 1999). In Kuwait and Bangladesh, the state administers zakah funds, but contribution is voluntary. According to Sadeq (2002), zakah implies intensive consumption goods. It can also play a minor role in addressing poverty. According to Naqvi (2003), in order to finance today’s social spending, levies from a much wider tax base at much higher rates are required far beyond what zakah contributions can ever hope to attain.

Interest or Riba Against these backdrops, if there is one distinguishing characteristic of the Islamic economy, it is the prohibition of riba, or interest. This is nothing new. The ban on riba was already observed in the medieval Muslim world (Udovitch 1979), and based on the Quran, there is a general consensus among Islamic scholars regarding imposing a ban on riba, which has been ratified in an Islamic economy (Ghazanfar and Islahi 1990). Actually, riba is a form of excess and an unjustified appropriation of income, and it therefore is at variance with the principle of Tawhid and brotherhood and with Islamic ideas about income distribution (Choudhury 1986). However, those scholars who see the ban on riba as relevant for the modern world generally distinguish two broad categories: riba al-nasia and riba al-fadl. The rationality of the prohibition of riba al-fadl is meant to protect people against sharp traders (Chapra 1985). It is argued by some Muslim jurists that the implementation of the prohibition of riba al-fadl is the responsibility of individual Muslims (Usmani 2000). Commercial activities are permitted under Islam, but they are subject to the ban on riba. They are also subject to another restriction: the ban on gharar (uncertainty) and maysir (gambling or speculation). As with riba,

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commentators have tried to find a secular rationale for the ban on gharar and maysir. Muslim jurists see the ban on gharar as a means to prevent people from taking advantage of simplicity or weak systems on the part of their counterparties, or in the language of economics, asymmetric information (Saleh 1986; Hassan 2002). As with riba, El-Gamal (2001) tries to make sense of the ban on gharar with the help of modern economic concepts, and in the process, by shifting emphasis away from protection of the weak. The ban on gharar can, in his view, best be approached as a prohibition of trading in risk. As for the ban on maysir, there is again the idea of commutative justice that is invoked to justify it. Muslim jurists see gambling as a zero-sum game. If one party gains, it does so at the expense of the other party. It does not contribute to an increase in welfare (Tag ElDin et al. 2007).

Time Value of Money In general, if shariah courts find that riba was involved in a contract, the transgressor has to donate the amount involved to the poor (Rahman 1980). This also applies to riba al-nasia. A question on a more theoretical plan is whether the Islamic rejection of interest on loans precludes recognition of time value of money. Many Muslim scholars, following Mawdudi (1999), amongst others (such as Uzair 1978; Siddiqi quoted by Koran 2006), are convinced that the whole concept of time value of money or time preference is devoid of sense. There are some opposite views on the subject, however. El-Gamal (2002) argues that neither all forms of interest fall in the category of forbidden riba, nor is all riba interest. He shows that the traditional jurists of the various schools of law saw sales in which the price was increased in the case of deferment as permitted, whereas an increase in the amount of debt was seen as riba, and thus, not permitted. Credit sales can, therefore, be used as a form of finance, but not interest-bearing loans. The notion of time value of money is thus fully accepted, according to El-Gamal. Another renowned scholar, Fazlur Rahman, saw the contradictions between the different hadith (sayings of the Prophet Muhammad) condemning riba, which led him to the conclusion that they are unlikely to be authentic (Pal 1999). This strengthened his conviction that the ban on riba refers exclusively to the one described in the Quran.

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Islamic Banking There have also been calls to develop an Islamic theoretical system of economics including Islamic macroeconomics and Islamic microeconomics (Chapra 2000), but these have met with little success except some elements of Islamic microeconomics. In their studies, Choudhury (2007), Asutay (2007b), and others have discussed an Islamic economic system based on a specific Islamic epistemology, founded on Tawhid. The pious wish of Islamic scholars/economists is that in the end, by combining the totality of shariah precepts with financing instruments, Islamic banks can become investment-oriented financial intermediaries and agencies contributing to the sustainability of the socio-economic order, the sociopolitical order, and institutions of preservation of community assets and wellbeing. In this regard, analysis of the problems and prospects of the abolition of interest and introduction of Islamic banking in different countries have been dealt with at length by Drummond (2000), Billah (2007), Chapra (2007), Zaman (2008), Asutay (2007b), and others. A modicum of scholarly consensus has been built around some of the basic themes of interest-free Islamic economics. It may be noted here that the vast majority of research activities in the field of Islamic economics and finance have focused on product development or financial instruments, with Islamic financial institutions being the landscape of such research. However, the main challenge for the Islamic financial services sector, as shown by Islamic finance studies, is how to design, develop and promote innovative shariah-based products or financial instruments (Kayed 2011). It is true that there are invaluable contributions from the pioneering research initiatives undertaken by leading Islamic economists, but the future research in Islamic economics needs to be more inclusive both in terms of its methodological approach and its target population.

Islam, Capitalism and Socialism Mahmud Ahmad (Ahmad 1999) gives a description of the difference between capitalistic and socialistic views of economics and Islamic economics in the line of Mawdudi (1999). He stated that capitalism accepts both profit and interest; socialism rejects them totally; and Islam accepts the profit motive but rejects interest. Some Muslim scholars shared Ahmad’s view. They saw entrepreneurship as a positive force as long as it does not degenerate into preponderantly speculative activities (Valeri 1997).

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One of the early proponents of Islamic economics, Anwar Iqbal Qureshi, was in favor of capitalism, but later on, Haque (1995) wrote against the theory of capitalism with reference to the Quran. For Anwar Iqbal Qureshi, profit is a positive phenomenon, even if it accrues within a capitalistic framework, as in the case of landowners earning rent. Haque (1995), by contrast, is very critical of capitalism and would favor a larger role for the state in the economy. Profits are suspect, and in his view, the injunctions in the Quran against riba are meant to cover a much wider range of activities where unjustified increases or surpluses are involved than is usually thought to be the case. Moreover, in the matter of the analysis of the inter-systematic comparisons between Islam, capitalism and socialism of the Muslim scholars (Mawdudi 1999; al-Sadar 1984; Naqvi et al. 1992), there is no need to add any further critical aspects. It is complicated territory where one can easily succumb to the logical error of comparing an ideal Islamic economy with the reality of capitalism and socialism. Such comparison seeks to prove the superiority of the Islamic system over competing economic systems. However, the plain fact is that, in the absence of a functional Islamic economic system, such proof is by and large locally unrealistic.

Empirical Aspects of Islamic Economics If what is meant by Islamic economics is empirical theory, then it is a generalization about observable economic reality founded on the process of abstraction and conceptualization. In fact, it would be difficult to refer to an Islamic economics as science, although we do not have the scientific study of economies in Muslim countries, as well as the study of Muslim economic institutions and commercial techniques (Ahmed 2002; Naqvi 2003). The superiority of an Islamic economic system can be convincingly established only on the basis of the superior economic performance of Muslim countries. But despite much horn tooting and waving of flags in the last five decades, Muslim countries have precious little concrete empirical evidence on this count. The examples of Iran, Indonesia, Malaysia, Pakistan, Sudan and Turkey cannot yet provide an adequate basis for meaningful inter-systematic comparisons, while other Muslim countries have simply failed to grasp the nettle. We must face the unpleasant reality that with a few honorable exceptions, most Muslim countries have generally done worse than non-Muslim countries in terms of the majority of human development indicators. It is a fact that the economic failure of Muslim countries in general and Muslim societies in

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particular cannot be blamed on Islamic economics. Further, the available empirical evidence also does not entitle us to make general statements about a priori superiority of traditional Islamic economic solutions, either. When Islamic economists develop empirical theory, what is presented as Islamic economics turns out not to be an alternative economics system as far as empirical theory is concerned. The focus and methods selected by Muslim economists for economic analysis are essentially those of neoclassical or Keynesian economics (Zaman 2005). The traditional questions that come under the purview of theories of price, production, distribution, trade cycle, growth, and welfare economics with Islamic themes cannot be tested empirically; however, topics such as zakah, Islamic banking, and profit-sharing have come into practice, though not fully. There are at least three problems associated with theorizing this discipline: (1) Islamic economists have not translated the techniques of analysis that have been selected to build up models of the Islamic economic system into empirical work (Ahmed 2002). For example, works on interest tend to construct models of how an interest-free economy would work. In his study, Mahdi (1988) observes that alternative economic models have successfully eliminated interest—through using either an IS-LM model within the Keynesian economic framework or portfolio asset management theory—which have demonstrated that Islamic economy is feasible and desirable not only for Muslim countries but also for all countries. Based on the studies of some Islamic economists’ work (for example Rashid 1991; Choudhury 1992), it is revealed that Islamic economists are very much attached to the deductive methodological approach so characteristic of neoclassical economics. (2) Evidence shows that the attempts made by Islamic economists in the matter of Islamic economics have sought to ground the discourse in a theory of wealth and distribution in very much the manner that Western economic science does. For example, if we take a glance at some studies (Kahf 1992; Khan 1984; Mannan 1982b; Siddiqi and Zaman 1989a and 1989b), they reveal the aforementioned fact. When engaged in the sort of discourse that one could understand as constituting empirical theory, it can easily be found that theory has not been developed following the framework of the philosophical foundation of Islamic economics. Despite their frequent references to numerous fundamental Islamic concepts, Islamic economics is little more than one large attempt to

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cast Islamic institutions and dictates, like zakah and prohibition of interest, into a Western economic model (Sardar 1985). It seems that these economists tried to derive Islamic economics theory in the shade of neoclassical economics, only dressed and made up in Islamic terminology. These studies on Islamic economics are very much embedded in the tradition of neoclassical economics in terms of their near exclusive concern with technical factors such as growth, interest, tax and profits (Sardar 1985; Mahdi 1988). (3) Even where there is the use of empirical data, as in the case of studies of zakah collection and distribution, it is difficult to see what makes such economics truly “Islamic” other than the fact that the subject matter concerns Islam and Muslims (Salleh and Ngah 1981; Salama 1982). It would also be difficult to grasp whether Islamic economics is a normative or positive science, as it is difficult to come to a conclusion from these theoretical, nonempirical studies in the area of Islamic economics.

Economics Behavior However, there are a host of conceptual issues that have not been seriously dealt with in theorizing Islamic economics. For example, veteran Islamic economist Siddiqi (1997) raised the interesting issue of the nonapplicability of the concept of economic rationality in the analysis of the behavior of Muslims. He suggests that the concept of economic rationality is unsuitable for analysis because it is unrealistic. This is a valid criticism that holds for the study of behavior in general, not just Muslim behavior. Furthermore, Islamic economists have suggested the concept of Islamic rationality in place of economic rationality. This, however, is a normative concept in the sense that it refers to conformity with Islamic norms. As such, it belongs to ethical discussions and does not address empirical theories. So far, Islamic economists have not advanced an alternative concept of rationality that can serve as the cornerstone of an empirical economic theory. Such would be a concept of rationality that specifies the attributes of economic agents as they exist and not as they should be. In summary, it is true that Islamic ethical economics norms, as understood and presented by Islamic economists, are clear and unambiguous; however, the attainment of economic justice is yet to be realised. There is a need for Islamic economics to pass through the empirical test. Within the broader informational context, bringing Islamic ethical values into economic analysis in no way prevents the spirit of scientific inquiry. It becomes transparent that a morally charged economic

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system can accomplish many objectives under one umbrella: it can promote a high rate of economic development to ensure equality of social and economic conditions for all in terms of their capability to translate material plenitude into the metric of individual happiness, while also safeguarding the freedom to achieve social cohesion and social stability. It will also guarantee effective protection for the poor and the weak against the tyranny of the rich and the powerful.

Man, Society and Islamic Political Economy In discussing the relationship of man with God, there are certain terminologies that need to be understood. These terminologies are: Tawhid, Rububiyyah, Khilafah, Tazkiyyahaa and falah. Tawhid, or the principle of the unity of God, establishes the nature of the relationship between God and man as well as that between men. Rububiyyah (sovereignty) refers to the belief that it is God who determines the sustenance and nourishment of man, and it is He who guides believers to success. It follows that successful development is a result of man’s work as well as the workings of the divine order. Khilafah (vice regency) is the concept of man as God’s vicegerent on Earth. This defines man as a trustee of God’s resources on earth. Tazkiyyah (purification) refers to the growth and purification of man in terms of his relationship with God, his fellow men, and with the natural environment. The putting into practice of these principles results in falah (welfare), which in fact is prosperity in this world as well as the hereafter (Ahmad 1980). The Islamic concept of development is, therefore, tazkiyyah (or purification) combined with growth (Ahmad 1980). This concept encompasses the spiritual, moral and material aspects of development, and the ultimate aim is to maximize welfare of man both in this life and in the hereafter.

Society and Islamic Ethics In Islamic society, it is ethics that dominates economics and not the other way around (Naqvi 1981). The goals of Islam are not primarily materialistic. They are based on Islamic concepts of human wellbeing and quality of life that stress brotherhood/sisterhood and socio-economic justice and that require a balanced satisfaction of both the material and spiritual needs of all humans (Chapra 1992; Ahmed 2002; Zaman and Asutay 2009). However, in reality there exists in most societies a relative scarcity of resources with unlimited claims upon them. A free-market capitalist economy uses market-determined prices as a filtering mechanism

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to distribute resources. The use of the price system alone, however, can frustrate the realization of socio-economic goals. Under a system of state control, the allocation of resources is in the hands of a bureaucracy that is often cumbersome and inefficient. According to Chapra (2000), the Islamic worldview implies that the market system should be maintained but that the price mechanism should be complemented with a device that minimizes unnecessary claims on resources. This device is the “moral filter.” This means that people should pass their potential claims on resources through the “filter of Islamic values” so that many claims will be eliminated before being expressed in the marketplace. Resources will not be allowed to be diverted to the production of luxuries until the production of necessities is ensured in sufficient quantities (Siddiqi 1981). The definition of luxurious or extravagant is related to the average standards of consumption in a society, the idea being that drastic departure from the average standards would not be permissible. Similarly, the individual profit motive is not the chief propelling force in Islam (Siddiqi 1981). Social good should guide entrepreneurs in their decisions, besides profit. A relevant saying of the Prophet Muhammad (pbuh) is “work for your worldly life as if you were going to live forever, but work for the life to come as if you were going to die tomorrow” (Hadith). Islam places a greater emphasis on duties than on rights. The wisdom behind this is that if duties (relating to justice and trusteeship, for example) are fulfilled by everyone, then self-interest is automatically held within bounds, and the rights of all are undoubtedly safeguarded. In light of these discussions, it seems that society is the primary institution in Islam, not the state (Cantori and Lowrie 1992). Chapra (1992) argues that in order to create equilibrium between scarce resources and the claims on them in a way that realizes both efficiency and equity, it is necessary to focus on human beings themselves, rather than on the market or the state.

The Limited Power of Islamic Government and Homo Islamicus As emphasized by Cantori and Lowrie (1992), Islamic law (shariah) limits governmental power. Shariah is so all encompassing that there is less need for legislation regarding issues of ethics, social responsibility, and human interaction. In Islam, emphasis is given on the human being rather than on state power. The real wealth of societies is with their people. An excessive obsession with the creation of material wealth can obscure the ultimate objective of enriching human lives. Humans are thus

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the ends as well as the means. Unless humans are motivated to pursue their self-interest within the constraints of economic wellbeing (the application of the “moral filter”), neither the “invisible hand” of the market nor the “visible hand” of central planning can succeed in achieving socio-economic goals (Chapra 1992). The aforementioned outcomes of the process of inference adopted by the Islamic economists, though ostensibly predicated on Revelation and apparently formulated around a set of values espoused by Islam, is not without its difficulties and contradictions both in thought and praxis (Nasr 1987; Asutay 2007a). Islamic economists are at pains to emphasize that homo Islamicus would behave in a manner more amenable and conducive to the goals of realizing a prosperous society than homo economicus would. Most of the Islamic economists contend that while some of man’s activities may need to be regulated by moral filters, formal state rules can regulate desirable forms of behavior (Farooq 2011). But apart from a cursory mention of the transience of this world and the punishment-reward incentive in the hereafter, there is very little in the literature explaining how these norms would be actualized in practice. This failure on the part of Islamic economists has been articulated, particularly by Kuran (1983), Nasr (1986), and Mahomedy (2011).

In the Matter of Islamic Political Economy Despite the fact that there is positive development in the area of Islamic economics, it faces a number of problems as far as normative prescription of Islamic political economy is concerned. The main problem with this state of affairs is that under the shade of Islamic economics, the policies generated in industrialized capitalist societies are implemented in Muslim countries and are legitimated. No doubt this process is undermining the very purpose to which Islamic economics is committed. A host of issues relating to political economy, such as uneven development, unequal exchange, bureaucratic capitalism, corruption, and the role of the state—which have been addressed by socialistic, capitalistic, and new institutional economic theorists—are not dealt with efficiently at the theoretical and empirical levels by Islamic economists. The problems that beset Islamic economics in terms of its theoretical perspectives, methodology and practical results are not disconnected from the political contexts of Muslim societies. It seems that Islamic economics has generally neglected those areas of interest that have become the trademarks of neo-Marxism, dependency, and world-systems theories. Islamic economics, therefore, has been rather innocent of political

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economy, which is ironic considering the ominous role that the state plays in the Muslim world. Indeed, the neglect of the state in Islamic economics is in stark contrast to the all-encompassing presence of the state in Muslim societies. This neglect, however, is not ironic if Islamic economics is understood in terms of its ideological role. Rather, Islamic economics in its neoclassical manner can be considered as an academic argument in the form of the state-led or state-dominated capitalist development that is prevalent in many Muslim countries. In fact, the political economy of most Muslim countries is such that the state intervenes directly in production, surplus extraction, and capital accumulation. These are major political issues. Rather than the market or social classes, it is the state that is the main driving force in the political economy of these countries. This is due to the autonomy of the state from the dominant classes. But what is important is the manner in which this autonomy is manifested. The notion of the autonomy of the state from dominant class interests implies that the state has interests of its own (Alatas 1987). Furthermore, political economy, which is the study of the interactions of the state and the economy, is virtually non-existent in Islamic economics (Alatas 1997; Asutay 2007a). Whenever the subject of the state is debated or discussed, it is done so in terms of ethical statements and not in terms of analysis and empirical theory. While it is necessary to understand the political ideals of Islam, it is equally important to examine the realities (Choudhury 1997; Asutay 2007a). Statements to the effect that the Islamic state is an instrument based on Shariah and a symbol of divine power on Earth are true and generally acceptable to Muslims (Nyang 1976). It seems the problem lies elsewhere; that is, in the nature and functioning of contemporary states in Muslim countries. In summary, the study of economic development in Muslim countries must lie within the field of political economy. Instead of concentrating on developing political economy perspectives founded on the basis of conventional and inconsistent economic ideas, Islamic economists should dispense with the idea of developing Islamic economics as a normative science. This should be done without neglecting the important contributions of existing modern perspectives in economics and political economy. In other words, the immediate concern of Islamic economists should be showing the world that Islamic economics could present acceptable solutions to the contemporary world’s economic problems. Islamic economists need to make a formidable case for Islamic economics.

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What is the Future of Islamic Economics? On one hand, if the study of financial crises is a part of social science and is symbolized by its continued inability to meet the challenges that confront it, then few would disagree that economics lies in the theories of deep crisis. Not only did the old problems remain unsolved in the global economy, some new problems emerged with threatening overtones. Mass poverty, terrorism, frustrated take-offs in development, increasing disparities at regional, national and international levels, global warming and environmental degradation, the co-existence of hunger and affluence, irrational use of non-renewable resources, incongruity between technology and developmental needs, the unsuitability of production and consumption processes, and structural deformities in relations between developed and developing countries are problems that neoclassical economics has failed to tackle. Even those economists who had earlier thought that their sophisticated economic models could provide answers to all of these perplexing problems are now realizing their failure in this respect (Ahmad 1981). These are the reasons why many development economists begin to look for an alternative to find out the solutions for the economy as a whole. Islamic economic studies, on the other hand, represent a systematic effort by Islamic economists to take a fresh look at the entire economic problem, including the methodology of economics with a view toward coming up with fresh solutions to contemporary economic problems (Ahmed 2002). For example, after the 2007 financial crisis all over the world, the proponents of Islamic economics found a theoretical solution to such a crisis within the Islamic economic system. Our critical review in this paper on the current state of the theory and practice of Islamic economics does not at all mean that we are discouraging research in Islamic economics. In fact, it is necessary to continue further needs-based, high quality research in the area of Islamic economics by encouraging and engaging those high caliber scholars who are well versed both in the field of contemporary economics as well as in Islamic ethics applicable to economics. In Islamic prescription, the economy should be regulated in such a manner so that economic power is not accumulated in the hands of a few people. It recognizes inborn inequalities in human faculties and does not allow people to obtain illegal income, which is a major source of the accumulation of economic power in our current world. Moreover, it dilutes economic power through laws such as the inheritance and zakah laws. It ensures certain public policies in the Islamic system, such as equal

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educational opportunities, healthcare, sanitation, equal access to information, etc. There has to be a renewed emphasis on the centrality of having a healthy interaction between Islamic ethics and economics to attain human happiness. The pressure of future economic problems will force human beings to search for an alternative. At that juncture, human society will be obliged to look more closely and objectively at what Islam has to offer by way of a solution to its problems (Khan 1991). Essentially, Islamic economics has a potential role to play across the globe, because the tenets of Islamic economics are universal and ethical, and in no way do they prevent the spirit of inquiry. It seems that the following issues are further challenges before Islamic economics.

Public Policy In a rather optimistic vein, it is observed that, for all their social and economic infirmities, Muslim societies still have it in them to do better if they mobilize the full force of their moral ideals and translate them into just and dynamic public policies. This is especially true when we see that luminous Islamic teachings ensure distributive justice and poverty reduction. Islam has stated these moral values much more explicitly and emphatically than Western secular thought. The equality of mankind before God and towards each other, and the poor having a prior right in the wealth of the rich, are the two regnant Islamic economic principles that have survived the vicissitudes of Muslim history. By contrast, the tendency in the West to overemphasis unbridled individualism and to substitute public responsibility for individual responsibility has prevented it from satisfactorily resolving the fundamental conflict between the pursuit of self-interest and commitment to work for the collective good. Their dilemma is that collective goals, even when universally accepted, cannot be achieved through purely individualistic behavior, which has a tendency to drift into an incapacitating isolation (Naqvi 2003). Therefore, there is a need to reformulate the whole spectrum of economic policymaking towards the individual, the firm, the civic society, and the state levels. They must be geared to promote efforts towards the establishment of a just social order.

The Necessity of Society’s Transformation The current financial and economic crises in the world have opened up new vistas for human reflection, dialogue and discourse, research and experimentation, and transformation and reconstruction of a needs-based

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economic system in the world. It is time to look into all the resources that are available to mankind in its search for a brighter future (Ahmad 2011). There are 1.6 billion Muslims in the world today, and they constitute one fifth of the human race. Fifty-seven Muslim countries straddle over 23 per cent of the land surface of the world. Strategic land, air, and sea routes pass through the Muslim world, and there is strong interdependence between Muslim countries and the rest of the world. Furthermore, Muslim countries are resource rich, but they presently lag behind in economic and industrial capabilities. They have huge financial resources, but are weak in the fields of technology, management, and advanced modes of production. Around 13 per cent of Muslim countries’ trade takes place among themselves and 87 per cent with the rest of the world. This shows their strong linkages with the global economy (Ahmad 2011). Keeping in mind the above stated advantages within Muslim countries, Islamic economics should now concentrate on society’s transformation. That is why Islamic economists should explore three dimensions in the area of Islamic economics, which should relate to each other and must be inseparable. These three areas are: (i) the normative dimension; (ii) the analytical and empirical dimension; and (iii) the transformational role of the discipline in reconstructing and reforming the economy and society. There is a need for the reconstruction of economic life at the societal and state levels to implement an Islamic economic system. The emergence of the global movements for Islamic investment, Islamic banking, and Islamic finance are salient factors to be borne in mind. Other developments relate to the establishment of organizations to implement injunctions relating to zakah, sadaqa (charity) and infaq2 (Ahmad 2011). These developments represent economic aspects of the contemporary Islamic resurgence. These constitute the only stepping-stones to a process of greater change towards the reconstruction of the entire socio-economic and political landscape.

Islamic Economics as Normative Science and Political Economy The common thread that one clearly discerns from most of the critique is the belief that Islamic economics does indeed have the potential to make a valuable contribution to economics as a normative science. In order to do so, it is necessary to expand the narrow conceptualization of it being just interest-free economics; it must transcend its current phase of exercises in apologetics and develop a character of its own. In this regard, three major action plans have been suggested as the preponderant premises by which Islamic economics will not only serve as a beacon for further the

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development of economics but will also elucidate the social and intellectual implications of the problems. Firstly, Islamic economists need to elaborate clearly on how the discipline’s philosophy and the worldview emanating there from mesh and correlate with economics. On one hand, it should emphasize the values that are absolute and universal and identify certain key institutions that can act as permanent pillars for the system. On the other hand, there is a vast potential for flexibility, which could cater to the demands of the time. Secondly, Islamic economics is currently devoid of considerations of political economy. It generally neglects the role of the state as far as empirical theorization is concerned. Problems to do with corrupt leadership, a weak civil society, and the lack of will to implement good laws and to build sound executive, legislative, and legal institutions lie at the heart of the economic problems. Islamic economists need to give these issues of the Muslim countries priority in their research agenda. Thirdly, a more creative approach among Islamic economists should result neither in the uncritical adoption of Western models and theories of development with the customary terminological adornments, nor in the wholesale rejection of the Western contribution to economic thought, but in a system that is cognizant of the realities of economic life in Muslim countries and that is not detached from political economy. An economics that can grow with valid assumptions, adequate methodology, and a body of economic theory capable of ushering in a humane society would be the economics of the future. Islamic economics has the potential to meet this challenge. All that is needed is for Islamic economists to girdle themselves up to present their case in a persuasive manner. The work contributed by scholars so far foresees a flourishing future for Islamic economics and will further grow if it is allowed to flower in an environment where intellectual freedom based on Islamic ethics is respected. The key to success lies in the ability to see, in different times and places, the contrast between the extant economic reality and the prevailing ethics and mores of society and to design a realistic economic and Islamic ethical response to this contrast. This is hard work, but nothing solid can be achieved without hard work.

Research Informs Teaching According to this researcher’s survey, there are at least 154 universities in the world that have introduced Islamic economics and finance either at the undergraduate or postgraduate level. Out of these universities, a few of them have introduced Islamic economics, banking and finance both at an

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undergraduate and postgraduate level. Also, a majority of these universities have been offering Ph.D supervision in the area of Islamic economics and finance. Another survey conducted by Belouafi and Belabes (2011) of the Islamic Economics Institute (King Abdulaziz University, Jeddah) included a sample of 123 programs and degrees bearing the Islamic Finance title, and it covered 26 countries across five continents. It may be noted that Islamic economics has been hindered by the fact that there is a clear shortage of specialized faculty members in the area of Islamic economics and finance, which undoubtedly has an adverse impact on the drive to promote Islamic economics and finance education at universities. Therefore, questions may be asked as to what roles researchers have played in promoting higher education and training in the area of Islamic economics education. It is a fact that developing learning and teaching curricula in Islamic economics based on credible research findings is hindered by many problems. One of the main prerequisites in developing such curricula is the need for high caliber researchers who possess the skills and the expertise of conventional economics as well as Islamic fiqh scholarship. This is lacking in the case of Islamic economics (Kayed 2011). However, in recent times, there has been a good record of seminars, international conferences, and forums devoted to debating and promoting Islamic economics. Certainly these researchers have helped to share the outcomes of research within the academic community, but much needs to be done additionally in this matter.

Conclusions Islamic economists’ impact on the theory and practice of Islamic economics is visible in at least three directions. Firstly, they not only explained the economic teachings of the Quran and the tradition of the Prophet (peace be upon him) with clarity but also initiated the process of the development of Islamic economics as an academic discipline. Research into different aspects of economics from an Islamic perspective has progressed during the last 50 years. Many Islamic economics research institutions have been established for this purpose in different parts of the world. Several dozens of international conferences have been organized and countless seminars and workshops have been held to develop different aspects of this nascent yet evolving discipline (Ahmad 2011). Over a hundred universities in the world have introduced Islamic economics as a teaching discipline. The impact of the contribution of first- and secondgeneration Islamic economists can be seen in all of their pioneering

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efforts. Moreover, it is essential to impart a vivid sense of the Islamic moral vision in a logically rigorous manner on principal determinants that relate to economic growth, distributive justice, and poverty alleviation. To give it an easily recognizable face, the Islamic moral vision needs to be translated into an Islamic economic system that then can be factored into Tawhid, justice (adl) and trusteeship (khilafah). These elements in effect will demonstrate that all human activities are vertically integrated and horizontally equilibrated to produce moral, social, and economic harmony and justice. In order to see optimum further development in this field, moral principles (like the human environment to which Muslim societies must relate) need to be given top priority. Islamic economists should assess the gap between norms of ideal Muslim behavior (as represented by homo Islamicus) and existing reality. They should also present an action plan for eradicating this gap (Zaman 2008). The hard fact is that what is intellectually obsolete must be quietly discarded. Rather than staking out a claim about the self-sufficiency of traditional wisdom, the proper attitude should be one of humility, because here as well as elsewhere, what we already know is only a small portion of what we have yet to learn. Islamic economists should take into account the contemporary Muslim society’s demands and aspirations in light of Islamic ethics. A comprehensive re-evaluation in the realm of ethics and economics must therefore be reflected empirically in Islamic economics as well. A greater informational base must be built upon the foundations of Islamic values and new knowledge about the Islamic system in order to evaluate Islamic economics prescriptions and to resolve the social and economic complexities of contemporary Muslim societies. The continued vitality and fertility of economics demands the flow of new ideas. For want of them, Islamic economics may soon come to reveal essential truths in this field.

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The Dawn of Modern Banking. Proceedings of the conference held at the University of California at Los Angles, September 23-25. New Haven, CT: Yale University Press. Usmani, Muhammad Taqi. 2000. “The Text of the Historic Judgment on Interest Given by the Supreme Court of Pakistan.” Accessed July 23. http://www.failaka.com. Uzair, Mohammad. 1978. Interest-Free Banking. Karachi: Royal Bank Company. Valeri, Mark. 1997. “Religion, Discipline and the Economy in Calvin’s Geneva.” The Sixteenth Century Journal, 28(1): 123-142. Zaman, Asad. 2008. “Islamic Economics: Survey and Literature Review.” Religion and Development Paper 13. Accessed January 16. http://groups.yahoo.com/group/islamicecon. —. 2005. “Towards a New of Paradigm of Economics.” JKAU: Islamic Economics, 18 (2): 49-59. Zaman, Nazim and Mehmet Asutay. 2009. “Divergence Between Aspirations and Realities of Islamic Economics: A Political Economy Approach to Bridging the Divide.” IIUM Journal of Economics and Management, 17 (1): 73-96. Zaim, Sabahattin. 1978. “The Attitude of Muslim Man in Economic Life: Muslim-Man Instead of Homo-Economicus.” øslam Tetkikleri Enstitüsü, 7: 243-258.

Notes 1

Among the proponents of this movement are: Ahmad Al-Najjar, Mahmoud Abu Saud, and Abdur Rahman Yousri Ahmed (Egypt); Ismail Raji Al-Faruqi (USA); Khurshid Ahmad, Nawab Hadiar Naqvi, Ziauddin Ahmad, Muhammad Uzair and Asad Zaman (Pakistan); Umar Chapra, Mohammad Zubair, and Ahmad Muhamad Ali (Saudi Arabia); Sabahuddin Zaim, Nevzat Yalcintas, and Murat Cizakca (Turkey); Anas Zarka (Syria); Muhammad Nejatullah Siddiqi and Fazlur Rahaman Faridi (India); Masudul Alam Choudhury (Canada); Muhammad Arif and Zubair Hasan (Malaysia); Mohammad Abdul Mannan (Bangladesh); and others. 2 Spending, disbursement; simply to please God without asking for any favor or hoping for a return.

HOW CAN “ISLAMIC ECONOMICS” BE POSSIBLE? ùENNUR ÖZDEMIR

Introduction In the first part of this study, the descriptive qualities of the religion of Islam are examined in order to shape a frame for Islamic economics. First, the importance of the tradition of commentary and the problems created by the abandonment of it in the process of history are examined. Next, the dynamism of the relationship between the ideal and reality (which is peculiar to Islam), the issue of what is determinative as to the qualities of Islamic society and economics, and the constant struggle (jihad) to approach “the moderate and mediocre” in order to form an ideal society are discussed. Unlike Christianity, Islam is a comprehensive and unitarian religion, so it is not possible derive the meaning of an “Islamic economics” independently from the “ideal” Islamic society and “ideal” Muslim. It is necessary to thematize the stated concepts and, along with this—in order to balance the inclination toward authoritarianism that results from the excessive/wrong use of Islam’s comprising and unitarian capacity—it is also necessary to consider the role of the regeneration and commentary (tecdid) functions in Islam. In this study, the attempt to create a frame for “Islamic economics” will be pursued in light of the following concerns. As far as it is known, one of the leading and unanimous principles of the religion of Islam is temperance, and thus, a Muslim should refrain from extremes by taking the “middle course” and honoring an “inclination of balance.” As to such dualities/antagonisms as otherworldly-worldly, material-spiritual, individual-social, and traditional-recent/modern, the desired state of balance is what is actually conducive to a vitalized state in life according to Islamic belief and culture. However, the requirement of a Muslim to “be witness to the truth” shows that Islam is not a doctrinal religion and should include dynamism and constant rejuvenation in the realm of these principles, which should be understood within an

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intellectual effort. Islam’s being not a religion of doctrines but of jihad means that it is a religion of struggle; and this means that it is not a subject of unchangeable doctrinal principles but of dynamic interactions connected to different processes. Rahman (1999, 22) also defines this state of balance not as “monotony and stability” but as “an ethical effort requiring to be renovated and improved constantly.” This can be achieved not only by taking Islamic principals and values but also events and developments occurring in the outer world into consideration. The aim here is for Islamic principles and values to answer the necessities and demands of the community and even of the culture in which Muslims live. Reflection upon these concrete social regulations will be ensured not by the absolution of constants formed by the inspiration of former ages but by conveying the core principles of the religion with the help of historical and social conditions and with steady, dynamic and effective commentaries. In other words, it composes neither those fixed situations or people in the name of these ideals nor those awaited to lead “the human of Islam” in the establishment of such values as goodness, sharing/cooperation, equality, truth and justice, which correspond to the core of the Quran. Instead, it composes the state of violent and tense struggle (jihad) that encourages humane activity to take action aimed at these targets. Therefore, the idealized states of “balance” are doomed to perish in accordance with their genesis. What remains real is the search for this balance and the continuity of the state of struggle. Since Islam is a religion against doctrines, it is wrong to contemplate that stable rules have been established and to try to maintain a stable form again and again. In this case, the real responsibilities of the “human of Islam”—who is chosen to be the caliph of Allah in the world—will be superimposed on some persons, institutions or rules. This leaves no place for jihad and struggle (that is, for the worldly life to be nothing but an examination for humans), which constitutes the real driving force of Islam. As a matter of fact, instead of taking responsibility in order to understand thoroughly and vitalize Islam, Muslims spent centuries just obeying the authorities. As to this time in history, there is no need to conduct great scientific studies to understand that Islamic dynamism was lost and that struggle (the “constant change principle”) and restoration were neglected. As a consequence, what is required for establishing an “Islamic economics” is the raising and circulation of awareness as to the need to move forward from the static/fixed assets of the past without falling victim to the illusion that there should be a desired static and ideal system (akin to heaven on Earth). Provision of this means that when Islamic economics is in question, “Islamic society and economics” are

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already present in places where the search and struggle for Islamic ideals—such as the free and self sufficient/autonomous person, equality, and justice—can be found. In the following part of the study, a general frame about the Islamic reinterpretation studies emerging in Turkey is drawn and the issue is taken at hand with all its currency. After this chapter, explanations as to what is meant by Islamic economics will follow: Islamic economics will be described by breaking it down into its general components, such as balance, equality, justice, and the struggle/jihad of the autonomous person for a rank-less/moderate society. Where the humane aspect is in question, the issue is illustrated under these subtitles: the place and importance of struggle (jihad), and the autonomous human (homo Islamicus) in the priority frame of labor/human effort in Islamic economics. In the conclusion of this study, the problems faced today by Islamic societies that have conformed extensively to capitalism and the issue of fragmentation emerging from a hierarchal society (damaging equality and justice) will be addressed.

The Combative/Dynamic Quality of Islam and Islamic Society as the Core of Islam, and the Example of Turkey Commentary as Jihad1: The Core of the Islamic Message and the Tradition of Commentary in Islam When viewed sociologically, there is a core message of religion that is stated in the Quran as a common core for all different religions and beliefs, and this means all belief systems have the same roots. There is an aspect of material conditions subject to historical changes, and thus, a constant process of change. According to this, all religions including Islam convey Allah’s message intended for humanity. While some differentiate this sameness with a thesis of relativity, some claim that this message maintains its core being by changing and reforming until the last religion: Islam.2 Social scientists should set their eyes on the “what” and “how” of what really happens, rather than on what the message of the religion is as a doctrine. Before beginning our discussion, it should be realized that this general principle of sociology is being separated in the context of those verses of the Quran that have certain provisions and those other verses originating from the core of the message and the outer factors that surround the message (müteúabih). This issue will be dealt with in detail afterwards.

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In this context, in Islamic belief just as in contemporary social science disciplines, it can be claimed that it is important to determine the religious and worldly experiences of humans, which are not only about the “what”ness of the “ideal” but also—and maybe more so—about how humans give meaning to it and what kind of a reality they offer through the medium of this meaning. Since the religion of Islam totally opposes being a religion of doctrines and regulations assigned by clergy (which is valid in Christianity), Islam requires adherents to focus more on how the ideals shaped their relationship with the concrete realities, rather than appointing and fixating on those ideals. Rahman (1999, 73) also emphasizes that the Quran does not give concrete doctrines to humanity; instead, it finds solutions to concrete historical events by showing the underlying reasons of the problems, and therefore, it shows the necessity for repeating the struggle (jihad) in every occurrence, in order to bring solutions and reveal the underlying reasons that will lead us to these solutions (Rahman 1999, 73).3 Thus, it will be interesting but also true to state that the approach of Islam to religious doctrines is close to what social sciences offer in the same subject. Indeed, Islam does not place itself on a metaphysical base by creating an impassable difference/gap between what is religious and what is worldly. It is mentioned in the Quran that the issues relating to the realm of the unknown/uncertain (gayb) are referred to as realms that one should not endeavor hard to understand. The priority to move along with worldly realities becomes clearer. What sociology of religion has found in this context is—in contrast to both Judaism and Islam lacking a separation as to the worldly and otherworldly—Christianity has this separation, and thus, what is Caesars’s should be given back to Caesar from the beginning. From the moment religious realities and identities have emerged—and even while they are emerging—they maintain their being by being endlessly shaped by, and in interaction with, the socio-economic, cultural and political conditions of the environment into which they are born. If Christianity were a religion absolutely separating worldly and otherworldly chores (which recognizes Caesar’s right together with Jesus’s right), this without doubt would be related to the conditions and restrictions of the political environment into which it was born. It is possible to search within this historical reality for the reasons why Christian monks and devotees totally abdicate from this world and regard everything related to this world as dirty and worthless. For this reason, the culture and ethics of Christianity did not have the chance to be founded in the ongoing interaction of physical/worldly and otherworldly. While it associates ethics to transcendental qualities, in Islam the ethical qualities

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of humans are considered the inborn qualities of humans, and thus, related to human nature. For the same reason, while mentioning an Islamic economics, it is not possible to talk about a Christian economics in the present time. While economics placed in the impious or worldly realm explains the irregularity of financial affairs, the problem with Islam is that some solid regulations are stereotyped as transcending time and era, and thus, they have come to be perceived as unchangeable. While the solution for Christianity here is to render the interaction between these realms (religious and worldly) possible, for Islam the solution can be claimed to be bringing the principal of jihad into life as a form of dynamic interpretation (ictihad). The reality that includes Islam and also Judaism concerns the continuous need to rejuvenate the absolute regulations originating from the message transmitted by revelation—regulations that should be the subject of historical change, as in the renovation in secular law; this is an approach that Muhammed Esed, from whose Quran translation we have benefited, also supports. The inclination for such a distinction is an obligation for Muslims assigned by the Quran by stating the difference between absolute and analogical (mutesabih); and it is possible to claim that the revitalization of this in changing historical conditions leads to the revitalization of the core of the Islamic message. This necessity is clearly stated in the following verse: He it is who has bestowed upon thee from on high this divine writ, containing messages that are clear in and by themselves—and these are the essence of the divine writ—as well as others that are allegorical. (5) Now those whose hearts are given to swerving from the truth go after that part of the divine writ (6) which has been expressed in allegory, seeking out [what is bound to create] confusion, (7) and seeking [to arrive at] its final meaning [in an arbitrary manner]; but none save God knows its final meaning. (Esed 2002, 3:7)

The aim of this verse can be interpreted to be the fact that there is a core related to a Quranic unity and message and surrounding the entirety of messages that should be subject to new commentaries and regulations related to changing events and surrounding situations. What needs to be done is to show allegiance to the core of the message and to determine the steps to be taken against the changing conditions as steps that should be taken with a specific jihadi carefulness and attention by the human who is in the position of Allah’s caliph on earth, as that is his responsibility. Constant surveillance of the consequences of the relationship between the core of the message and the changing conditions of life and their dynamic

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incorporation into the course of life can be counted as one of the leading forms of struggle that is included in the dynamics of Islam as a religion of struggle. Since it is not possible for the dynamic lifetime processes to fully correspond to the core of the message and to stay constant against changing conditions, the result of the tension created by the practical problems and necessities of life and the ideals subject to commentary (while still constituting the core of the message) will be the “Islamic jihad” (as an activity of interpretation). For the same reason, while the issue is being handled below, it should be mentioned that the renewal and reinterpretation (tecdid and ictihad) traditions have been part of the whole of Islamic history. Since reinterpretation4 was thought to be a menace to Islamic unity, the process was accelerated by the word and will of the governors, and the principle of collection-agreement (icma) (Rahman 1999, 35, 37) was developed. This means that when a specific and agreedupon principle was opened to discussion—even if it was done so for acceptable reasons—people were indirectly hindered from contemplating and commenting on it. The specific problem of the complexity in seeing the interaction and unity between the religious and worldly realms in the fast changing conditions of our era should not be overlooked. Some regulations that developed in the name of religion are being stalled by failing to see their temporariness and attributing to them a specific holiness (which means indoctrination against the warnings of religious sources). This seems to eliminate the social dynamism and the active intellectual role acquainted with individuals. In fact, when the historical course is examined, it can be seen that changes in the worldly life, motivated by the complexities of life, can bring reinterpretations into interaction with reality. For example, the ability of Islamic reinterpretations meeting with different cultures, languages and traditions to put forward excessive differences can be explained within this framework. As another example, new Islamic interpretations of present day liberal Muslims who place equality and justice at the center of the message of Islam describe their investments— which they exhibit as a way of “arming themselves with the arms of their enemy”—as “financial jihad,” which can be linked to this issue as well. Another example comes from the dispersion of the interpretations that regard the moderation of the ban on interest. Certainly, all these are being legitimized as an action of jihad attempting to re-establish a link between the outer parts of the world of Islamic societies that represent the hegemonic power of the given environment and to reach a new balance in Islamic societies.

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The institution of renewal (tecdid) that corresponds to the new interpretations on the basis of change and renewal is as old as the religion of Islam itself. The reality of renewal, as it can be seen in the example of religious sects, has led to the emergence of many different Islamic interpretations. However, this difference of interpretation has shown itself through a channel of ethnicity and nationalism (Sayyid 2004, 937), which has even given way to a degree of relativity that mentions different Islams at the same time. This is the unique quality of Islam: it can be articulated into changes easily and believes in the existence of different ways to reach the holy realm, even if the core is the same; it also shows the defining nature peculiar to the Islamic core and the historical endurance of the core. However, given the fact that the printing press was introduced into the Islamic world with a delay of 300 years (after encountering resistance), it can be claimed that in comparison with the intellectual richness of the contemporary world, the dispersion and development of Islamic knowledge were hindered, and thus, a probable diversity of interpretations was also hindered (Diner 2011, 79). In addition, and especially in Arab countries, it is expressed that the elite language used in the past prevented religious knowledge from becoming widespread in the common public sphere and thus from becoming the subject of democratic interpretations (Diner 2011, 7, 79). In this context, Diner (2011, 22) states that especially after the establishment of the Republic in Turkey, the official language chosen was advantageous in this aspect because it was also the language spoken among the common people. In the context of Islam, which opposes the formation of a class of clergy (even if it does not hold the power to legislate the final decision), the existence of a Ministry of Religious Affairs in Turkey (which holds the Islamic intellectuals in its structure), and also the existence of a class of theologians, are expected to be counted among the factors that cripple the richness of Islamic interpretations. Another realm in which the “core” of the Islamic message and the historical reality seem to conflict with each other—and probably as a consequence of the assumption that the highest point of interpretation has been reached—is the claim that the way to interpretation (ictihad kapÕsÕ) is closed. However, for Islam—which places no one between Allah and the subject and holds an attitude strictly against clergy (and also counts every Muslim on earth as a conveyor of the message)—by leaving alone the monopoly of reinterpretation, it should be seen as impossible to close this path by which all Muslims are held responsible, for it will enable them to reach the truth through the most appropriate behavior. Then again, in the historical process, it is emphasized that those who esteem that all the present knowledge is what

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the old generation has produced until now have agreed that there is no need to “think, contemplate, search, question, discuss and criticize”; and thus, logic, philosophy and Islamic theology have been subjected to attempts at prohibition. These authors, especially for those who are outside of the pioneering intellectuals of the sunnah, have been determined very dangerous for the common people (Efekan 2011, 77). Although there are those who defend the idea that the way to reinterpretation is now blocked and has gained a great acclaim in the course of history, it can also be seen that interpretations and practices aimed at answering the contemporary needs have not been lacking either. 5 The fact that the monopoly of theologians in the religious corpus would be overrun is given as the reason for the diffidence in the matter of “opening the way to interpretation” (SubaúÕ 2003, 132). Beyond all these, along with a nonconformity to the balance between the religious and worldly, the effort to produce a religious knowledge of leaving what is worldly and rational behind in time has set forth an understanding of a distorted religion and ethics that stereotypes the historical dynamism (Rahman 1999, 88). Given this, an effort of interpretation that leaves more space to worldliness would be stabilizing in order to eliminate the consequences of this situation. Because of the taboo nature of those practices that were brought into the agenda by political elites, Islamic societies’ connection to their own history was sabotaged; and thus, these societies need a dynamic and pluralist interpretation program. In fact, because a stable emphasis on a doctrine independent from reality and in which there is no place for intellectual jihad is not present in Islam, we can regard the existence of pluralist interpretations as one of the requirements of Islam. Nevertheless, theologians that emphasize the necessity of rejuvenation against the hindrances posed by Sunni interpretations are also not lacking. One who must be remembered here before all, and who is one of the leading names of the “clergy” in our time, is Mehmet Görmez, the current president of Religious Affairs in Turkey. He has been as critical of the traditional Islamic legacy as to say to his equivalent from Saudi Arabia, who is the head of the Saudi Presidency of Ewqaf and Dawah, the following words, which seem quite pluralist and also close to the reality of renewal: “It has now become a fact that Islamic knowledge produced by the Islamic world has moved further from enlightening the way of the Muslim community. There is a need for an intellectual mobilization that will illuminate the path of all Muslims and humanity” (Görmez 2012). In addition, ølhami Güler (though he does not represent the consensus here) does not refrain from stating that no interpretation can be extracted

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from its era and its agents; thus, what needs to be done for all generations is to make their own interpretations by taking their own realities into consideration (Güler 1992, 58). Again, the evolutional and changing quality that Garaudy attributes to Hanafi law intellectuals against the frozen and fixed doctrinal understanding of feudal Europe reflects the situation of the dynamic Islamic ideal that—namely renovation—is balanced again and again and that we have been trying to define here (Garaudy 1965, 44-5): They had brought forward the principles of change and evolution by abandoning the worldview which characterized the feudal middle ages of the West and which is dogmatic and unchangeable. They said, ‘The law is not unchangeable. The law cannot be similar to the rules of logic and mathematics. It generally sets forth what is present and changes within the conditions that once created it.’

The Ascetic Ethics (Christianity) vs. the Moderate Ethics (Islam): Dialectics of Ideal and Real in Islam While explaining the dynamics of the emergence of the ascetic ethics of Protestantism (and generally of the Reformation), Weber underlines the importance of “the ethical tension” that is caused by the belief in the strict separation of the world and religion in Christianity. The distance placed between the worldly and otherworldly spheres makes it obligatory to imprison what is holy into the metaphysical realm and without being totally detached from the world (e.g. vow of virginity, life in a monastery); this also makes it unattainable. This in general allows Christian ethics to gain a puritan and ascetic quality that excludes the majority of the population. Christianity being a doctrinal religion has brought forward a deficiency in the flexibility that must be present in regulations; and all these, as Weber claims in his Protestant Ethics thesis, make ethical change scattered but sharp and obvious. Against this, because the religion of Islam did not emerge in politically restricted conditions, it had the opportunity to pursue a balance founded between the world and the other world, between material and meaning, and between body and soul; and thus, a unity was formed composing all of these dualities. In this case, because worldly and other worldly realms are not defined as exclusive of each other, a state of intermingling is also possible. Weber describes Islamic ethics as a “moderate ethics” (Turner 1997, 239-41, 293) in its inclusion of most of the worldly pleasures based on a human’s innate qualities. In comparison with the puritan and ascetic ethics

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of the West, it includes many elements that can be regarded as pleasurable and luxurious; thus, while Western ethics leaves the majority of the population out, Islamic ethics can embrace everyone. This is because of Islam’s balance and “moderation” principles, and these, in an Islamic climate—and by diffusing also into the world of West, which has surrendered to hedonism—will continue to be the central scale in the Eastern/Islamic context. Otherwise, it does not seem possible to revitalize equality and justice in real life. According to this measurement acknowledged by Aristotle, who advised moderation and a middle way in virtue and happiness, both society and humans should be “moderate” or “medium.” According to this, one should neither be too rich nor too poor, for this is a measurement in which the advancement of one person cannot be envisaged independent from the deterioration of another. As in every other subject, “balance,” “moderation,” and “the middle way” are being preached within the interaction between ideal and reality. As a requirement of this search of balance, the concrete material reality is not seen as something irreligious; religion is embedded into the “worldly” realm. The absence of institutional control facilitates all these and makes Islam balancing and equitable; and for these reasons, tension is low and change is hard to see and unclear, though it is still widespread, gradual and invincible. It is either hard or unnecessary to realize and name this change. So how can change take place in this way? In Weberian analysis, the need to address this tension and change intensifies as the distance between the acknowledged beliefs and the present reality grows. As can be imagined, this distance can hardly be in question for the religion of Islam because of its uncertainty in the separation of religious and worldly chores. Change mostly takes place silently because of its being gradual, slow, and scattered in time. For Islam, while a sharp and radical change cannot be expected for these reasons as it happened in the emergence of Protestantism, one of the consequences of the changes undergone on the global level and since the last period of the Ottoman empire is that the changes occurred in a deepened way when an extensive population was at the root of the problem and led to obvious tensions and radical changes as a result. We witness that Weber has undergone such a profound transformation that he has disproved his own invariability thesis, which he attributes to the East.6 Because the era that we have been passing through requires a great need to conform to the changes of the time, big leaps and deep abysses of ideals and reality are being felt, which accordingly leads to radical changes. This process is seen as paving the way to a moral rejuvenation as the result of a sudden and tough encounter both with the Western world and with Islam’s original sources. In giving life to this, the

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change taking place in the Eastern ethics, which encompasses all the community, is traditional with regards to the fact that it is not individualistic, supports activities based on customs, and is being controlled and directed from the outside. Yet the fact that this is quite stereotyped should be pointed out. As a result of the pains undergone because of the concrete changes and of the need to reinterpret the religious and social sources after returning to them, an increase in the capacity to reacknowledge the ideal took place. Reaching a new balance would only be possible by taking the ideal and the real at hand at the same time and transforming them, which is just what happens now (Özdemir 2006, 41, 94). As discussed above, because the religion of Islam finds a habitat in the ground of interaction between the worldly and religious realms, it already goes through a constant and gradual change; major and minor innovations step into a human’s life without being realized. In the forthcoming steps of Islamic societies, renewal and reinterpretation were relatively restricted by governments creating an institutional shadow in the name of religion; but they were still a part of Islamic life. This is one important reason for the assumption that a revolution did not occur in Islam. In fact, when conformity to Islam is in question, and if it can be put forward that a change did not occur, it is not the question of “should there be a reform movement in Islam” but the question of “how did it become possible for Islam to go without a reform in all these years” that should be pursued. For Islam, as a religion of moderation and balance, it is not possible to catch an optimum point of balance that addresses the whole community by mixing the religious and worldly realms. This would be called indoctrination and a struggle to freeze reality. What accords with the requirements of Islam is a constant state of search, struggle, renovation and reform. By placing reinterpretation (ictihad) at the base of Islamic law (fiqh), Fazlurrahman finds such a strong conditionality between the two as to claim that, “If there is interpretation, there is Islamic law, otherwise we cannot talk about an Islamic law” (Rahman 1999, 33). As a matter of fact, the word in verse 106 of Al-Baqarah supports this determination that even Islamic ideals are also included in the context of “interpretation jihad”: “None of Our revelations do We abrogate or cause to be forgotten, but We substitute something better or similar: Knowest thou not that Allah Hath power over all things?” (Esed 2002, 2:106). However, for a long time throughout the course of history, people were content with their situations. Leave alone trying to find change and a new interpretation/balance; they tried hard to maintain what was extant.

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Almost as a contradiction to the Islamic message, while examining these years in which an effort to preserve the tradition emerged, it should also be remembered that the balance of material and meaning has been deteriorating in the favor of meaning. In this framework, in the example presented by Ülgener (1981, 25, 38-9, 107, 112-4), Turkey connects the delay in Islam’s being intermingled in modern economic processes to the divergence from the search of balance; to the tradition of Sufism (which has come to be understood as “totally retiring from the world” by receding from the rational motives of Islam); and lastly, to what can be called “folk Islam.”

The Process of the Change and Reinterpretation of Islam in Turkey One of the concepts that I have benefited from in order to explain the ongoing religious and ethical change in Islam is Weber’s “ethical tension,” which I have tried to explain above. As a consequence of reasons such as the state of balance, totality, and the ambiguity of the distinction of worldly-religious in Islam, it has been put forward that Islam has not been exposed to an “ethical tension,” which is seen as responsible for change by Weberian analysis. It is obvious that this tension will be low in proportion to its being scattered over place and time; then again, the present conditions set forth changes low in intensity and ambiguous in quality, and the perceptions of the ideal that create breakdowns both in place and time and that humanity brings from history and tradition are being put forward by being changed radically. The material conditions of the change in Turkey are being constituted by the facts of urbanization and globalization (alongside the increasing possibilities in communication, transportation, and technology) in the context of pervading and deepening modernization. Weber claims that the “moderate ethics” of Islam close it off to a change such as capitalism. However, the ethics that has been a subject of the tension flowing from the cultural beliefs and values of the common people’s ground—with its moderation and melancholy (evidenced by the folk songs, music, and religious rituals that find fertile ground for practice in both Alevi and Sunni communities)—can be regarded as quite puritan and even ascetic in comparison with the Western ethics, which has surrendered to hedonism and a grave consumption culture. Another criterion that Weber applies in order to give meaning to the process of change is related to a “return to sources/source texts” to create this change, meaning a return to the original text/meaning (to church, original texts or facts) as a source that contains the ideals of the religion.

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We can also see a similar inclination in Islam. Sources that are being returned to within this framework, primarily after the Quran and the Prophet’s sunnah, include other historical figures and texts. It can be said that anyone who feels the need to do so can make an interpretation in an Islamic context (which is not based on a class of clergy). Going beyond some figures who initiate a study of interpretations that intends to find unique answers to the needs of the modern era (such as Fethullah Gülen), Islamic belief defines every human as an agent of Allah on earth and deems interpretation as a responsibility for every Muslim. Thus, it can be seen that everyone can begin to do the work of interpretation so as to meet the restored needs of each individual’s life. Within this framework, while reinterpretations that answer to everyday needs are being developed, traditional Islam (authority and obedience) is replaced by an able Islam that is ready to embrace time and is resurrected with internalized and individual choices. It can be asserted that throughout the course of history, Islam has always been inclined to such an evolution thanks to its sectarian, faith-bound, and intellectual eclecticism and diversity. The reason why the sectarian differences in Islam have not transformed into a “war of truth” (as happened in Christianity) is agreement on the point that “the one who is of Islam cannot be regarded as infidel (kafir)” 7 and the acceptance that different realms of truth are different reinterpretations that include relativity (SubaúÕ 2012, 51-3). In addition, in a saying attributed to the Prophet, it is put forward that “the Ummah will be separated into 73 different parties and only one of them will reach to salvation,” and this shows that his vast knowledge promotes tolerance and indulgence (SubaúÕ 2012, 51-3). This hadith must have had a role in putting the Quranic principle of “contest in benefaction” between different beliefs and reinterpretations into place, by facilitating tolerance and indulgence. When we look at improvements based on the actual reinterpretations in the sphere of “Islamic economics,” which constitutes our subject, we should turn to the AKP as the actor of political and economic life, and to MUSIAD, which represents the Anatolian capital. The creators and transporters of this process are the “Muslim bourgeoisie” represented by MUSIAD, which plays the role of the new privileged class of Turkey. Although it is stated that “a conservative person can both be in favor of free market and of welfare state according to the requirements of the social conditions and conjuncture,”8 it is seen that today a suitable version of Islam for the needs of liberalism is being created in the present day’s conditions. The Anatolian capital, which played a role in the founding of the AKP and also constitutes its socioeconomic body, is a key point from

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which to understand this process. Against the Ottoman tradition and the social engineering that was fulfilled by the hand of the state (without being questioned in early Republican times), the AKP generated an overhand renewal in every range in Turkey, and they also pioneered the renewal of morale. Changes that took place in the financial realm are experienced at the same time as the ethical renewal that includes Islam’s reinterpretation. This total ethical renewal in which the ascetic philosophy of “very little (in the way of worldly goods)” is abandoned or transformed in the financial realm, even if the term is not accepted in Turkey, and is expressed with the concept “moderate Islam” on a global scale. For the last ten years, if we put it forward in the frame of the concept “pluralist modernism,” the AKP has actualized a modernism process unique to Turkey, and as the present voting rates have shown, the transformation towards being a modernized/ capitalized society (which has taken place through the new (Muslim) elite’s lives and lifestyles) has been ongoing, while it also includes the poor and helpless parts of society. The perspective that is visible in the approach of MUSIAD’s copresident Erol Yarar is a liberal interpretation that underlines the right to choose in this world. By emphasizing that violators of religious rules will be “executed” in the other world, not only the sharp edges of the traditional ethics that restrict freedoms are grasped but also the worldly responsibilities of humans that originate from religious identity are minimized. Against this, it should also be noted that the government is being criticized for becoming authoritarian after a three-period experience of governance and for impeding the liberalistic endeavors and reforms mostly achieved in the AKP’s first years (so as to create stability and with the support of the liberals). It is obvious that if the AKP wants to be loyal to its reformist and liberalist mission (as it was at the beginning of its rule), it should create a multidimensional and colorful atmosphere within the party itself, not just within the dynamics outside of the AKP. When the need to convert the traditional, authoritarian and submissive characteristics of the Sunni tradition is taken into consideration, it can be said that the hindrance of critical and different/liberalist approaches will constitute an important obstacle to individual and social development, dynamism and modernization. The critical approach of the President of the Republic Abdullah Gül in the opening of the parliament in 2012 is instructive as to the need to see the differences in Sunni tradition as normal. Not only did Gül express stabilizing messages delivered to those outside of the AKP, he also took initiative in order to pave the way for a variety of ideas to which the Sunni tradition is not accustomed by showing that “different ideas can be present among those who normally share a common worldview” and

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“contrary ideas can also be present among the parties who normally share the same worldview,” even inside a wing of the AKP. Such positions can enable Muslims to pass beyond the traditional submissive Sunni understanding, which requires that one totally obey the government in the ongoing process. More importantly, even though it is marginal and it belongs to a small minority, the existence of the line of an alternative change (and thus, interpretation) can be observed here. The poor wing of the society, the number of whom increases in parallel to the increasing capitalism in the country—and who become more and more de-propertied (mülksüzleútirilen) by all means (through the socioeconomic, sociocultural and moral aspects completely)—runs in line with the Islamic reinterpretations focusing on labor and property (including the HAS Party and the leading mediatic figure and ideologist of this fraction). Parallel to the opposing position of the HAS Party (which terminated its existence in favor of the AK Party) and without succeeding in the initiation of an effective interpretation activity, øhsan EliaçÕk, expressing a position which reminds one of Ali Shariati as the leading ideologist of Iranian Revolution, expresses that Islam is not an otherworldly religion. It was revealed in order to be put into practice in this world, and it is vital to the struggle to vitalize these revelations in real life. According to this attitude, the core of the Islamic message is freedom, equality and justice, and social intervention in the name of these principles is unavoidable. The struggle here must be towards the equalization of all people. The verses that they refer to from the Quran to support their arguments are as follows: Allah has bestowed His gifts of sustenance more freely on some of you than on others: those more favored are not going to throw back their gifts to those whom their right hands possess, so as to be equal in that respect. (Esed 2002, 16:71) Seek instead, by means of what God has granted thee, [the good of] the life to come, (85) without forgetting, withal, thine own [rightful] share in this world; (86) and do good [unto others] as God has done good unto thee; and seek not to spread corruption on earth: for, verily, God does not love the spreaders of corruption! (Esed 2002, 28:77)

While the dominant liberal interpretation in the present time, apart from the fulfillment of the manifest religious responsibilities such as zakah, tends to defend that human freedom is essential to Islam, the leftist/socialist interpretation alleges that in order to enforce the requirements of Islam, a mixture of state and society is essential. While the conveyance of these views is actualized by the AKP and the prevalent

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religious community (the Fethullah Gülen community), the second interpretation is executed by some factions remaining from the HAS Party (the voices of whom are still marginalized and weak) as well as by a group of Muslims led by øhsan EliacÕk (anti-capitalist Muslims). The idea of “laissez faire” liberalism that is represented by the AKP and institutions like MUSIAD is being accepted by the Muslim bourgeoisie with the justification that there can be no coercion in religion; however, the opposing wing (which we can address as being leftist Islam) emphasizes that Islamic regulations were revealed to found an order in the world, and it is necessary to comply with them. We evaluate these two approaches as to some basic grounds of our project. On the one hand, because the revitalization of Islam’s idea of “self-contained/whole human” is connected to the provision of the human’s basic needs, some mixtures that will contain state interventions here seem unavoidable; but on the other hand, as a confirmation of the liberalist view, if the society cannot proceed with the richness that will enable this possibility, it is also unavoidable to take the emergence of the risks that will raise poverty rates as a consequence of the distribution of absence into consideration. For example, can an Islamic world that totally focuses on distribution say “yes” to a financial order that will cut off access to telephones, television, Internet, and airway transportation, all of which have become basic needs of the global era? What is more, can this be seen as a decision that will bring good consequences to the Islamic world? As a result, it is observed that there are reasons that force us to take views of both the liberal and the social justice wings into consideration.

Islamic Economics: The Struggle/Jihad of Autonomous Human Beings for Balance, Equality, Justice, and a Rank-less/Average Society Introduction According to the point of view of this study, although the general outlook of the world economy seems to be conflicting with Islamic values, for the reasons that “everything can be known in its totality and with its oppositions” and for the necessity of viewing all the religious messages revealed as messages from God (including Islam), the capitalist system that is going through a mixing process with Islam cannot be thought of as separate from the Islamic paradigm. According to the Islamic paradigm, no financial system can be left out of an Islamic order that is being formed by struggles in the financial realm. With reference to this, the purpose

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must be “a contest of goodness” in the frame of these different beliefs and practices coming out of them. The expression of this in the financial realm is the provision of equality and justice. Thus, the relationship of Islam and capitalism should be understood in this framework. In today’s conditions, in which Islam has become mixed with capitalism, interpretations that answer to capitalism’s requirements and those opposed to this by defending equality and justice give some clues as to the formation of the understanding of an Islamic economics. For this, besides the qualities coming from the historical Islamic experience, Islamic societies’ practical needs and qualities should also be taken into consideration simultaneously. What is certain is that in addition to Islam being based on the balancing of the world and religion, the financial issues of the world should not be specified as independent from people’s (religious) intentions and struggles. In any case, Islam has come to be identified with the “principle of balance,” which can be seen as a “rule” on which there is consensus and no constants because of its nature, and which includes both the worldly and otherworldly dimensions in its being. Through this “principle of balance,” Islam is a religion of a dynamic “moderation” that should be found and attained over and over, as well as of mediocrity and classlessness in financial terms. It does not allow accumulating both a fortune and poverty at the same time. According to this, beyond being on the side of the weak, it is obvious that Islam intends to reach a societal order in which there is no such thing as weak/poor and that is constituted by moderate individuals and positions. Regarding the existence of the weak and poor, Islam’s estimated position can be summarized as follows: From the days of the emergence of Islam, a basic point which differentiated it from other belief systems is that “the security of the weak against the strong is ensured, which means to avoid from creating a class order” (Hodgson 1995, 121). In this framework, Hodgson expresses that Islam does not allow any kind of aristocratic class order. It emphasizes equality, and it struggles to vitalize this principle in practical life by making comparisons with the class order in the West (Hodgson 1995, 274). To evaluate today’s conditions, it should be noticed that being mixed with capitalism impairs in Islam this equality aspect, which is based on social justice and cooperation. However, not being mixed with it results in Islamic countries being left behind the other countries on the global scale at the same time. This is the paradoxical situation of the Islamic world today. With an awareness of this paradox, Mustafa Ozel conveys his ideas and warns Muslims who have placed themselves in governmental power

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in every area in Turkey: “The question is not that our bourgeoisie is being replaced by theirs, but what kind of alternatives against this non-humane system.”9 It is obvious that Islam has not shown a strong effort at creating an alternative to capitalism; however, as the mechanism of the law of dialectics requires, without being mixed with capitalism it is not possible to reach an Islamic uprising against it. The need to move towards the opposite sides at the same time can seem paradoxical, but in fact it is the exact positioning that the principle of balance requires. Another question that should be answered at this point is “what are the principles that originate from the Islamic message and are regarded as ideal, and thus, should be ‘protected’ in the name of Islam and Islamic economics?” These principles will be set forth and a discussion as to their operation will be executed below.

Islamic Economics The Ideal/Doctrinal Frame and Application: Islamic Economics as Dialectics of Equality, Justice and Balance First of all, in contrast to Christianity—which totally externalizes the worldly realm from the religious notion—to mention an “Islamic economics” for the religion of Islam is both meaningful and necessary. Leave aside questioning if there is an “Islamic economics” in the context of Islam; many contemporary interpreters defend that the real message of the Quran is to generate socio-economic justice and equality among the people.10 As emphasized in the first part of this paper, it is necessary to remember that Islam (compared to Christianity) is not a doctrinal religion. This means that compared to Christianity (which is a doctrinal and institutionalized religion), Islam provides a dynamic frame of belief that does not allow freezing and fixing what is holy for the sake of the search of an ideal order; and thus, Islam is based on jihad in all respects. The doctrine that reflects the world of ideals in Islamic practice should be in constant contact with the renovations originating from the subtle reality and should be a subject of intellectual jihad. In this case, apart from reality, what is “ideal” shows itself as a ground for reformation and for a dynamic interaction that does not allow a doctrinal formation and freezing/fixation. Contrary to Christianity, in Islam, there is no institution or authority that will decide the “what”-ness and quality of the ideal; nor is it advised that there should not be. Thus, an ambiguous difference between doctrine/ideal and practice can be mentioned; and in fact, the ideal state

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relies on a state of balance in which these two are combined at the same time. According to this, the practice includes also the ideal and produces it again and again, just as can be said for the practice itself. Secondly, despite or maybe because of its dynamic characteristics, Islam is framed by some principles in financial issues as it is in all other issues. Starting from the acceptance that the life in the world is just a test for humans, for this test to be possible and be maintained on equal grounds, the efforts to provide freedom (which will activate what a person possesses), equality, and justice are of vital importance. There is an obligation for humans to use their free will toward this aim, even if not for them to have a totally equal possibility of “examination.” For this reason, in order to be on the side of the weak, and by relying on an equal and moderate societal order in which there is no such thing as weak and poor, there is the inclination for equality and justice to be indispensable conditions for a classless society and to constitute the basic principles of the Islamic paradigm. 11 In light of this perspective, “ideal Islamic economics” can be defined as an order that requires one to struggle in order to distribute means and property equally to all of society so as to create a society constituted by a group people able to maintain their livelihoods.12 When the classical Ottoman order, which has become a subject of many precautions in order to make this possible in real life, is taken into consideration, according to one interpretation, 13 because Islam takes its basic and valid principle about the issue of property from the acceptance that “To Allah belongs the dominion,” Islamic economics can also be understood as totally opening property to the use of the whole society, apart from distributing it onto the base of the society. According to the idea of unification (tawhid), the real possessor of everything is Allah. For this reason, there are some who claim that private property that is transferred to the Ottomans from the Romans has neither a meaning nor a place in Islamic law (Cesur 2002, 85-6). Since the common society is the messenger of Allah on this earth, possession of the property should also be in the hands of them. Anderson is of the opinion that the absence of private property is key to understanding the whole issue of the East (Anderson 1974, 474). The leading figure of Islam’s leftist interpretation, Ali Shariati, emphasizes that private property is only possible through the individual effort of people: “…only those who work have the right to property… Property here means the right of one person on what he himself has gained. Thus, the possessor of property is the worker” (Cesur 2002, 85). By relying on the verse from the Quran saying “[t]hat man can have

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nothing but what he strives for” (53:39), Shariati gives practical examples to this principle, such as caliph Umar’s provision that no one can hold a land/territory in his hands without cultivating it more than three years, and he adds reflections on this implementation in Ottoman times to his example (Cesur 2002, 85). Supporting these conditions as stated above, and as the ban on interest also indicates, Islamic economics is an economy of capital stock (autonomous/free/able human). The legitimate (halal) earnings according to Islam are based on work (Denek 2010, 60-62). To work and sustain one’s needs are both basic principles and obligatory (farz) in Islam, and work and struggle have been regarded as equal to jihad itself (Tabako÷lu 1997, 80). By hindering the formation of classes and supporting individual freedom, this system is constructed upon autonomous/independent people who can maintain themselves. 14 However, in the process of conversion with capitalism, in addition to aspects that deteriorate and convert the “homo Islamicus” to a “homo economicus,” the injunctions that force even the ban on interest are being transgressed—the practice of interest can be accepted as halal in regards to inflation rates—and are in need of interpretation and explanation. If we make a trial of explanation here: The dialectical oppositions on which the Islamic principle of balance is based in the long term can explain the reality/the present situation. In order for Islam to advise a balance, it is obvious that it should accept the existence of oppositions and contradictions as valid data. As it can be seen in the example of interest, the interaction between ideals and the current reality can be bent as far as to include the reinterpretation of the ideal. While the process of globalization and the integration of the conditions of the world are occurring, it is obvious that to only take the qualities of the Islamic world into consideration is not sufficient for vitalizing the principle of balance in Islam. For this reason, even if a deviation from the balance on a global scale is a situation in favor of the weak, it may also bring a paralysis of moderate society by making it lose its dynamism and eliminate the oppositions from which the system actually benefits. It has brought it into reality. Thus, this situation can pave the way to finding reasons to incline to new interpretations that aim at meeting today’s requirements, even in regards to certain principles such as interest, equality and justice. At present, Muslim businessmen’s thesis of “financial jihad” can be justified through this point, which claims that they intend to find a new balance answering to the needs of the era by “temporarily leaning towards richness, and to a class-based societal order; in other words arming themselves with their enemy’s means.”

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The Transition Era and Ideal Islamic Economics: Ahmet Tabako÷lu’s Approach Ahmet Tabako÷lu is renowned for his studies on this issue, and he evaluates the subject by separating “Islamic economics” into two groups— “transition era Islamic economics” and “ideal Islamic economics”—and comparing and contrasting them. It is necessary to understand why Tabako÷lu chooses such a distinction: Tabako÷lu defines economics in the light of Islamic principles as the “ideal Islamic economics”; he defines the Islamic economics that is founded through interaction with the modern financial system and present realities as the “transition era Islamic economics.” According to the framework that we try to shape here, the realities of economics cannot be thought of as independent from Islamic principles and regulations, and it is also not possible to revitalize these principles and regulations independent from the given realities in any time or era in question. As in all areas in this subject, there is an interactive relationship between these areas. What is most important is that nothing is totally religious or totally worldly in the context of Islam, which does not recognize a sharp difference between the world and religion. These two are intermingled and do not mean something independent from each other. Thus, the question of “how can an Islamic economics be possible?” can be answered by saying that it is a reality that can or cannot (at the point of expectation that it will pave the way to an unchangeable ideal) be possible in any occasion. An ideal society and economics that will struggle to be founded and reconstructed again and again in the frame of specified ideals will correspond to dynamic processes both when the reality and the ideals are in question. For these reasons, Tabakoglu’s warning that it is necessary to make “theoretical studies of the transition into this system” in order to “present the qualities of the ideal system” should be revised critically (Tabako÷lu 1997, 77). While defining the ideal Islamic economics, he does not neglect to point out its hypothetical quality and to emphasize the debatable quality of it at the point of its interaction with capitalism: Ideal Islamic economics is a model in which it is assumed that Islam is being realized with all its institutions, people and societies. Even this model has been affected by many elements of the West; the concept of Islamic economics is naturally open to discussion. (Tabako÷lu 1997, 74)

In addition, “many issues whose existence can be discussed in the ideal Islamic order find a place in the transition era Islamic economics.” Thus, another development that makes the separation of the drawbacks of which

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Tabakoglu refers impossible is that the possibilities that come with technological improvements do not cause Islamic societies to be totally abstracted from the rest of the world. Humane Principals in Islamic Economics: “Homo Islamicus” Homo Islamicus: Autonomous Human. Because it reduces humans to biological beings and leaves out their socio-cultural and spiritual aspects, it is for certain that “homo economicus” cannot come to terms with an “Islamic economics.” The subject of Islamic society is “homo Islamicus,” which is in the position of being an ethical subject that seeks goodness. Actually, this human is an element on which Islam does not agree with capitalism nor with socialism because of their materialistic content; and for this reason, Islam puts a certain distance between itself and this human. Just like in capitalism, the human of socialism is a “materialistic/economic” human. Even Shariati, whose socialism is not open to discussion, seems to be in conflict with socialism because of its materialistic content (Aktay 2002, 66). Shariati challenges materialism because of the central position of production means instead of humans. According to Shariati, socialism should take humans as its center, not the means and processes of production (Cesur 2002, 79-82). The most determinative side of Islam as to its position against the contemporary systems is this “autonomous/fullyequipped homo Islamicus.” This human—unlike the “homo economicus” of the West, who spends his life in pursuit of survival and income to maintain his life—is a human who is concerned with his social and religious responsibilities (such as worship) beyond the basic requirements of life, and he is equipped with socio-cultural and spiritual richness that cannot be reduced to his economical needs. One example of the formation and support of this autonomous/self-equipped human of Islam is the practice of “sustenance” in the Ottoman state (Genç 1989). Every subject’s need was intended to be addressed by the waqfs and other charitable organizations that formed from the state and the society. Assistance in order for the people to be independent/free individuals was seen as an indispensable requirement of the regime, which originates from the capital stock (autonomous human). Homo Islamicus: Labor-based Humane/Economical Action. As also supported by some “unchangeable” 15 regulations that arrange financial life, such as the ban on interest and the obligation to give zakah (charity), human activity (labor) is placed at the center of economical activities that are affected by the Islamic belief system. While interest is the main

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responsible figure for wealth being consolidated in a minority of hands, it is externalized as an element that hinders sharing. Zakah and charity (sadaka) are indications of a sharing order in face of the reality that every person can become in need of help at a certain point in his life; and if he is not needy, this is also an indication that he is again rendered self-sufficient by the hand of the society. The main principle that directs the other principles is that “Islamic economics” needs an environment of struggle (jihad) in which everyone tries to create a ground upon which every person is self-sufficient and autonomous in maintaining their lives. Becoming someone who tries to realize one’s being through this struggle is dependent on one taking one’s responsibilities onto oneself, and thus, living a dynamic life. Homo Islamicus: Human of Struggle (Jihad). Legitimate (halal) income in Islam depends on labor, and one’s working to meet one’s basic needs is obligatory (farz) besides having central importance, and these struggles are seen as different parts of jihad throughout Islamic history. Moving in opposition for the sake of the development of the human—according to the principle of the unity of oppositions in dialectics—is a necessity, just like the belief in Islamic “examination” (completion of one’s humane development) is only possible in this way. Balance for the sake of prosperity, equality and justice in present conditions means an effective struggle through negative conditions in order to take steps for equality and justice and is a necessity in this frame. This struggle will even require temporarily deviating from goodness (not with the intention to do evil) for the sake of balance. Islam prohibits going to extremes in every matter, and its prohibition of extremes even in the spiritual realm can be meaningful in this framework. Otherwise, the interactions between the opposites that come from the state of “examination” and an indoctrination that creates imbalance and serves to freeze and stereotype a situation will emerge. To summarize, the state of struggle (jihad)—including the ideal/principle realm of the intellectual activity—is the only tool that will make the “examination” process possible and steady, and it plays a vital role in hindering the search of balance to result in stereotypes and indoctrination.

Conclusion Turkey has gone through a radical change in the socio-economical area after 1980. Turkey has experienced an environment in which it has been transformed into an urban society and in which rural areas have mixed completely with capitalism. The independent peasantry (autonomous and

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self-sufficient humans) that are equipped with socio-cultural and spiritual bonds and possibilities (which are part of the central codes of the classical Ottoman socio-economic system) have been de-propertied and are mired in poverty. This development is the result of improvements after Turkey’s intermingling with global capitalism and of the accumulation of wealth into the hands of a small minority. As a consequence of the process that has estranged a large proportion of the population from the totalitarian “Islamic human” (autonomous human) and that makes them approach the Western “materialistic human” (homo economicus) by condemning them to a “war of survival,” the “moderate/classless society” that has taken over from the Ottoman state and is also maintained in the Republican era has paradoxically been abandoned with vast societal support. As it is obviously seen, Islamic society, which had its methods of production and consumption that enabled it to maintain its existence self-sufficiently, has been transformed (even if not into a professional consumption society) into a de-propertied impoverished society in the first decade of the AKP government. Because of the Islamic identity of the conveyors and producers of this process, it is necessary to question if the current policies are nothing but totally an “Islamic capitalism” 16 (abdestli kapitalizm). It is important to pay attention to those who talk in favor of the de-propertied part of the society by taking their references from an Islamic context, even if their voices are low. The first objection comes from a group of Muslims pioneered by Ihsan EliacÕk, who present themselves as anti-capitalist Muslims. This group constantly directs attention to the reality that Islam is a religion that does not allow one person to accumulate vast wealth in his hands. According to this, Islam only allows an individual a little property through which one will meet one’s basic requirements in life: There are some regulations that should be followed both in gaining and spending property. In order for the inequality not to become widespread Islam allows only to a small fortune, and what is redundant should immediately be distributed. Accumulation of wealth is also possible with partnerships; one person cannot accumulate it in his hands. However today those who make charity even do this not properly, not with the intention of being equals, but to maintain the current situation as it has always been going on; this is not acceptable.17

The president of MUSIAD (which is an organization that speaks for Muslim entrepreneurs), Erol Yarar, reacts to this opposition with the following “defending” answer:

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How Can “Islamic Economics” Be Possible? In the critique of accumulation of wealth, there is also the issue of the source not being processed. Modern capitalists, by constantly transforming their wealth into investments and supporting this with the charity they execute, actually do not fall into this mistake (in his speech EliacÕk says he does not regard this as redundant; which means his opposition is in the point of luxury expenses). However, when the changing consumption habits are taken into consideration, Yarar also defends the luxury expenses of the businessmen wing by mentioning the changing conditions and life standards of our era. This defense is justified with such examples as while no one had mobile phones 100 years ago now it is regarded as a requirement for every person now.

By referring to history, Yarar defends the intention of the businessmen to accumulate vast wealth in their hands with this example: In Islamic history, there were some who gave all of their property (like Abu Bakr) and some who gave half of it (like Umar); so, one way of giving wealth cannot be imposed. According to Islam, it is proper to leave these issues to the self-providence of humans; it cannot be said that if one does not give all of his property, this is forbidden (haram). Besides, if businessmen distribute all of their property, it will not be possible for them to go on making investments.18 Thus, EliacÕk also pointed out that he accepts the way to transform one’s wealth into investment as “indirect giving/distribution.” As a consequence, in the context of a dialectics which finds “fertility in controversy” (Güler 2000, 99) and of a jihad-based interpretation of Islam, it can be claimed that the developments in today’s Islamic world, including Turkey, might bear fruitful results in regard to generating a healthy connection between Islam and today’s conditions.

References Aktay, Yasin. 2008. “Reform, øctihad ve Tecdid Ba÷lamÕnda øslam ve Hayat.” Milel ve Nihal 5(2): 43-73. —. 2002a. “So÷uk Savaú Dönemi Arap øslamcÕlÕ÷Õnda Sol ve Sosyalist Ba÷lam: Seyyid Kutub Örne÷i.” øslamiyat SayÕ 2: 43-68. Anderson, Perry. 1974. Lineages of the Absolutist State. London: Verso. BakÕrezer, Güven ve Yücel Demirer. 2006. “Ak Parti’nin SÕnÕf Siyaseti.” Mülkiye 252. Cesur, Ertu÷rul. 2002. “Ali ùeriati (1933-77): Allahperest-Sosyalist.” øslamiyat 2: 90-1. Denek, Muhammed Nur. 2010. øslam, Eúitlik ve Sosyal Adalet. østanbul: Phoenix.

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Diner, Dan. 2011. Mühürlenmiú Zaman: øslam DünyasÕnda Durgunluk Üzerine. østanbul: ø.Ü. Bilgi Üniversitesi YayÕnlarÕ. Efekan, Haluk. 2011. “MuhafazakarlÕ÷Õn Hermenöti÷i.” Do÷u BatÕ 14(58): 73-87. EliaçÕk, øhsan. 2011. Sosyal øslam: Dinin Dire÷i PaylaúÕmdÕr. østanbul: Destek. Esed, Muhammed. 2002. Kur’an MesajÕ: Meal-Tefsir. østanbul: øúaret. Garaudy, Roger. 1965. Sosyalizm ve øslamiyet. østanbul: Yön yayÕnlarÕ. Genç, Mehmet. 1989. “OsmanlÕ ømparatorlu÷u’nda Devlet ve Ekonomi.” 5. MilletlerarasÕ Türkiye Sosyal ve øktisat Tarih Kongresi-Tebli÷ler. østanbul: Marmara Üniversitesi Türkiyat AraútÕrma ve Uygulama Merkezi. Görmez, Mehmet. 2012. “øslam’a SaldÕrÕya KarúÕ ølim Seferberli÷i.” Yeni ùafak, September 29. Güler, ølhami. 2000. “Sa÷cÕlÕk Olarak Sünnilik.” Tezkire 9(17): 90-100. —. 1992. “øslam AnlayÕúÕmÕza Dair.” Tezkire 4: 45-59. Güler, Zekeriya. 2012. 40 Hadiste øú ve Ticaret AhlakÕ. 7. BasÕm, østanbul: øGøAD YayÕnlarÕ. Hodgson, G. S. Marshal. 1995. øslam’Õn Serüveni: Bir Dünya Medeniyeti’nde Bilinç ve Tarih. Cilt I-II, østanbul: øz. KÕrbaúo÷lu, Hayri M. 2011. Ahir Zaman ølmihali. 9. BasÕm, Ankara: Otto. Özdemir, ùennur. 2010. “øslami Sermaye ve SÕnÕf: Türkiye/Konya MÜSøAD Örne÷i.” ÇalÕúma øliúkileri Dergisi 1(1): 37-57. —. 2006. Anadolu Sermayesinin Dönüúümü ve Türk Modernleúmesinin Derinleúmesi: MÜSøAD. Ankara: Vadi. Özel, Mustafa. 1994. “Zengin Adam Olur Mu?” AnlayÕú Dergisi. http://www.anlayis.net/makaleGoster.aspx?dergiid=76&makaleid=2205 Rahman, Fazlur. 2002. “øslam’Õn øktisat ølkeleri.” øslamiyat, Çev. Ali RÕza Gül, 2: 139-146. —. 1999. øslam ve Ça÷daúlÕk. Ankara: Ankara Okulu YayÕnlarÕ. Sayyid, S. Bobby. 2004. “øslamcÕlÕk ve Postkolonyal Durum: Ulusal, Siyasal ve Sömürge-SonrasÕ øslamcÕlÕk Örne÷i.” Modern Türkiye’de Siyasi Düúünce: øslamcÕlÕk. østanbul: øletiúim. SubaúÕ, Necdet. 2012. “Necdet SubaúÕ ile Mezhep KavramÕ ve Bunun øslam’daki UzantÕlarÕ Üzerine Söyleúi.” ønterpress, July 1 (www. ønterpress.com). —. 2003. “‘øhya’, ‘Tecdit’ ve ‘Islah’Õn Modern KullanÕmlarÕ.” Tezkire 33: 130-153. Tabako÷lu, Ahmet. 2008. øslam øktisadÕna Giriú. østanbul: Dergah. —. 1997. “øslam øktisadÕnda øúçi-øúveren Münasebetleri.” MÜSøAD Çerçeve 5(20): 74-84.

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Turner, Bryan. 1997. Weber ve øslam: Eleútirel Bir YaklaúÕm. Çev. Yasin Aktay, 2. BasÕm, Ankara: Vadi. Ülgener, Sabri. 1981. Zihniyet ve Din øslam, Tasavvuf ve Çözülme Devri øktisat AhlakÕ. østanbul: Der.

Notes 1 In the context of the concepts of jihad and interpretation (ictihad), which according to Rahman come from the same root, he mentions the concept “intellectual jihad” and calls attention to that interpretation (ictihad) that is actually a form of the intellectual jihad movement. See: Rahman 1999, 59. 2 See: Güler 2002, and Rahman 1999, 29-30. The emphasis of Rahman on the need to change bears similarity to our perspective in this study that ideals are also subject to the process of change. 3 At this point, it is minutely emphasized that principles that can be deduced from the Quran are hidden in “concrete solutions of the problems” that actually emerged at one specific point in history. 4 Rahman designates these years as the “ages of reinterpretation (ictihad)” (1999, 35). 5 An actual example for this can be the following: Even on the issue of the prohibition of interest about which there are absolute/clear rules in the Quran, the existence of interpretations throughout the whole Islamic world that claim that interest is legitimate/halal regarding inflation rates supports this thesis. For a study supporting this interpretation both theoretically and broadly, see Aktay 2008. 6 Turner, on the other hand, protests against Weber’s claim of disunity. See: Turner 1997, 239. 7 In fact, what Islamic belief asserts is that in order to be regarded as Islam, one does not have to be a Muslim, for in the Quran, it is clearly stated that the message is revealed for all the human communities. 8 This expression belongs to YalçÕn Akdo÷an, the chief consultant of President Erdo÷an. See: BakÕrezer, G. and Demirer, Y. 2006. “Ak Parti’nin SÕnÕf Siyaseti.” Mülkiye 252: 29. 9 Özel, M. 1994. “Zengin Adam Olur Mu?” AnlayÕú Dergisi: www.anlayis.net/makale Goster.aspx?dergiid=&makaleid=2205. 10 See: Rahman1999, 72. 11 For one of my studies in which the issue is discussed from these perspectives and the changes that occur in those aspects are being set forth through the relationship of worker-employer, see Özdemir 2010. 12 For detailed explanations about the ideal Islamic economics, see Tabako÷lu 2008 and 1997. 13 According to Ihsan Eliacik, who is one of the pioneers of the social interpretation of Islam, Islam only permits individuals to possess a little property through which they will meet the basic needs of a human. Eliacik has various books addressing

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this kind of opinion, and in the bibliography of this study, only one book is included. See: Eliacik 2011. 14 For a similar point of view, see Tabako÷lu 1997, 75. 15 Rahman states that even the principle of zakah, on which there is a consensus as to its being unchangeable, can be strengthened with different interpretations and enriched in practice. See: Rahman 1999, 19. 16 Together with “anti-capitalist Muslims,” the first figure to use and generalize this statement was Ihsan EliacÕk. 17 These ideas are mostly taken from the programs in which Erol Yarar discussed these issues, and it is possible to include reflections from some different ideas. 18 Yarar’s ideas are principally also compiled from the discussions between him and Eliacik in the media.

PART 2: BASIC CONCEPTS, NEW THINKING AND FUTURE DIRECTIONS

HUMAN POTENTIAL, WELLBEING AND PHILANTHROPY: A PHILOSOPHICO-ECONOMIC INQUIRY MASUDUL ALAM CHOUDHURY

Introduction The study of the entitled theme in this paper will be examined by the concept of endogenously interrelated variables and goals. The field of development is emphasized. Endogeneity in development issues as mentioned in the title will be done by way of the recursive—and thus, evolutionary—complementarities between the selected variables representing what we will refer to as “the good things of life.” The unity between such variables and their relations will project the meaning of the episteme of unity of knowledge relating to the specific problem and issue under investigation. The specific problem studied revolves around the methodology, formalism and application of the overarching organic relationship between the three interrelated entitled topics. This paper will thus formalize the problem of interrelationship between the three topics in an interconnected way of invoking what such organic relationships mean in reference to the episteme of unity of knowledge, expressed as complementarities between the selected variables addressing wellbeing. The concept of wellbeing is thereby formalized within the episteme of unity of knowledge on the specific problem of using and regenerating philanthropy by feedback in resource allocation and development between the donor and the recipient via a reproductive system of inputs and outputs. The integrated approach described above constitutes the essential Islamic way of addressing any socio-scientific theme on the basis of its epistemology of divine oneness referred to as Tawhid. This is a Quranic term. We will invoke it in this paper to imply the divine law of oneness of God as a systemic precept. Such an epistemology of divine systemic oneness can be used for the socio-scientific study of “everything” (Barrow 1991) beyond only mainstream Islamic issues: for example, the wellbeing

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issue of Canadian Native People in the light of their spirituality question in human resource development.

Objective This paper will formalize the following endogenous organic relationship and examine its application to the problem of uplifting the development of marginalized communities. A rigorous formalism is undertaken. A fairly extensive literature review in evolutionary economics is done to compare the contending methodologies with the one on evolutionary learning that we use in this paper. On the applied front, we will examine the wellbeing of Canadian Natives. This is done by using the formalism of the endogenous relationship between human potential as creativity and the feedback of resources (philanthropy in the productive sense) that is generated in the circular causation relationship between human potential, wellbeing, and resource development to realize the goal of sustainability. Such an organic relational formalism by endogenous feedback between the critical targets conveys the meaning of interactive, integrative and evolutionary learning in this paper. Its empirical perspective is conveyed by the method of circular causation between the selected variables.

Human Potential The Concept of Human Potential The concept of human potential invoked in this paper is that of the human learning within and along with the specifics of the world-system in which the human being participates and actualizes through the interrelated dynamics of Mind and Matter. Thereby, human potential comprises the perpetual capability of the human being in the interactive realms of consciousness, actuality and sustainability involving meaningful pairings between the self and the other. This particular precept is a central note in the Quran towards conveying a systemic symbiosis in the framework of unity in diversity derived from the law of oneness, Tawhid. In this extended meaning lies the endless domain of learning with the microcosms of the world-system in which the human individual and totality interacts, integrates, and thereby rises to evolutionary learning processes enabled by Mind-Matter dynamics. By Mind, we mean in this paper the domain of consciousness that is invoked by a well-defined relationship between the inner self (Heart) and

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the thoughtful mind. By Matter, we mean the specific and the general domain of worldly relations generated by participation. This invokes objectivity, social actions and their responses. The realm of Matter thereby overarches the domain of cognition into sensate and abstract comprehension. These exist in cohesion as an organic unity, not one without the other. Finally, there exist the critical interrelationships in evolutionary learning between the realms of Mind and Matter, within which are found the meaningful circular causation relations between consciousness, actuality, and human sustainability, understood as extended social and scientific interrelations—the socio-scientific order. The inner self as the seat of objectivity establishes a teleological relationship representing circular regeneration between Mind and Matter. So, what comprises human potential according to the evolutionary learning worldview? Human potential is centered on a unified worldview of interrelations between Mind and Matter born out of consciousness. The Mind in turn is primordially affected by the Heart. That is the soul. But consciousness in the soul and in connection with the material and cognitive order emanates from the episteme of unity of knowledge in relation to the unification of the world-system and its details. Within this overarching worldview of unity of knowledge in relation to the generality and particularity of issues under investigation, human potential comprises the integration of the seats of consciousness. The organization of consciousness in relation to the cognitive framework of a unified worldsystem stands on the episteme of unity of knowledge. The application of the Matter-Mind unity of being and becoming arises from the evolutionary learning process model of conscious organization of the emergent social and moral reconstruction. The Participatory Example of Business for Human Potential An example of human potential is found in the Blue Ocean Strategy prescribed by Kim and Mauborgne (2005). They prescribe an inclusive model of Blue Ocean participatory and cooperative worldview in business. The Blue Ocean Strategy is contrary to the Red Ocean Strategy of mainstream economic theory and application, behavior and organization, pedagogical practice, and intellection. Consequently, the entrepreneurial spirit and human development reflected in the cognitive and real world constructs mark the ever-progressive learning processes of participation and complementarities by organic relations of unity between the micro, forming the aggregate (e.g. macro) entities.

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With the free entry of firms in an environment of participatory market exchange, the sustainability of survival and growth can proceed. Survival is manifest along the learning path of complementary relations between the good choices of life as determined by the epistemic consciousness of goodness (Moore 1962). Human potential thereby is not the property of perfect and imperfect competition economic theory, based as these are on optimality and steady-state conditions of the marginalist world-system. In fact, all of economic theory, both microeconomics and macroeconomics, is found to be premised on the postulate of marginalist hypothesis (Dasgupta 1987). Shackle (1972, 97) remarks on the fictive nature of optimality and steady-state equilibrium born out of the postulate of marginalism in mainstream economics: Equilibrium is a solution, and there is, in the most general frame of thought, no guarantee that a problem which presents itself, unchosen and undersigned by us, will have any solution, or that it will not have an infinity of solutions. In either case, there is no prescription of conduct.

Human potential and its incorporation in human development and the design of sustainability must necessarily hold knowledge to remain incomplete, while learning perpetually in the framework of unity of being and becoming (Prigogine 1980). Besides, since knowledge cannot be complete in the evolutionary learning universe, and because human potential in the midst of evolutionary learning embraces all of reality comprising mind and matter, knowledge regarding anything cannot be complete in the small and in the large. This is a Tawhidi property of the moral law in relationship to the learning universe of human intellection. Only instantaneous knowledge formation is fictively possible. But such instantaneous knowledge-flow, as an equilibrium state in the core of economics, is a fictive concept in the conscious universe. Such is the idea of the core of economics conceptualized by Debreu (1959). In reference to this knowledge-based interrelated cause and effect, writes Shackle (1972, 26): “… we cannot claim Knowledge, so long as we acknowledge Novelty. Novelty is the transformation of existing knowledge, its reinterpretation; in some degree necessarily its denial and refutation.” Placing Human Potential in the Evolutionary Learning Formalism Figure 1 displays the above kind of regenerative interrelations that explain the concept of evolutionary learning, and thereby it establishes the extended version of the concept of sustainability. The regenerative

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interrelationship ensuing in this way is studied by means of what we call circular causation. It is the method representing the connected worldsystem of symbiosis and continuity by organically unifying relations (pairing = complementarities) vis-à-vis Tawhid as unity of knowledge and its constructed world-system of unity of being. This empirical method is similar to but widely extends Myrdal's idea of cumulative causation. In this paper, both the conceptual and empirical and applied versions are endowed to the concept of circular causation in the light of unity of knowledge. Figure 1 is a depiction of the circular causation concept of the evolutionary learning model used in this paper. Circular causation as the model of endogenous interrelations implies that human potential is an evolutionary learning precept that arises from and continues to sustain a given epistemic praxis (Sztompka 1991; Resnick and Wolff 1987). The emergent dynamics of interrelations comprise the domain of the Mind. They are organically connected with Matter in the sense of circular causation in the evolutionary learning worldview. The emergent nature of recursive evolution centered in the interrelationships that Mind-Matter interaction and integration harbor is like the Mobius String that remains intact in the space-time structure (Boslough 1985). The world-system of human potential is thus continuously and perpetually re-originative. There is no terminal point regarding optimum and steady state resource allocation conditions. Time, which is essential in defining the condition of the terminal points, as in optimum control theory, is not the essential element of learning. Time is replaced by knowledge-flows as the substantive element of learning, change, reconstruction and continuity. Time simply records such coordinates. Knowledge causes them to occur. Events are happenings as coordinates defined by the tuplet of knowledge-flow and its causation on social actions and responses that occur over time “t.” We define an event along the learning trajectory by (T, x(T);t). In the absence of steady-state equilibrium and optimal states of events and in the absence of the time factor, which is replaced by knowledgeflows occurring continuously and perpetually, the concept of human potential acquires its substantive meaning. It is different from the concept of human capital, a neoclassical resource. Consequently, many of the economic analyses and the social and public perceptions relating to human capital and economic growth and development are altered. These are replaced by altogether new concepts. We will note such substantive changes in concepts and application.

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Formalizing Human Potential in the Evolutionary Learning Universe Governed by the Episteme of Unity of Knowledge The Epistemic Characterization of Consciousness (Mind) Let : denote the epistemological premise of unity of knowledge. It is treated as a topological super-space; that is, with the unbounded open cardinality measure (Rucker 1989). Here is a Tawhidi formalism derived from the Quran as it applies to “everything.” Let T  :, such that there exists a mapping denoted by S that maps : onto knowledge-flows denoted by {T}. Thus, S(T)  :, for T  :. Thereby, for different T-values, {T1}‰{T2} :; {T1}ˆ{T2} :; {T1}‰ˆ{T2}  :; {I}  :; :{: in the sense of closure of the very largescale universe of : (Tawhid as the moral law of divine oneness). Thereby, {I}‰:’ = :, where :’ :; {I}ˆ:’ = {I}. :’ has the topological properties mentioned here. Finally, any monotonic functional of the values as shown here has the same topological order-preserving properties. The expression, {I}‰:’ = :, where :’ :; {I}ˆ:’ = {I},

(1)

has a special significance. Expression (1) means that a set of false statements signified by {I} represents disjointed or differentiated relations. This is contrary to the organically unified ones, which are treated as the set of truth statements denoted by :’ in the normative sense of the episteme of unity of knowledge. Relations in :’ are established by pervasive complementarities, or in the development model by participation between entities. In summary, the fundamental epistemological characterization of unity of knowledge in terms of the super-topological relations is as follows: (:,S) { :oS [{T}Ž :’‰{I}] ……… o S [:]

(2)

Expression (2) can be written as the disjoint composition of the following two independent chains: (:,S) { :oS [{T}Ž :’] ……… o S [:]

(3)

and (:,S) { :oS{I}={I} ………. o S {I}  [:]

(4)

with the topological properties stated on {T} and {I}.

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Now, if a measure-theoretic function, say P(.), is applied to the functionals in expressions (3) and (4), then the following result holds: P({I}) = 0; therefore, P({T}Ž :’) = 1

(5)

Therefore, :oS {T}oS :, as P(:’) = 1, with P({I}) = 0

(6)

This summary relation has significant implications on the existence of evolutionary learning equilibriums in open and unbounded subspaces that are contained within the closed and unbounded super-space of : (Choudhury 2011). The mathematical results in such a case of continuous and differentiable mappings of {T} gives rise to an extension of the Fixed Point Theorem to evolutionary ones that are not locally bounded and closed, and hence, not locally compact (Nikaido 1987). But in the largescale universe of :oS:, the evolutionary learning functions become compact once again. The Epistemic Characterization of Materiality (Matter) By a further extension of the mappings on {T} and {Tc}, the complement of {T} on :, such that ‰ˆ{Tc} = {I}, causes a monotonic positive transformation to exist, such as {x(T)}. The {x(T)} (likewise, xc(Tc)) as vector, matrix, tensor and further relational extensions of the same, represent the material domain of the knowledge-induced (deknowledge-induced {Tc}) variables of various systemic entities with which the Mind and Matter relate. Consequently, all the topological properties of the {T} and {Tc} spaces apply to {x(T)} and {xc(Tc)}. It is to be noted that x-type or xc-type functionals cannot apply in (:,S). That is because by the property of super-cardinality of this super-topology, any functional transformation on this limiting super-space will be of the super-cardinal or infinite dimension. That would be absurd for any cognitive artifact to assume. The Epistemic Characterization of Human Potential Human potential denoted by the functional h(.) is the totality of monotonic positive transformations of the type {h(x(T))}. h(.) denotes a continuously and positively differentiable functional with respect to Tvalues. Such functionals emerge along the paths of evolutionary learning processes.1 The functional h(.) can be composed of different levels of microaggregation. As such, we can distribute h(.) by categories of target groups,

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sectors, regions, projects, etc. h(.) can also be constructed as an index, such as a human potential index for targeted marginalized groups in the context of development, etc. With such aggregation, development planning can be designed and centered on the concept of human potential rather than human capital. The latter is a neoclassical concept that does not fit into the phenomenology of our evolutionary learning model. The characterization of human potential in the development model is as follows: Development (D(..)) may be defined as the following extensively participatory process along the evolutionary learning path with many interacting, integrating and evolving entities that remain complementary to each other in circular causation interrelations. Such an experience in the normative perspective of moral-social reconstruction remains continuous and pervasive. Such a continuous learning experience conveys the meaning of sustainability and of participatory development as a process. Indeed, the South Commission (1990, 13) defines the meaning of socioeconomic development in the broad sense encompassing economic, social, and human factors as follows: To sum up: development is a process of self-reliant growth, achieved through participation of the people acting in their own interests as they see them, and under their own control.

We can now define development as a process, D(..), in terms of the relations concerning human potential as a compounded functional relationship signifying complementarities between the critical variables denoted by {T,x(T)}. The epistemologically induced evolutionary learning path by {T}  (:,S) signifies sustainability: D(f(h(x(T))) = {T}o{x(T)}o{hi(x(T))}o{fi(hi(x(T))}

(7)

The composite mapped in expression (7) means that the epistemic knowledge defines the parameters of development via its induction of the development variables. For example, financial and real resources, GDP, HDI, HPI, GEM, employment, price level, trade, capital/labor ratio, GINI coefficients, etc., are now induced by the normative condition of circular causation between the variables. Such T-induction generates endogenous relations between the development variables. The variables then feed into the specific human potential indexes and their further monotonic transformations. The latter kind of mapping is shown by f(..) in the complementary implication of the compound index. An example of the complementary

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index of specific categories ('i') of human potential functions is h(.) = 3ihiDi(..). Here Di denotes hi-elasticity coefficients of the total h(.)-index. A further disaggregation is also possible, given i=1,2,..,n. An implication of such a disaggregate composition of the human potential index is a new form of human development index that can be composed of the human poverty index, human empowerment index, corruption index, equality index, and the like (Demarting 1999; UNDP 1997, 1998, 1999, 2000 issues; Millennium Development May 25, 2012).

Wellbeing The Concept and Measurement à la Unity of Knowledge as the Functional Ontology Since the concept of human potential is a dynamic form of generating and mobilizing human resources within a complex of evolutionary learning processes, it upholds a permanently creative nature. Therefore, when we link the concept of human potential with the issues of philanthropy and wellbeing through a circular connection between these goals, then the concept of philanthropy must be understood as a productive resource that generates self-reliance and sustainability among and by the participants. Thereby, the circular causation endogenous interrelationship between human potential, philanthropy and wellbeing cannot result in idle charity. This precisely is the meaning underlying the Quranic Zakat. Zakat is a mandatory due of 2.5 per cent of liquid wealth for human resources to uplift individuals at the grassroots. Hence, such endogenous interrelationships between the three elements hold up both a dynamic and a sustainable perspective of human resource development. Therefore, philanthropy as a morally embedded productive resource feeds into and regenerates human potential. Such a recursive relationship and its sustainability along the evolutionary learning processes is formalized and measured by the objective criterion of wellbeing. We therefore define wellbeing as the functional of the complementary and regenerated interrelationships between philanthropy and human potential. Such organic interrelations evaluate and assign levels of unification between the variables in light of the episteme of unity of knowledge. The normative reconstruction of the unifying relations between the selected variables and their functions represents the ethical reconstructive possibilities using philanthropy and human potential as goals. Such organic interrelations are as explained in Figure 1.

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The concept and empirical nature of the organically unifying relationships comprise the normative worldview. The evaluation takes its course from the positive stance of the issues as they are to what they ought to be. Thus, the positive and normative states together form the possibility for moral-social reconstruction in the applied and empirical sense. The empirical implication underlying the positive evaluation of the relationships between the variables representing philanthropy and human potential is to lead into simulation to realize the changes required for transforming a differentiated state of human wellbeing into a system of complementary relations. Complementarities and participation represent the sure signs of unity of knowledge and its moral-social reconstruction of the specific issues under consideration. This is the consequence of the action of unity of knowledge in practical experience as Quranic pairs. In this sense of being a normative simulation of the positive state of differentiation or a reconstruction of a weak form of the complementary relationship between philanthropy and human potential, the wellbeing objective criterion assumes both a conception and measurement of unity of knowledge. The underlying methodology will be explained later. Wellbeing as a conception in objective criterion explains the cognitive stage of understanding unity of knowledge as an episteme at the functional ontological level. No metaphysical meaning of ontology is invoked here. Functional ontology presents the operational formalism derived from the episteme of unity of knowledge. The operational consequences of unity of knowledge are found in the reconstructed world-system of complementary (participatory) relations between the selected variables of the specific problems under study.

The Evaluative Stage of the Wellbeing Index: From “Estimation” to “Simulation” The evaluative stage of wellbeing comprises the conceptualization, measurement, and inferential and policy-theoretic implications of social reconstruction. This version of the functional ontology of unity of knowledge, reflecting the episteme working itself in the framework of unity of the specified problems and issues at point, reflects two stages of valuation of facts. Firstly, there is the “estimation” stage. In this stage the circular causation relations between the representative variables {T,x(T)}, as of human potential index h(T,x(T)), are “estimated” by the facts as they are.

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Secondly, the “estimated” evaluation of results is examined for unity of relations between the variables. That is, the degree of complementarities between the variables is evaluated. A lack of complementarities between the selected variables of the problem at hand presents a sign of differentiation and marginalism. Such a lack of a complementary state is improved by the method of simulating the “estimated” results. This “simulation” process marks the stage of improving the degree of unity of knowledge by normatively characterizing the problem and issue at point. Such empirical evaluation between “estimation” and “simulation” can be further disaggregated into the component human potential indices hi(..) and the multifarious systemic variables involved in such an exercise of disaggregation. In expression (7), such a disaggregation is explained by the non-linear processes that remain embedded in economic development. Further on, the positive monotonic transformation, f(h(T,x(T))), extends the disaggregation levels to various micro inter-systemic relations. The empirical and policy-theoretic, institutional, structural, and discursive nature of participatory changes that are altogether embedded in the development process by transition from the “estimation” stage to the “simulation” stage marks the being and becoming of stages of evolutionary learning in unity of knowledge. Empirically, the participatory change that ought to be induced in the development process is carried out by the “simulation” stage. In this paper, the specific issue is that of attaining higher levels of the human potential index by means of inducing complementarities between the variables of the disaggregate human potential indices. The empirical exercise of leading the “estimation” stage to the “simulation” stage is carried out by the system of circular causation relations. Below we explain such a model further.

The Phenomenological Model of Wellbeing in Terms of the Human Potential Index Stage 1: The Conceptual Formalization of Wellbeing Our selection for the wellbeing function is the human potential index in the sense of the composition of the development process symbolized in expression (7). We re-write the problem of evaluation of wellbeing as follows, subject to its subsequent empirical “estimation” and followed by policy-theoretic “simulation” of the “estimated” results. We refer to the stages between “estimation” and “simulation” together as “to evaluate.”

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Evaluate h(x(T)) = 3i[hi(x(T))]Di; i = 1,2,..,N Subject to the circular causation relations: xj(T) = fj(x’(T)), where, xj(T) is an element of the vector x(T); x’(T) is the vector x(T) without xj(T); j = 1,2,3,…n

(8) (9)

The “estimated” values of the xj(T)-variables in the system of relations signified by expression (9) are theoretically fed into expression (8) to yield the measure of the human potential index as the wellbeing index. But this part of the theoretical exercise is not empirically possible, for values of the coefficients, while they are estimable in the system of equations of expression (9), are not estimable in expression (8): Data on h(x(T)) are not available ad hoc. Thus, stage 1 remains simply as a theoretical construct of the Wellbeing Function with its evaluation stages of “estimation” and “simulation.” Now Stage 2 of “estimation” leading to “simulation” enters. This is the main empirical exercise pertaining to wellbeing and the human potential index. Stage 2: The Empirical Formalization of Wellbeing We note that expression (8) is simply a monotonic form of the relation,2 T = F(x(T))

(10)

Expression (10) can be taken as the proxy for wellbeing or the human potential index in the epistemic sense of “estimation” followed by the “simulation” of knowledge-value in respect to unity of knowledge (i.e. complementarities and organic participation). The empirical systems of (9) and (10) together with their multifarious equations and variables now represent the functional ontological nature of “estimation” and “simulation” as the formal model of circular causation. We write this complete circular causation system as follows:

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The “Estimation” Stage: Positivistic State of Examining Complementary Relations between Variables or Otherwise xj(T) = fj(x’(T)), where, xj(T) is an element of the vector x(T); x’(T) is the vector x(T) without xj(T); j = 1,2,3,…n T = F(x(T))

(11)

(12)

The estimation of the coefficients of these equations is done by (i) the data on x(T)-vector; and (ii) the ranks generated for T-values by noting the observed degrees of complementarities between the selected x(T)variables. Such a rank-assigning exercise is done by examining the degree of complementarities of the x(T)-variables and determining their corresponding pair-specific T-ranks by the variables selected. Then these pair-specific T-values are averaged against the paired variables as they appear. Such rank setting can also be carried out additionally by institutional and group discourse in rank-selection. The T-values can also be assigned algorithmically. The “estimated” coefficients present the positivistic state of the complementarities and, thereby, the participative nature of development by focusing on human potential, philanthropy and wellbeing as complementary goals. But as in the neoclassical case of marginal substitution between variables, which signifies a non-learning state of resource generation and mobilization, the negative signs of the coefficients or their weakly positive signs in the estimated circular causation variables will contradict complementarities and participation. Such results would negate the development process in the human potential context with sustainability gained along the evolutionary learning path of unity of knowledge of the Mind-Matter interrelationship. The “Simulation” Stage: The Normative State of Examining Complementary Relations The “simulated” normative corrections to the “estimated” positivistic results now follow. The simulated coefficients are assigned by changing their values to positive or near positive ones by institutional and policy discourse to the extent of the possibility of attaining such simulated coefficient values. Such a simulation exercise marks the potential for moral-social transformation required in realizing expression (7) of development and sustainability.

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The results of simulated changes in the estimated coefficient values show up in the new “predictor” x(T)-values and, thereby, on the simulated T-value in expression (12). The simulated relations are thus obtained, including the “simulated” as well as the “estimated” T-value as the proxy of human potential. In this way, the human potential index is premised on knowledge-flows that are gained by discursive learning in a continuously participatory development scenario. Such a development scenario marks sustainability in the good things of life (e.g. dynamic basic-needs regime of development).3

Summary of the Circular Causation Method Applied to the Methodology of Unity of Knowledge The phenomenological model of unity of knowledge and its conceptualization and application to the issue of human potential comprises the totality of expressions (8)-(12) along with the details of the “estimation stage,” the “simulation stage,” and the “predictor stage,” all as explained and encapsulated by the term “evaluating” the wellbeing objective. Through the combined method in such a case, the positive and the normative consequences are combined to establish the non-demarcation rule between these and between the deductive and inductive reasoning in the development debate. Each of these ways of reasoning is the recursive product of the other in cycles of evolutionary learning. Hence there exists continuous and pervasive interaction, integration and evolutionary learning between the variables and the goals. Such a methodological result represents the unity of knowledge in the phenomenological model. It is applied, measured, and explained by the method of circular causation in the human potential index as wellbeing manifesting development sustainability. Recently, such a method of scaling and interpreting survey data was done by Bloom and Reenen (2010). They measured the differences found in inter-firm and inter-country economic performances and associated this with differences in management practices. Their empirical measurement technique is based on the scaling of survey results to prove this fact. The scaling for rank-assignment of relationship between population and economic growth by the circular causation method was done by Choudhury, Hossain and Hossain (2011). Maurer (1999, 21) wrote on a similar notion of organizing order out of complexity and of the inevitability of causality in a heavily stochastic nature of organic system:

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“… regularities in biological systems arise through a statistical process of causality.” The moral-social embedding of the wellbeing criterion has been formalized by Sen (1990) in the deontological framework. Sen writes against the transitive axiom of rational choice and invokes moral judgment. The ethical deontological consideration in moral choice is preferred to the utilitarian instrumental rationality in Sen’s (op cit. 78) discussion of the wellbeing criterion in the following words: I have tried to argue that the distancing of economics from ethics has impoverished welfare economics, and also weakened the basis of a good deal of descriptive and predictive economics.

The extension of the utilitarian postulate of economic rationality and its implication on optimal social choice are both over the set of goods/services and utilities. For if the welfare function comprises the map of individual utility functions, each and all of which are optimized by the agents and society at large, then in utilitarianism the welfare is independently established on individual utility functions. This is a logical result, but it remains devoid of any substantive meaning in collective choice and interaction that make up society. This paper has extended the arguments of the impressive writings in the direction of establishing wellbeing as an epistemological concept that combines deductive and inductive reasoning, normative and positive reasoning, and the a priori with the a posteriori, contra Kantian phenomenology (Seidel 1986). The same is true of a methodological proof of Popper’s idea of demarcation in his separation of the deductive from the inductive (Popper 2004 reprint; Blaug 1993). The conceptual precept is combined with the empirical part in the result on the non-demarcation nature of unified reasoning combining deductive with inductive, normative with positive. Such a unification of reasoning is conveyed by the system of relations (8)-(12). Consequently, as a result of such methodological unification in the human potential-centered development paradigm (expression (7) the inherent evolutionary learning processes arising out of the properties of interaction and integration between target variables and their relations (i.e. (T,x(T)), f(h((T,x(T))))—and which are continuously pervasive across continuums of development stages—establish unbroken endogenous relations between the state-variables and the ethical, policy and institutional variables. Thereby, all variables in the expression (7), further detailed in the remaining expressions, are endogenous in nature. The only exogenous premise in the entire system of circular causation relations is

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the episteme of unity of knowledge at the formal ontological level denoted by the primal governing premise, (:,S).

Philanthropy Philanthropy is a charitable resource that is considered within the organized relationship of the human resource for self-reliance and productivity in the development of human potential, as we have explained in the context of human potential. Philanthropy thereby becomes a pooled financial and productive resource bundle that may be invoked at the level of the individual or group donor. But its social implications and effectiveness in the uplifting of human potential are gained by the organization of such resources at the collective social level. The organizer may be the national government (e.g. development expenditure), at the non-governmental level (e.g. non-governmental organizations), at the integrated community level (e.g. pooled charity network), or an international organization (e.g. international development finance for philanthropy). Charity now assumes a productive and human resource development perspective. With its directions being productive and following ethical development according to the development of human potential in target groups, philanthropy—together with its relationship with the evolutionary learning process—becomes a target of sustainable development planning. This is true particularly in micro-entrepreneurship, which aggregates complementary effects in a dynamic unified way to the social whole. When philanthropy is included as an endogenous variable in the sense of organized charity that plays its catalytic role in human potential’s role in development (i.e. expression (7)), it becomes a variable in the vector {x(T)}. The variable representing philanthropy is thereby subjected to circular causation in the system of relations (8)-(12). Thereby, in the stages of “estimation” followed by the “simulation” of the circular causation relations with philanthropy, we infer that organized charity is represented by social aggregation that is realized by means of societal, institutional and policy effects in developing human potential by way of productive and conscious transformation of the labor force. The concept of consciousness used here is that of realizing unification, which is composed of complementarities and participation between philanthropy as social obligations and its productive use in regenerating the momentum of unification. Unification by sustainability is exhibited by the basic-needs regime of development. This signifies development along the path of the good things of life.

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Examplees of the produuctive use of philanthropy p aand its regeneeration by the social syystem to sustaain the “philan nthropy-humaan potential-w wellbeing” interrelationns include the microenterpriise (e.g. Gram meen Bank) an nd microentrepreneurrial developm ment through h strategic innteraction with large corporationss (Choudhuryy and Harahaap 2009). Thee Grameen as a a nongovernmental developmeent-oriented bank b uses sma mall loans giveen to the village’s desstitute membeers to establish h cooperativee microenterprrises with the objective of reducingg poverty. By way of this oobjective, the Grameen has now beccome a social bank with the goal of achiieving the pro oductivity of the poor vvillage-based recipients of small loans. T Thus, microen nterprises based on coooperative venntures are pro omoted with ssmall loans an nd a high recovery ratte of loans. A trust is theereby establisshed composeed of the circular regeenerative flow w of human reesources of thee type we refeer to here as Philanthroopy.

b on the episteme off unity of The systtem of circullar relations based knowledge (system (7)-(12)) is fully y encapsulateed in Figure 2. Loan recovery (i.ee. voluntary loan l payment by the borrow wer) is the start of the recursive reelation that reegenerates thee conscious prrocess of evo olutionary learning in sustaining Grameen-type, “philanthrropy-human potentialp wellbeing” ccircular causatiion relations. Consciousness C s as the comm mencement and regeneraation of the knnowledge-indu uced process driven by the episteme

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of unity of knowledge is sustained by the endogenous evolutionary learning process of unity of organic relations between “human potential— philanthropy-wellbeing.” Establishing and sustaining this kind of unified endogenous interrelationship requires functional ontology to formalize the relations and then to “estimate” and “simulate” the empirical results of circular causation by the empirical inference formed by the functional ontology toward sustaining the unified interrelations. This is signified by complementarities, participation and continuity in the basic-needs regime of development—micro-entrepreneurial development denoted by f(H(P(D(T)))—as the good things of life (Streeten 1981).

Philanthropy-dynamics in the Cooperative Arrangement between Microenterprise and Corporation In many Muslim countries, the emerging Islamic banks promote microenterprises by joint venture financing of small operations with corporations. An example of such a project is the Underprivileged Children Educational Program (UCEP) in Bangladesh. UCEP is funded by foreign donors. Through the program, panhandling children are taken off the street and put in fast-track vocational training programs combined with basic education. The trained students of UCEP are then employed and further trained on-the-job by corporations in Bangladesh. This form of vocationally training the marginal labor force for hands-on jobs in corporations has been preferred. The marginal labor force is not unionized. This allows the corporation to carry on their productive activity uninterrupted and at a low labor cost. Figure 3 explains that, like the case of Grameen philanthropy in human potential and sustainable development, UCEP’s foreign training donations can be viewed as philanthropy for developing human potential in the otherwise ignored destitute population. The advancement of the trained labor force over stages in corporations, and the trust placed on such a marginalized labor force—which is progressively trained in placement corporations—forms the functional circular causation relationship between the grassroots and the progressive levels of development of human potential between the informal enterprise and corporations. The resulting trust as human value in the workplace, the productivity gains, empowerment, entitlement, income generation, and human potential altogether form the recursive forces for regenerating conscious sustainability. The unity of the entire regenerative system is established by such recursively regenerative circular causation relations.

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Unifying Philanthrop py with Hum man Potentiaal in the Weellbeing Hum man Development Indeex In the ddefinition of sustainable development bby expression n (7), the critical inteeractive, inteegrative and evolutionaryy interrelationship of regenerativee circular cauusation is ideentified betw ween (i) the epistemic e origin of unnity of know wledge, which h is functionaally denoted by {T} (:,S), and (ii) its unifyiing influence on the worldd-system und der study. This is hum man potential h(.) in its co omplementary relations to the state, policy, instiitutional and behavioral b varriables {x(T)}}. This includ des within it philanthroopy in terms of o the other staated types of vvariables. Thee result of the circularr causation denoted by f{T,x(T)} aand h(T,x(T))) is the consequencee on evolutioonary learnin ng denoted bby evolutionarry (evol) values of w wellbeing prooxied by {T} }evol-values allong the evo olutionary learning patth. Such evollutionary valu ues in new eemergent path hs arising from the prrevious ones are determineed by recallinng the epistem mic core, {T}evol (:,,S), etc. By the im mplicit functiion theorem applied a to h* = h(T,x(T)) (.), we can write for thee wellbeing index: {T}evol  (:,S) = H{x(T)}evol

5) (15

Subject to ciircular causatiion between th he {x(T)}-varriables Expressiion (15) is subjected s to “estimation” and “simulaation” by means of preedictor valuess, as explained d earlier.

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We now w combine the interactive, in ntegrative andd evolutionary y learning by the embeedding of hum man potential within philannthropy and wellbeing w in the sustaainable develoopment conteext. The resullt is derivatio on of the following ggeneral-system m model of epistemic e uniity of knowleedge and evolutionaryy learning in the t Mind-Mattter relational context in refference to the functionnal ontology (epistemologi ( ically endoweed formalism)) (Gruber 1993):

w note thatt philanthropy y in the In conclusion to this section, we developmennt debate is noot to be treateed as a handoout of charity y. For the developmenntal effects off philanthropy y to be realizzed, as in thee case of enhancing hhuman potentiaal and wellbeiing, which is a participatory y concept of learning and unity off knowledge, it must be a productive and a social factor. The general-system m model of unity u of know wledge, now applied a to the specific case of the “pphilanthropy-h human potentiial-wellbeing”” synergy of an organnic relationshhip, now beco omes an appllication in su ustainable developmennt.

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Review of the Literature on Evolutionary Economic Dynamics Introducing the Comparative and Contrasting Views The evolutionary learning methodology used in this paper is akin in its explanation but not in analytics to the ideas of Myrdal (1958) and to Schumpeterian economic growth and development presented by Cantner, Gaffard, and Nesta (2009). In the sociology of knowledge, it is similar to the dialectical thesis presented by Sztompka (op cit) and a Marxist methodology reproduced by Resnick and Wolff (op cit). We will review these works in light of the evolutionary methodology presented in this paper. The substantive difference between the methodology of this paper and of the rest mentioned here is the great epistemic divide of unity of knowledge. To quote Hawking (1988) on this matter of unity of the scientific worldview, the essential nature of the unitary episteme in everything (Barrow 1991) remains the core of the new scientific episteme. Such an assertion centering on unity of knowledge and its construction of the unitary knowledge-induced world-system projects the epistemological nature of scientific revolution. We need to appreciate this viewpoint, for although it arises from the natural sciences, it carries on relevance in the social sciences as well, keeping in view the intra- and inter-systemic unity made possible in the general-system depicted in Figure 4. Hawking (1988, 10-11) writes in terms of the unitary scientific project: The eventual goal of science is to provide a single theory that describes the whole universe. However, the approach most scientists actually follow is to separate the problem into two parts. First, there are the laws that will tell us how the universe changes with time…..Second, there is the question of the initial state of the universe. Some people feel that science should be concerned with only the first part; they regard the question of the initial situation as a matter for metaphysics or religion. They would say that God, being omnipotent, could have started the universe off any way he wanted. That may be so, but in that case he also could have made it develop in a completely arbitrary way. Yet it appears that he chose to make it evolve in a very regular way according to certain laws. It therefore seems equally reasonable to suppose that there are also laws governing the initial state.

Barrow (1991, 15-16) writes about the unitary law of “everything” (slightly edited): The current breed of candidates of the title of a ‘Theory of Everything’ hopes to provide an encapsulation of all the laws of nature into a simple

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Human Potential, Wellbeing and Philanthropy and single representation. The fact that such unification is even sought, tells us something important about our expectations regarding the Universe. These we must have derived from an amalgam of our previous experience of the world and our inherited religious beliefs about its ultimate Nature and significance. Our monotheistic traditions reinforce the assumption that the Universe is at root a unity that is not governed by different legislation in different places neither the residue of some clash of Titans wrestling to impose their arbitrary wills upon the Nature of things, nor the compromise of some cosmic committee.

Gunnar Myrdal and the Evolutionary Economic Worldview A great deal of similarity between Myrdal’s (1968) idea of “the wider field of valuation” in development theory and our formulation of the wellbeing criterion exists. The moral and social spectrum of valuation in the development worldview led Myrdal to become utterly dismayed with neoclassical economic theory. He attached the utilitarian foundation of welfare economics and suggested academic change in this regard. Myrdal (1987, 274) wrote in this regard: Hundreds of books and articles are produced every year on welfare economics, reasoning in terms of individual or social ‘utility’ or some substitute for that term. But if the approach is not entirely meaningless, it has a meaning only in terms of a forlorn hedonistic psychology, and a utilitarian moral philosophy built upon that psychology. I have always wondered why the psychologists and philosophers have left the economists alone and undisturbed in their futile exercise.

Likewise, there is a profound commonness in the concept of circular causation between our and Myrdal’s methods, further carried over by Streeten (1958), Kaldor (1975), Toner (1999), and others. On this point Toner (1999, 124) writes importantly to bring out the distinction between mainstream economic theory, principally neoclassical economics, and the theory of circular causation. The latter endogenously integrates economic and non-economic elements of a comprehensive understanding of economic theory for studying total wellbeing: The notion of complementarity in production and consumption is central to CC (circular causation in the process of cumulative causation) theory. For Kaldor, given his concern with growth and dynamics as opposed to the allocation of fixed resources, complementarity in production and consumption is far more pervasive and significant than the neoclassical principle of substitution.

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The same kind of strong circular causation between economic and noneconomic complementarities is supported by Kaldor (op cit). Joseph Schumpeter on Evolutionary Economics à la Austrian Economic Legacy Schumpeter, like Myrdal and Boulding (1981), in the literature on evolutionary economics modeled the development paradigm as a dialectical process in creative destruction. The states of economic change were not to be found in equilibrium. Rather, disequilibrium and its cumulative deepening were seen as the perpetual design of change. This can be seen in the Schumpeterian argument of technology in development. The most important form of a technology-like factor is human potential. How can we treat this idea in the combined anticipated effects of Schumpeter and Myrdal’s theories of evolutionary economic dynamics relating to development? Gafford (2009) refers to Schumpeter’s disequilibrium approach in such a case with technology-like effects, which we take as human potential: As shown with the model used by means of numerical simulations, the introduction of the new technology generates an initial fluctuation, which brings about temporary unemployment as well as a temporary fall in productivity. However, this fluctuation very soon dampens down and the economy converges to a new steady-state corresponding to the superior technology, with a higher level of productivity—which allows lower prices and higher real wages—and full employment.

But if such temporary disequilibrium effects as in the case of human potential to bring in new ideas remains in abeyance, Myrdal’s circular causation will cause the multiplying and deepening of the temporary perturbations into large proportions. An example is the flare of inflation, which as Winston Churchill remarked, is like pregnancy; it runs its course. Myrdal’s cumulative causation also has such “butterfly effects” as to multiply the small and temporary disturbance à la Schumpeter into large consequences. The evolutionary learning approach, while being dialectical, agrees with the dynamic process implied in Schumpeter and Myrdal’s development approaches. Yet, it is not a normative disequilibrium model. Instead, the epistemic model of evolutionary learning in unity of knowledge at large is an evolutionary equilibrium model of creative evolution carrying the past into the ever-new future continuously and across systems. Here then is a critical difference despite methodical

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similarities in the approaches of all these contending general-system models of sustainable development. We have defined this in accordance with the continuous synergy between human potential, philanthropy and wellbeing. The Dialectical Model of Unity of Knowledge

and

Evolutionary

Learning

Model

Sztompka (op cit) and Resnick and Wolff (op cit) formalize their similar dialectical models of circular causation that agree methodically with our evolutionary learning model. Yet, methodologically, the two sets of models remain apart. The difference lies solely on the nature of the epistemic source of knowledge affecting the Mind-Matter interrelationship in respect to the development problem. Mind-Matter starts from and ends in the rationalist premise according to the dialectical reasoning of the rationalist authors. 4 Consequently, when this epistemological premise is brought into the development of economic theory, the issues of transitivity and economic rationality enter. As a consequence of such an old mainstream postulate, which Amartya Sen (1977) refers to as the domain of the “rational fool,” human potential becomes human capital. Thus, the neoclassical postulates of optimality, stead-state equilibrium, predictability, and permanence of economic rationality define individual, market and social behavior. In such cases, human potential ceases to be a continuous and pervasive evolutionary act of learning over the dimensions of knowledge, time and space in which our epistemic model of evolutionary learning abides. If otherwise this possibility was allowed, then two consequences will arise. Firstly, the existence of utility, welfare and production functions is denied. No convex to the origin or well-defined surfaces of resource allocation between competing agents can exist. Secondly, due to predictability in the midst of simulacra of possible resources, allocations are lost. The probability distribution of resource allocation is not acceptable as a way out of the unmeasured uncertainty that remains. See O’Donnell (1989) on Keynes’ epistemology. The evolutionary learning dialectical model of development in respect of expression (7) and Figure 4 overcomes the mainstream indeterminateness of the development dynamics. This is realized by assigning “near” spot-valuation to the uncertain events by reading the probabilities of occurrence of given contingent states with better accumulated stock of knowledge-flows. Such “near” spot-valuation points are the nodes of the overlapping generation model for simulating

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allocation resources for attaining the intertemporaal wellbeing objective along the suustainable pathh of evolution nary learning.. Prediction in n such an overlapping generation model m is thus attained by cconvergence under u the evolutionaryy learning prrocess. This is i both an enndogenous prrocess of consciousneess and is partticipative in nature n in the m model of partticipatory developmennt. This is thee epistemic co onsequence oof unity of kn nowledge. Here humann potential neccessarily remaains predominaant. Figure 5 shows the congruence in i the domainn of the Min nd-Matter dialectical reelationship beetween the ratiionalist doctriinaire and the episteme of unity of kknowledge (Chhoudhury 200 09).

Amartya Seen (2010): Adaptation A off the Paradi digm of Com mmodities, Capabilitiess and Wellbeiing to Circula ar Causation Organic Rellations of Epistemic O Oneness Here is a straightforw ward adaptation n of Amartya Sen’s paradig gm to the evolutionaryy learning worldview of unity of knoowledge expllained by expression ((7). Sen form malizes his paradigm ass follows. W We have drop pped the specificationn to individuaal “i” in Sen’s actual formullation and repllaced this with the soccial choice equuivalence:

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What is the path towaard reaching D(..) D from eitheer side of the spectrum in expressioon (18)? In the absence of the epistemicc premise, theere are no binding grouunds for the innterrelationshiips to exist beetween the com mmodityvariables annd their variious function nal transform mations. Conssequently, Amartya Seen's paradigm can equally invoke a utilittarian type aggregation of happinesss, and this is of the Benthaamite form. O Or, by Sen's arguments a against utilittarianism, thee aggregation may be compplex but not ethical e by way of unityy of knowledgge between th he good thing s of life; that is, in the life-sustaininng paradigm of developmeent. Consequeently, the mix of needs and wants as acceptabble choices is permittedd in the su ustainable developmennt regime. Yet Y the con nsequence oof individualism and independencce of preferences in such so ocial aggregatiions is not reccognized. In brief, Amartya Sen's claimed eth hical social agggregation of individual preferences in his develoopment paradiigm is not epiistemologicallly viable. It is simplyy an exogenoously enforceed state of ppreferences off a sheer analytical nnature. Sustaiinable develo opment cannoot be the end dogenous achievementt of such an end of learnin ng otherwise attained by the t moral reconstructioon towards thhe unity of the t developm ment worldview w by the episteme of unity of know wledge.5

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Application of the Evolutionary Learning Paradigm of Endogenous Development: Canadian Natives A development paradigm centered on human potential with development expenditure as a case of philanthropy in the wellbeing function provides a fresh policy perspective for Canadian Natives. Thus far in Canadian Native history, the framework of economic development has focused on the model of the matching of the Aboriginal Peoples to the non-Aboriginal levels of education and training, the reduction of the unemployment rate to the non-Aboriginal level, and the potential for raising tax revenue from a fast growing population of Canadian Natives. The focus is thus on economic efficiency and productivity gains. This presents a neoclassical framework of development using the target of optimal human capital investment in economic growth. Yet the recent history of Canadian Native labor force and population change reveals no significant gains. On this issue, Mendelson (2004) writes: Whereas fewer than one-third (31.3 per cent) of all Canadians have less than a high school graduation, almost one-half (48.8 per cent) of the Aboriginal identity population did not graduate from high school. Only 9.9 per cent of the Aboriginal identity population graduated from high school, as opposed to 14.1 per cent of the population overall. About 12.1 per cent of the Aboriginal identity population had a trades certificate or diploma, and another 12 per cent graduated from a college. A mere 4 per cent of the Aboriginal identity population had a university degree, as opposed to 15.4 per cent of all Canadians. Only in trades certificates and diplomas is the Aboriginal identity population achieving better than the rate of coursecompletion among the total population. In 2006, the employment rate of First Nations people living on reserves was 51.9 per cent. Those living off reserves recorded an employment rate of 66.3 per cent. First Nations People living off reserves, but who were registered for Native Indian status, recorded a 71.4 per cent employment rate. In 2006, on-reserve Native Indians had an employment rate of 51.9 per cent compared with 50.0 per cent in 2001. First Nations people living off reserve but without registered status had an employment rate of 64.0 per cent. This was up from 58.2 per cent in 2001. The unemployment rate among First Nations people aged 25 to 54 living on-reserve was 23.1 per cent. By comparison, 12.3 per cent of First Nations people living off-reserve and 5.2 per cent of non-Aboriginal people were unemployed. Among First Nations people living off-reserve, unemployment rates for people with Registered Indian status were 13.7

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per cent in 2006 compared to 9.4 per cent of people without Registered Indian status. Projections between the years 2006 and 2026 under the assumption of Aboriginal People matching the educational levels of non-Aboriginal People in 2006 show the following trends: The labor force participation rate of Aboriginal People will change by rates between 9.50 per cent to 7.02 per cent according to the best and lowest projection scenarios, respectively. This compares with a percentage change of -9.59 for nonAboriginal People for the same time period. The percentage change in employment for Aboriginal people compared to the change for nonAboriginal people between 2006 and 2026 will stand at 347206/1225071 = 28.34 per cent; or 155857/1225071 = 12.73 per cent on the basis of best or worst scenarios of projection, respectively. Contribution to productivity in the best scenario of projection by 2026 is expected to be between 0.007 per cent and 0.014 per cent in 2026. Additional growth contribution to output is expected to be 0.015 per cent of GDP. Additional employment growth would be between 0.008 and 0.016 per cent by 2026 (see Gionet (2009)).

Inference from the Canadian Native Statistics The above projections point out that the model of human capital development relating to an expected positive correlation between education, employment, labor force participation, and income generation is an efficiency approach that overlooks the importance of the labor market adjustment issue by way of adopting empowerment and cultural sensitivity to work. Canadian Natives would rarely gain even with massive expenditure as philanthropy by the Canadian Government. On the other hand, human potential with national development expenditure to generate endogenously progressive labor force adaptation requires involvement of Canadian Natives in their own culture of development, yet while remaining within the Canadian national perspective (Battiste 2002). Indeed, the unemployment rates of Canadian Natives remain very high, yet the increasing population size and the resulting increasing labor participation rate require labor market adaptation. This can be realized by the cultural sensitivity of the Canadian Natives in the Canadian national perspective of the Aboriginal development paradigm that we have presented in this paper. The objective is to integrate together the goals of human potential, philanthropy and wellbeing.

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Conclusion This paper has contributed a new paradigm of participatory development in the context of a general-system model of evolutionary learning. This development worldview involves a specific phenomenological model of epistemic unity of knowledge. We constructed the model in the generalized case and particularized it to the case of human potential as a goal of participatory development. In the phenomenological model, philanthropy is treated as a productive resource. Wellbeing is the ultimate evaluative criterion. It conceptualizes and measures the epistemic criterion of organic unity between human potential, philanthropy, and a gambit of other variables that either complement or show differentiation between them. The latter kind of relationship needs ethical reconstruction as the normative perspective in simulation. Following the formalism of the general theory of sustainability in the context of the immanent evolutionary learning model that arises, the applied case of Canadian Native wellbeing in such a model was addressed. A wider range of data could extend the empirical exercise to a policytheoretic study of Canadian Natives’ wellbeing using the circular causation method, which we addressed in this paper.

References Barrow, J. D. 1991. Theories of Everything: The Quest for Ultimate Explanation. Oxford: Oxford University Press. Battiste, M. 2002. “Indigenous Knowledge and Pedagogy in First Nations Education: A Literature Review with Recommendations.” Report, Ottawa: Indian and Northern Affairs Canada. Blaug, M. 1993. The Methodology of Economics. Cambridge: Cambridge University Press Bloom, N., and Reenen, J. V. 2010. “Why Do Management Practices Differ Across Firms And Countries?” Journal of Economic Perspectives 24(1): 203-224. Boslough, J. 1985. Stephen Hawking's Universe. New York, NY: Avon Books. Boulding, K. E. 1981. Evolutionary Economics. New York: Russell Sage. Cantner, U., Gaffard, J. L., and Nesta, L. (eds). 2009. Schumpeterian Perspectives on Innovation, Competition, and Growth. New York, NY: Springer. Choudhury, M. A. 2013. Socio-Cybernetic Study of God and the WorldSystem. Pennsylvania: IGI-Global Publishers.

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—. 2011. “On the Existence of Evolutionary Learning Equilibriums.” Journal for Science 16: 68-81. —. 2009. “Dialectics in Socio-Scientific Inquiry: Islam Contra Occident.” International Journal of Sociology and Social Policy 29(9-10): 498511. Choudhury, M. A., and Harahap, S. S. 2009. “Complementing Community, Business and Microenterprise by the Islamic Epistemological Methodology: A Case Of Indonesia.” Islamic and Middle Eastern Finance and Management 2(2): 139-159. Choudhury, M. A., Hossain, M. Z., and Hossain, M. S. 2011. “Estimating an Ethical Index of Human Wellbeing.” The Journal of Developing Areas 45: 375-409. Dasgupta, A. K. 1987. Epochs of Economic Theory. Oxford: Basil Blackwell. Debreu, G. 1959. Theory of Value: An Axiomatic Analysis of Economic Equilibrium. New York: John Wiley. Demarting, G. 1999. “Human Development Index” in Encyclopedia of Political Economy, edited by P.A. O’Hara. London: Routledge. Gafford, J. 2009. “Innovation, Competition, and Growth: Schumpeterian Ideas within a Hicksian Framework” in Schumpeterian Perspectives on Innovation, Competition, and Growth, edited by Cantner, U. Luc Gaffard, J. and Nesta, L., 7-24, New York: Springer. Gionet, L. 2009. First Nations People: Selected Findings of the 2006 Census. Ottawa: Statistics Canada. Gruber, T. R. 1993. “A Translation Approach to Portable Ontologies.” Knowledge Acquisition 5(2): 199-200. Hawking, S. W. 1988. A Brief History of Time. New York: Bantam Books. Kaldor, N. 1975. “What is Wrong with Economic Theory?” Quarterly Journal of Economics 89(3): 347-357. O’Donnell, R. M. 1989. Keynes: Philosophy, Economics & Politics. London: Macmillan Press Ltd. Kim, W. C. and Mauborgne, R. 2005. Blue Ocean Strategy. Boston: Harvard Business Press. Maurer, B. A. 1999. Untangling Ecological Complexity. Chicago: University of Chicago Press. Mendelson, M. 2004. Aboriginal People in Canada's Labor Market: Work and Employment Today and Tomorrow. Ottawa: The Caledon Institute of Social Policy. Wikipedia. 2012. “Millennium Development Goals.” Accessed May 25. http://en.wikipedia.org/wiki/Millennium_Development_Goals.

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Moore, G. E. 1962. Principia Ethica. Cambridge: Cambridge University Press. Myrdal, G. 1958. “The Principle of Cumulation” in Value in Social Theory, a Selection of Essays on Methodology by Gunnar Myrdal, edited by Streeten, P., 198-205, New York: Harper & Brothers Publishers. —. 1968. “The Wider Field of Valuations” in Asian Drama, an Inquiry into the Poverty of Nations, Vol. 1, 49-127, New York: Pantheon. —. 1987. “Utilitarianism and Modern Economics” in Arrow and the Foundations of the Theory of Economic Policy, edited by George R. Feiwel, 273-278 London: Macmillan. Nikaido, H. 1987. “Fixed Point Theorems” in The New Palgrave: General Equilibrium, edited by J. Eatwell, M. Milgate and P. Newman Eds. 139-44, New York: W.W. Norton. Popper, K. 2004. The Logic of Scientific Discovery. London: Routledge. Prigogine, I. 1980. From Being to Becoming. San Francisco: W.H. Freeman. Resnick, S. A., and Wolff. R. D. 1987. Knowledge and Class. Chicago: University of Chicago Press. Rucker, R. 1983. Infinity and the Mind: The Science and Philosophy of the Infinite. New York: Bantam Books. Seidel, V. J. 1986. Kant, Respect and Injustice: The Limits of Liberal Moral Theory. London: Routledge & Kegan Paul. Sen, A. 1977. “Rational Fools: A Critique of The Behavioural Foundations Of Economic Theory.” Philosophy and Public Affairs 6(4):344-317 —. 1986. Poverty and Famines: An Essay on Entitlement and Deprivation. Oxford: Clarendon Press. —. 1990. On Ethics & Economics. Oxford: Basil Blackwell. —. 2010. Commodities and Capabilities. New Delhi: Oxford University Press. Shackle, G. L. S. 1972. Epistemics and Economics. Cambridge: Cambridge University Press. South Commission. 1990. The Challenge to the South, Oxford: Oxford University Press. Streeten, P. A. 1981. Development Perspectives. London: Macmillan. Sztompka, P. 1991. Society in Action: The Theory of Social Becoming. Chicago, IL: The University of Chicago Press. Toner, P. 1999. Main Currents in Cumulative Causation: The Dynamics of Growth and Development. Houndmills, Hampshire: Macmillan Press Ltd.

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United Nations Development Program (UNDP). 1997, 1998, 1999, 2000. Human Development Report Issues. New York: Oxford University Press.

Notes 1

By Taylor’s theorem of expansion of a continuously differentiable around a point, say T*, hence x*(T*), we obtain, h(x(T)) = h*(x*(T*)) + 6i{(xi-xi*)/1!}*[(dh/x(T)}.(dxi(T)/dT)]~T + 6i{(xi-xi*)2/2!}*[(d/dT)(dh/xi(T)}.(dxi(T)/dT)]~T + higher terms. Here x = {x1, x2, …, xn} Writing the above expression in the following form yields the development meaning of change: [h(.)-h*(.)] representing advancement in human potential as caused (on the righthand side of the Taylor series) by factors of enhancement in resources and the many-faceted factors on which development as a process stands, while allowing the human potential to progress positively by the evolutionary knowledge value that reflects unity of being and becoming between the good things of life. Elsewhere, I have explained the primal characteristic of the good choices of life in development to be the dynamic basic-needs or life-sustaining choices that are aggregated from the micro-level to the complex nature of social aggregation (Choudhury 2013). 2 The expression for T is the implicit function derived from h* = h(T,x(T)) in expressions (7) and (8). By the condition of continuously differentiable over continuums of knowledge, time and space dimensions, the Jacobian determinant of the inversion will exist. Hence, T = F(x(T)). This equation comprises expressions (10, 12). 3 The Quran (14:24-27). 4 Sztompka writes (op cit, 115): “Therefore we cannot but seek the ultimate, primary mover of society in their traits and properties—in brief, in human nature.” In this paper we have equated the claim of human nature with rationalism as a dialectical philosophy. 5 Consider Sen's entitlement failure in his starvation set (1986). In order to restore optimal entitlement, Sen argues that the interior point can be moved on to the welfare surface by means of endogenous (consciousness) and exogenous (government development expenditure as policy). But because of this incongruent mix, there can be two effects. Firstly, the endogenous and exogenous preferences will break apart. The exogenous preferences will yield a welfare function of the utilitarian type. The endogenous preferences will yield continuous perturbations of the welfare surface. In this case, Sen has nothing to impart in respect of control and predictability. The second effect is that an interior point cannot be moved on to the welfare surface because of the perturbations caused between the exogenous and endogenous mix of preferences. Thereby, no optimal welfare surface will ever exist. On this issue, Sen's starvation and entitlement failure methodology will never reach an optimal and predictive state.

THE ROLE OF FIQH IN ISLAMIC FINANCE ABDULAZEEM ABOZAID

Introduction Islamic law is the most flexible and heavenly revealed law when compared with the other revealed laws in their original versions, as the Quran tells us. Thanks to this flexibility, Islamic law, or Fiqh, can accommodate many market needs. Elements of the flexibility of Islamic financial law include: permissibility being the original rule in Shariah; Shariah rules not being all fixed or permanent, for they include the Mutaghiyyrat (changeable) elements; and prohibition not being of the same degree in Shariah. Equipped with a flexible basis for legislation, the Faqih is provided with general guidelines that help him reach sound and acceptable rulings. These guidelines teach the Faqih to observe the following while judging or developing a transaction: the structure of the transaction; the essence of the transaction; the general as well as the particular Shariah objectives of the transaction; and the implication of implementing the transaction. Shariah also teaches the Faqih to prioritize these requirements when compromising some is necessary. Wellestablished Shariah concepts, however—like Shariah policy, public interest, and necessity—have been used in the modern Fiqh, especially in Islamic finance, to reprioritize these requirements and sacrifice some. Although these concepts are Shariah concepts and some are originally valid instruments in Ijtihad Fiqhi, applying them in the context of Islamic finance has raised major Shariah concerns. The following discussion touches on some of the proper Fiqh instruments for Islamic finance, and then it elaborates on the instruments effectively in use and their Shariah concerns.

The Proper Fiqh Instruments in Islamic Finance Shariah equips Shariah scholars conducting Ijtihad with multiple Fiqh instruments that help them create and endorse products. The following are the most important Fiqh instruments available to the Mujtahid.1

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Shariah Texts and Their Interpretations Shariah texts refer to the Quran and Sunnah. In the area of financial transactions, Shariah texts provide general rules and rarely provide details. This is because the nature of financial transactions changes over time (Mutaghiyyrat) and tends to get more complicated with the advance of age. Therefore, it will not be convenient to provide details on something changeable by nature, because these details will not be relevant to the modern applications of the contracts. The general rules provided by the Shariah texts, however, are sufficient for Muslim jurists to deduce Shariah rules for the modern transactions, because these general rules represent principles on the bases of which correct Shariah rules for the new financial transactions can be derived. When attempting Ijtihad, however, Muslim jurists may find that the same Shariah text pertaining to a financial transaction may be interpreted in multiple valid ways. In fact, this applies to most legal Shariah texts and explains the reasons why different schools of Fiqh exist within the boundaries of Shariah. Contemporary Shariah scholars do not need to restrict their fatawa (legal opinions) to one particular valid interpretation, or even to the interpretations made by the classic schools of Fiqh, as long as the interpretation they choose, or develop on their own, is basically valid (i.e. it is not in conflict with the established Shariah rules and principles, and the Arabic language can accommodate it within the context of the text).

Permissibility Being the Original Ruling in Shariah In the absence of a clear and authoritative text, things are deemed by Shariah to be halal (permissible). The prohibition, on the other hand, needs to be communicated to Muslims in definitive terms in order to be established over something. This, in fact, constitutes a vital tool in the hands of the Shariah scholars to endorse new Islamic banking and finance products and transactions. Shariah boards can endorse new structured products or transactions as long as they are free of prohibited elements, like Riba (interest), Gharar (uncertainty) and Ghabn (fraud).

Prohibition Being of Different Categories Prohibition in Shariah is not of the same category, especially in the field of financial transactions, for there exists the so-called haram lithatihi (unlawful in itself) and haram lighairihi (unlawful in consideration of something else). The first prohibition is applicable to cases where the evil

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is embedded in the very act, like in Riba, where charging interest is an evil in itself, or in gambling, where it involves unjustified seizure of others’ properties. The second prohibition relates to acts that are originally lawful but made unlawful owing to the presence of certain conditions, like sale contracts when concluded during Jum'a (Friday) prayer (Kamali 1989, 330). Although the sale contract is originally halal by virtue of some textual evidence, it is deemed haram if concluded during Jum’a prayer, since engaging in the act of sale, or any other transaction, may lead to the evil of missing Jum’a prayer. In other words, the haram lighairihi is unlawful in view of its results and implications. 2 Being so, there is a procedure for acts under this category of prohibition not to be regarded unlawful if they can be construed as not leading to the perceived cautions. This means that if care is exercised for the act not to lead to the feared evil, then the act may be regarded as lawful. This, in fact, adds flexibility to Islamic law and functions as a relaxing instrument, particularly within the framework of Islamic financial contracts. However, it remains the responsibility of Shariah scholars to identify the unlawful acts that can fall under this category of prohibition, in order to look into the possibility of neutralizing them by laying the appropriate conditions that will deprive these acts of their evil-producing nature. In this regard, the very prohibition of gharar (uncertainty), one of the main reasons for deeming many financial transactions unlawful, is declared by some esteemed old Shariah scholars not to be meant for itself but instead in conjunction with its possible evil implications (tahreem tharai’i), such as a possible resulting dispute between the parties to the contract.3 This means that gharar is prohibited only when evils are expected; if, however, none of the evils or harms recognized by the Shariah is to be anticipated, then the contracts involving the gharar can be validated. This stand may be supported by the existence of many exceptions that Shariah makes to the gharar prohibition, like in the Shariah validation of gharar-bearing contracts like Salam and Istisna’,4 and also in tolerating gharar in contracts when it is minor and trivial in size.

Analogy (Qiyas) Analogy (qiyas) is very instrumental in Ijtihad Fiqhi: it relates to the extension of a Shariah ruling of an old established case to a new case when the latter shares the same illah (effective cause) as the former. Since Shariah texts have stated the rulings of many financial transactions, the Faqih may make use of these stated rulings by extending the same to the new transactions if they are found to be sharing the same illah. For

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example, the modern day financial derivatives, when used for hedging, have been basically found to be similar in essence to gambling and games of luck, and therefore, they have been ruled by contemporary scholars as unlawful, since gambling itself is stated by Shariah texts as unlawful. Thus, analogy is a very vital and useful instrument, and it ensures consistency between Shariah and reason. The challenge however is to a certain extent in identifying the illah and to a larger extent in assessing the similarity of the new case with the old case, a process that jurists have termed as tahqiq al-manat.

Public Interests (al-Maslaha al-Mursalah) By definition, Maslaha Mursalah refers to any interest that is deemed to be beneficial to the society and that has no textual evidence on its authority or otherwise. It is a juristic device whose authority has been established based on the fact that all Shariah rules are meant to realize public benefits. Muslim jurists have built on this fact the notion of Maslaha: deeming as permissible anything that realizes public interest and as invalid or impermissible anything that brings about harm and evil. One of the basic conditions, however, for the operation of this juristic instrument is for the perceived Maslaha not to be in conflict with any Shariah text or established principles, for human perception of Maslaha may err, and Shariah texts and principles must prevail over any human legal exercise.5 Among the major Fiqh schools, the Maliki school is known to be the leading proponent of Maslaha as one of the Ijtihad instruments and sources of Shariah. On the other hand, other Fiqh schools reject it as an independent source of Shariah, though they practice it, possibly under a different name, 6 without theoretically admitting its authority as an independent source of the Shariah (Abozaid and Dasouki 2009, 7).

The Relationship between Maslaha and Maqasid al-Shariah (Shariah Objectives) Maslaha directly relates to Maqasid al-Shariah, since the very realization of Maslaha is the primary objective of the Shariah. Protection of religion, life, lineage, intellect and wealth are the five essential values of Shariah, and all Shariah rules revert to these values. Rules of Ibadah and Jihad, for example, relate to the protection of religion. Islamic rules of financial transactions, on the other hand, relate to the protection of wealth.

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Protection of all these essential values is the ultimate Maslaha for human beings, and thus, it is the primary Shariah objective.

Blocking the Means to Evil Among the valid juristic devices that the Mujtahid needs to uphold while attempting Ijtihad on a Shariah issue is Sad al-dharaiy’, which means blocking the means to evil before it materializes. A particular transaction could be lawful in itself, but in view of its goal or outcome it may lead to evil, and thus, it should be ruled as unlawful. Leasing a real estate property, for example, to a company that will use it as a gambling casino is unlawful, though the lease contract in essence is lawful; this is in view of the implications resulting from this lease contract, which is in the context facilitating the evil of gambling. Another application is a sale contract when executed in a way that renders it an interest-bearing loan. Selling an asset on a credit basis and then buying it instantly on the spot for a cash price and in collusion with the buyer is effectively a Riba contract, whereby the original seller has advanced cash money to the buyer, then claimed from him more, and the asset of the sale has been used only as a tool to presumably legalize the exchange of cash (inah sale). In fact, Sad al-dharaiy’ is of a special importance in Islamic finance since it protects it from the invasion of products that have a valid structure but an unlawful essence. In other words, it helps ensure the identity of Islamic finance being genuinely distinguished from that of conventional finance. Thus, Sad al-dharaiy’ is a juristic device that excludes rather than endorses new products, yet it is an extremely vital tool in ensuring the quality of the products being genuinely Shariah-complaint and not conducive to the evils of the conventional banking and finance products.

Invalid Fiqh Instruments and Applications Despite the valid instruments with which Shariah equips the Mujtahid, when determining Shariah validity of contracts and transactions as detailed above, the contemporary Ijtihad in Islamic finance has departed from the proper tools and methodology of Ijtihad Fiqhi by adopting inapplicable instruments, twisting or misusing some instruments, and overlooking important instruments as detailed in the following discussion.

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Use of Inapplicable Instruments Shariah Policy (al-Siyasah al-Shar’iyyah). The term Shariah policy has recently entered the jargon of the fatawa related to Islamic banking and finance. Some products and transactions have in their list of fatwa justifications the term Shariah policy. So, what is Shariah policy, and is it a valid instrument with which Shariah boards can endorse products and transactions? The meaning of Shariah policy. Shariah policy, or al-siyasah alShar’iyyah, in its broad sense refers to the area in Islamic Fiqh that explains rulings related to policies and approaches taken in managing and organizing national policies in accordance with the spirit of the Shariah. It covers a whole spectrum of issues in areas like economics, the judiciary, politics and international relations (Abozaid and Dasouki 2009, 7). It is the management of the public and general affairs of the Muslim state in accordance with public interests and the interest of the Muslim state. Shariah policy involves different principles, including striking the balance between what is dictated by the circumstances and the stated Shariah rules. In other words, it gives the Muslim governor the needed flexibility to occasionally set aside an established Shariah rule in favor of a new rule that has Shariah-bearing if the latter serves the public interest or the state in a better way. It may involve the temporary suspension of some Shariah provisions that relate to Mubahat (the permissible). In other words, it relates to Maslaha in its macro applications, and in some of its applications, it relates to the estimation of the general darurah (necessity) that is capable of rendering the prohibited things permissible or the obligatory things not mandatory. Examples for Shariah policy include the launching of war or signing of treaties, disallowing marriage before a certain age, enforcing mandatory education, and enacting new laws. Who is to determine the Shariah policy? Shariah policy can only be determined by the Muslim government and cannot be determined by individuals, including Shariah scholars. This is because it relates to the management of the people and the state’s general affairs, which is the responsibility of the Muslim government. The assuming of the responsibilities of the Muslim government by individuals opens the door to an endless evil. Basically, individuals do not have the capabilities to draw general policies; and even if they come to possess them, it is feared that they may tilt the scale in their own favor and use this principle to serve their own private interests.

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The mishandling of Shariah policy in Islamic finance. Despite the above qualification, some Shariah scholars assume the Muslim government’s responsibilities in determining Shariah policies in Islamic finance. In the absence of Shariah-committed Muslim governments and their roles in drawing up the necessary Shariah policies in Islamic finance to meet the challenges facing this industry, individual Shariah boards and scholars have without authorization taken up this responsibility of the Muslim government and engaged themselves in practicing Shariah policy. However, the danger stems from the fact that realization of the public’s interests and maintenance of Shariah objectives, which are the core of Shariah policy, will have then been placed at risk. This is because Shariah policy is quite a sensitive principle. When Shariah scholars determine Shariah policy, their presumed transparency may be challenged and be influenced by the material gains they may derive from the Shariah rules they determine on the basis of their exercise of the Shariah policy. Obviously, Shariah scholars are not neutral or independent in this regard, but rather beneficiaries from the rules that they may justify through Shariah policy. In other words, it is justifiably feared that Shariah boards may misuse this very sensitive legal tool called Shariah policy to tolerate unlawful transactions that would please their employers (Islamic banks) under the pretext and the claim that these transactions serve the public interest or the economies of Muslim countries. Besides, competitions between banks and lack of coordination among Shariah boards will very likely result in conflicting Shariah policies, yielding conflicting rules, products and stances on what constitutes a public interest. Eventually, it is the Ummah (Muslim community) in general that will suffer from this practice, and the Shariah policy will lead to the opposite of the goal for which it has been designed. It is for these two reasons that Islamic law gives the power of determining Shariah policy to the Muslim government and not to individual bodies or entities. In fact, it is a tool in the hand of the official politicians, as the name indicates, and not in the hands of anyone else, so the absence of a Shariah-observant Muslim government does not give the right to individuals to assume responsibilities that cannot be theirs. Moreover, determining an issue on the basis of Shariah policy is not simple; it is a process that involves observing different considerations, such as the degree of urgency, and measuring the harms against the benefits expected and the implications on all levels. It may also involve setting a timeframe that needs to be observed and possibly amended in light of the results, implications and changing circumstances. Therefore, it is not a simple process but rather one that requires an institution at the

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topmost government level. For this reason, determining a Shariah policy is joint governmental work. The Muslim ruler should set Shariah policies after consultation with the Shura (consultation) council, which houses trustworthy and independent consultants of different specialties and backgrounds. Another important element that relates to the operation of Shariah policy is the enforcement of the policy, for the absence of the enforcement power may lead to opposite results. In the context of Islamic banking and finance, if not all of the financial institutions abide by the rules issued through Shariah policy, disorder and chaos will prevail, and these institutions will fail to play their perceived economic role in the society. Thus, even when individuals follow the Shariah policy correctly, lack of enforcement will hinder its success and may render it ineffective. However, none of the above is observed when Shariah policy is determined by individual Shariah scholars or Shariah boards, and apart from that, the lesson that experience has taught us is that transparency is not something that can be taken for granted in any person. Shariah scholars—being humans, and thus, fallible—are never an exception. In fact, Shariah dictates that transparency and credibility must be sought in anyone who is to hold an office attending to public affairs and needs, but being a practical and realistic religion, Shariah does not stop at this point. In fact, it places rules and restrictions on the conduct and the behavior of such a person. The Muslim judge, for example, must be among the most trustworthy persons to be eligible for his position, but his proven trustworthiness never gives him the right to take fees or accept gifts from the parties attending his court, for this may trigger his instinctively sinful human nature, and thus, influence his judgment and cause him to deviate from the path of justice.7 The Principle of Darurah (Necessity). It is a well-established principle in Islamic law that Darurah, which means necessity, renders the prohibited things permissible. All schools of Islamic law unanimously agree upon this principle, and it constitutes a Fiqh maxim that reads, “Necessities permit the forbidden” (Al-Dharurat Tubih Al-Mahzurat). It means that the forbidden can be committed without sin when necessary. However, when jurists discussed and explained the applications of this Fiqh maxim, they mentioned what is known in Arabic as dawabit, which means conditions and guidelines, in order to ensure the functionality of this maxim. These guidelines (dawabit) are of course stated in or derived from the Shariah texts. One of the guidelines relates to what constitutes a darurah. The jurists’ approach to the concept of legal darurah can be

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summarized by saying that darurah is something that is indispensable for the preservation and protection of the five essential values: religion, life, intellect, lineage and wealth (Al-Shatibi n.d., 2/10). This means that being in the state of darurah gives the Mukallaf (the Muslim charged with Shariah rules) the legal excuse to commit the forbidden when it becomes indispensable for his survival (spiritually or physically). 8 Therefore, in order for the principle of darurah to be operative, the underlying act must be indispensable for the survival of the human being, i.e. it must be a necessity. However, some Fiqh schools have placed on par with necessity what is termed in the Shariah as Hajah (need), but only when it is public. This term refers to a human need that is not essential for the survival of human beings, but it is important for their wellbeing. In other words, hajah is that which a human can survive without, but only with hardship and difficulties. For example, having a car is not a necessity in Shariah terms, but it may be a public need in some places. The Misapplication of Darurah. Darurah has been loosely used in Islamic banking and finance to justify products that would not pass a Shariah scrutiny test and would breach basic Shariah rules. The justifying argument predicates on the submission that such products are indispensable for the survival and long-term sustainability of the Islamic bank due to certain uncontrollable considerations. Very clearly, this argument presumes that the very concept of banking is a necessity in itself, while in actual fact banking is not indispensable for the Mukallaf’s survival from the Shariah perspective, nor is it a public need in Shariah terms. If such darurah hypothetically exists, then it would rather legitimize dealing with conventional banks directly. Obviously, when Shariah prohibits something, it always provides alternatives. For example, when Shariah prohibits zina (sexual relations outside of marriage), it permits marriage; when it prohibits wine and pork for consumption, it permits all other sorts of food and drinks. Likewise, when Shariah prohibits certain contracts such as contracts based on Riba (interest) and gharar (uncertainty), it alternatively permits many contracts like sale, lease, salam, istisna’, mudarabah and musharakah. To economists, such contracts are even better alternatives to Riba and gharar, and ultimately, they can help develop a prosperous and healthy economy, while an economy that is based on Riba and gharar deepens the disparity between the rich and the poor and leads to inequitable and unjust wealth allocation in a given society. Thus, there is no darurah that may allow Islamic banks to abandon these beneficial contracts in favour of harmful and destructive ones.

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Moreover, tolerating a sinful activity on the basis of darurah never justifies the claim of its original permissibility. Islamic banks have tolerated certain products on the basis of darurah and then offered the same to the public as Shariah-compliant products. Obviously, this is a betrayal of Shariah rules and a betrayal of the clients’ trust, not to mention that it results in negative effects from such an attitude on the image of Shariah, if not Islam in general. Promoting as Shariah-compliant something that is not raises questions about the rationality of the religion by Muslims and non-Muslims alike, which may cause aversion to Islam.

Misuse of Valid Instruments Misuse of Maslaha. Contemporary Ijtihad in Islamic banking and finance has overemphasized Maslaha as a Fiqh instrument. In some cases it has been treated as a priority over Shariah texts as well as Shariahestablished rules. Upon the existence of a conflict between a Shariah text or an established rule and a Mujtahid’s perception of Maslaha, the latter has been sometimes given priority over the established Shariah text or rule, like in circumventing the prohibition of Riba (though its prohibition is clearly established) on the basis of Maslaha. This work is a departure from the legal Maslaha, i.e. the Maslaha that carries a legislative power in Islamic law, for a variety of reasons. First, the claim of a possible conflict between a Shariah text and Maslaha is an erroneous claim. If the Shariah text or rule is definitive, then it cannot be in conflict with a real Maslaha, because all Shariah rules aim at the realization of Maslaha. Therefore, in this case it is the assessment of Maslaha by the Mujtahid that will be deemed erroneous. In other words, the issue of a potential conflict existing between a definitive Shariah text and the Maslaha is not conceivable if we are viewing Maslaha from a Shariah perspective. However, if we are viewing Maslaha from a human perspective, then the conflict is plausible, but the determination of what is beneficial and what is harmful cannot be left to human reasoning alone.9 Human reasoning plays a role only in a framework guided by Shariah. This is because the inherent limitations of human beings posit a strong reason that requires Divine guidance to ascertain what is right and what is wrong (Abozaid and Dasouki 290, 7). Second, even if such a conflict hypothetically exists, then it is the Shariah texts that must be given priority over Maslaha. This is particularly true since Maslaha derives its authority from the Shariah text and not vice versa. It is illogical to give priority to a branch over its parent and source of authority (Al-Zuhaili 1993, 361).

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Third, the approach of giving priority to Maslaha fails to distinguish between a definitive (qat`y) and a speculative (zanniy) text. If the text is definitive with regards to its authenticity (thubut) and meaning (dilalah), then the ruling it produces is final and binding; i.e. there is no room for a human’s perception of Maslaha to add any interpretation to the text (AlGhazali 1413, 176; Al-Bouti 1982, 119). If the text is speculative with regards to its authenticity or meaning, then there may be an avenue for the perceived Maslaha to further interpret and give meaning to the text in a way that does not hinder its realization. This is acceptable as long as the perceived Maslaha meets all of its conditions: being public, not private; authentic, not false; and definitive, not probable (Al-Bouti 1982, 119). To summarize, upon presuming the occurrence of a genuine conflict between the Shariah text and the Maslaha, then priority must be given to the Shariah text and not the perceived Maslaha, provided that the Shariah text is definitive in terms of authenticity and meaning. If, however, there is a justifiable doubt over the authenticity or the meaning of the text, then there is an avenue for the perceived Maslaha to reconcile with the text. Twisted Interpretations of Shariah Texts and Fiqh Statements. Some interpretations of Shariah texts that come in the form of Fiqh statements made by some Fiqh schools have been twisted to help legitimize certain problematic Islamic banking and finance products. For example, although sale of future debt to a third party is ruled as unlawful by all Fiqh schools based on some Shariah texts, its validity has been falsely and mistakenly attributed to some Fiqh schools (like the Shafi’i school), and a groundless distinction has been made between a debt resulting from a loan contract and a debt resulting from other financial contracts, allowing the selling of the latter but not the former. In fact, neither the validity of the sale of debt nor this distinction has any Shariah bearing whatsoever. This position is based on twisted interpretations of Shariah texts and some Fiqh statements.10 Another example is inah sale. Although all Fiqh schools base the permissibility of the contract on its essence and objective, rather than its form and structure, which is the basis for the validity of the contract, cotemporary fatwa in Islamic finance have implied the opposite by considering a contract Shariah-compliant only if its from and structure are sound from a Shariah perspective. Not only do these fatwa contravene Shariah texts and principles by basing contracts’ permissibility on their form and structure rather than on essence and objective, but some of them also attribute such erroneous stands to the Shafi’i Fiqh school when they

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claim that this school rules the permissibility 11 of inah sales (Abozaid 2008b).

Overlooking Important Instruments Relevant Shariah Texts. Some Shariah texts have been overlooked in fatawa on Islamic banking and finance products although they are closely related to the fatawa in question. For example, Shariah texts very clearly state that combining sale contracts and loan contracts in one transaction is unlawful ( 12"ϊϴΑϭ ϒϠγ ϞΤϳ ϻ" or, “it is prohibited to combine sales and loans”), and like sale contracts, in this regard so is any commutative contract as elaborated by jurists (Al-Dasuqi n.d., 3/76). This is because the sale or the commutative contract in general can be used to cater to interest in the loan contract. For example, interest can be catered to in sale contracts by demanding a price that is higher or lower than the market value, like in the lender colluding with the borrower to give him an interest-free loan but conditional on the latter buying from the former something at higher than the market value or selling him something at lower than the market value. However, this Shariah text has been totally overlooked in a variety of products, like in a product termed “Islamic pawn broking.” Herein the bank provides a so-called interest-free loan conditional on the borrower providing valuables that will be “safeguarded” by the bank against fees, so that the bank can profit from the loan indirectly through the fees charged on the so-called safekeeping of the valuables. Another product is the service-based Islamic Credit Card. Herein the issuing bank provides the credit on an interest-free loan basis; however, it charges the card holder for the embedded services as well as the extra services coupled with the card, like the free products the card holder may be entitled to when subscribing to the cards. This practice is basically valid, but provided the fees are against the services and not the loan. To ensure it is so, the market value of these embedded or attached services must not be lower than the fees charged on the card. However, in practice it is much lower, which means that the fees are meant to cater to the interest over the loan. Blocking the Means to Evil. Although this instrument is vital and important for identifying the Shariah-compliant products and protecting contracts from being misused and manipulated as elaborated earlier, it has not received the due attention by Shariah scholars working for Islamic banks. This is demonstrated by the existence of products criticized for being genuinely no different from the conventional products, and by the

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misapplication of some Islamic finance products to the degree of distortion. Had this instrument been observed and applied, it would have removed these practices from the shelves of Islamic banks and filtered financing deals so that no financing would be given when resulting in unfavorable implications

Conclusion From the above discussion, it can be concluded that Shariah has equipped Muslim jurists and scholars with useful and practical Fiqh instruments that, if used properly, will yield sound and controversy-free transactions and products. However, due to improper implementation of these instruments, some controversial products have crept into Islamic finance and ruined the image of the industry. The main reason behind this unfortunate phenomenon is the disorder and the lack of organization in the Ijtihad domain despite its tremendous importance and the adverse impacts of not giving it the due attention it deserves. To reform the status quo of Ijtihad in the field of Islamic banking and finance, the following urgent steps are necessary: -

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Ijtihad in Islamic finance must be exercised by an Ijtihad institution and not by individuals, at least on the products level, whereby a truly independent centralized Shariah committee has the authority to endorse or reject products. Besides highly qualified Shariah scholars, the independent central Shariah committee must include economists, lawyers and financial experts, and it must have a binding authority over the individual Shariah boards. In the absence of a Shariah-committed Muslim government, a body comprising highly qualified intellectuals of different relevant specialties, similar to a Shura council, can be formed to handle matters related to Shariah policy, and it can collaborate with the central Shariah committee to determine the Shariah policy related to Islamic finance. All fatawa issued by individual Shariah boards or scholars must be subject to scrutiny by the centralized Shariah committee. Procedurally, the centralized Shariah committee must have the authority to conduct unannounced Shariah auditing visits. Shariah scholars posing on Shariah boards must be accredited by a special institution based on certain globally acceptable criteria, and

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the Shariah board members who do not qualify for Ijtihad or fatawa must be removed from the board. The segregation between the Ijtihad institution and the political system has led to chaotic approaches to Ijtihad and fatawa by individual Shariah scholars. This disorder had not caused considerable harm before, but with the advance of Islamic banks, it has now caused serious damage. The same disorder and confusion, however, will inevitably take place even in other fields of Islamic affairs when they are applied at the institutional level, because the root of the problem is the same: the rupture between the political system and the Ijtihad institution.

References Abdulsalam, A. I. 1999. Qawa`id Al-Ahkam fi Masalih Al-Anam. Beirut: Dar al-Kutub al-`Ilmiyyah. Abozaid, Abdulazeem and Dasouki. 2009. “A Critical Appraisal of The Challenges of Realizing Maqasid Al-Shariah in Islamic Banking and Finance.” IIUM Journal of Economics and Management 15(2). Abozaid, A. 2008a. “Contemporary Islamic Financing Modes between Contracts Technicalities and Shariah Objectives.” Presented at Eighth Harvard University Forum on Islamic Finance, Harvard Law School— Austin Hall, USA, April 19-20. —. 2008b. “Examining Bay' al-'inah and its New Applications in the Islamic Financial Institutions.” Journal of Al-Tamaddun 4. —. 2007. “Examining the Malaysian Shariah Guidelines for Islamic REITs.” Paper presented at the International Conference on Islamic Capital Market, Muamalat Institute & Islamic Research and Training Institute in Jakarta, August 27-29. Abozaid, Abdulazeem. 2006. “The Devotional Dimension in Interestoriented Shariah Rulings.” Journal of Islam in Asia 3(1). —. 2004. Contemporary Inah: Is it a Sale of Usury? Aleppo: Dar alMutlaqah. Abu Daud. n.d. Sunan Abi Daud. Beirut: Al-Maktabah Al-‘asriyyah. Al-Bouti, M. S. R. 1982. Dhawabit Al-Maslahah fil Shari`ah al-Islamiyah. 4th ed. Beirut: Al-Risalah. Al-Dareer. 2009. Al-Gharar wa Atharauhu fil Uqud. 2nd ed. Beirut: by Dar al-Jeel. —. 2009. Al-Gharar wa Atharauhu fil Uqud. 2nd ed. Bairut: Dar al-Jeel. Al-Dasuqi. n.d. Hashiyah. Beirut: Dar Ihia’a al-Kutub al-Arabiyyah, Al-Ghazali. 1413. Al-Mustashfah. Beirut: Dar al-Kutub al-`Ilmiyyah.

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Al-Kurdi, A. 1986. Al-Madkhil Al-Fiqhi. Damascus: Damascus University Publication. Al-Shatibi. n.d. Al-Muwafaqaat. Beirut: Dar al-Fikr. Al-Tirmidhi n.d. Sunan al-Termithi. Cairo: Dar al-Hadith. Al-Zuhaili, W. 1993. Al-Waseet fi Usul al-Fiqh. Damascus: Damascus University Publishing House. Ibn Juzai. n.d. Al-Qawanin Al-Fiqhiyyah. Beirut: Dar al-Kutub alIlmiyyah. Ibn Nujaim. n.d. Al-Ashbah Wal Nazooir. 1st ed. Beirut: Dar al-Kutub alIlmiyyah. Ibn Qudama. 1985. Al-Mughni. 10 vols. Beirut: Dar Ihya' at-Turath alArabi. Kamali, Mohammad Hashim. 1989. Principles of Islamic Jurisprudence. Kuala Lumpur: Pelanduk Publications. Majallat Al-Ahkam Al-`Adliyyah. Sohail, Mahmassani. 2000. The Philosophy of Jurisprudence in Islam. Kuala Lumpur: Open Press.

Notes 1

Mujtahid is the one who performs Ijtihad Fiqhi. For more details on this matter, see Abozaid, A. 2007. “Examining the Malaysian Shariah Guidelines for Islamic REITs.” Presented at the International Conference on Islamic Capital Market, Muamalat Institute & Islamic Research and Training Institute in Jakarta, August 27-29. 3 Ibn Tayimiyah and Ibn Al-Qaiyyem have adopted this approach. Further details and discussion can be found in Al-Dareer. 2009. Al-Gharar wa Atharauhu fil Uqud. 2nd ed. Beirut: Dar al-Jeel. 4 Other examples include Khayar al-Shart (option of stipulation) and the sale of pregnant animals. In the first case, the contract is uncertain to the contractor who grants this option to the other, and in the second case, a part of the price goes implicitly to the pregnancy, though its outcome is not certain. 5 The formulation of a rule on the basis of “al-maslaha al-mursalah” must take into account the public interest and conform to the objectives of Shariah. The application of this tool must fulfill three main conditions. First, it should only deal with transaction matters (muamalah) where reasoning through rational faculty is deemed to be plausible. Second, the interest should be in harmony with the spirit of Shariah. In other words, it must not be in conflict with any of its main sources. Third, the interest should be of an essential and necessary nature (darurah) and not of a luxury type. For more details, see Abozaid, A. 2006. “The Devotional Dimension in Interest-oriented Shariah Rulings.” Journal of Islam in Asia 3(1); and Mahmassani, S. R. 2000. The Philosophy of Jurisprudence in Islam. Kuala Lumpur: Open Press, 87-89. 2

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6 For example, istihsan (which is adopted by the Hanafi school) leads to the same end result of Maslaha in some of its applications; it endorses Shariah rules based on their inherent benefits. 7 All Fiqh schools are of the opinion that judges cannot be paid or given gifts by the parties attending their courts, and according to some Fiqh schools, they cannot even accept gifts from the public. See: Ibn Qudama. 1985. Al-Mughni Volume 10. Case 8267, Beirut: Dar Ihya' at-Turath al-Arabi, 118. 8 Majallat Al-Ahkam Al-‘adliyyah, section 22; Ibn Nujaim, Z. n.d. Al-Ashbah Wal Naza’ir, 1/105-107; Al-Seyoti, J. 911 H. Al-Ashbah Wal Naza’ir, p.84-92; AlKurdi, A. n.d. Al-Madkhil Al-Fiqhi, p.48. 9 This argument is supported by a number of Qur’Ɨnic verses, one of which is Qur’Ɨn 23:71. Refer to Bin Abdelsalam, A. n.d. Qua’id Al-Ahkam fi Masalih AlAnam, 2/161. 10 For details on this issue, refer to Abozaid, A. 2008. “Examining the New Applications of Sale of Debt in the Islamic Financial Institutions.” Journal of Islam in Asia 5(2). www.abdulazeem-abozaid.com. 11 For details on these sales, see Abozaid, A. 2004. Contemporary Inah is it a Sale or Usury. Aleppo, Syria: Dar Al-Multaqa; and Abozaid, A. 2008a. “Contemporary Islamic Financing Modes between Contracts Technicalities and Shariah Objectives.” Presented at the Eighth Harvard University Forum on Islamic Finance, Harvard Law School—Austin Hall, USA, April 19-20. 12 This Hadith is reported in many Sunnah authoritative books, including Sunan Abi Daud (3504) and Sunan Al-Termithi (1234).

CONCEPTS IN ISLAMIC ECONOMICS REVISITED: THE CASE OF POVERTY MUHAMMAD SYUKRI SALLEH

Introduction Earlier elsewhere, I have highlighted that there are at least six challenges that have been faced by contemporary Islamic economics (Salleh 2013a). They relate firstly to the Islamic economics framework (worldview); secondly, to the un-redefined western ethno-centric concepts used in Islamic economics; thirdly, to the research methodology adopted in Islamic economics studies; fourthly, to the extent of the Islamic system established out of the execution of Islamic economics policies; fifthly, to the ability to establish a real Islamic society from the implementation of Islamic economics programs; and sixthly, to the knowledge-practice dichotomy of the Islamic economics scholars themselves. Earlier, I have discussed separately part of the first challenge that relates to the Islamic economics framework (worldview) with an emphasis on the adoption of western ethno-centric economics assumptions—that is, the scarcity of resources and the existence of unlimited wants (Salleh 2011). As a continuation to the above discussion, this paper intends to delve into the second challenge faced by contemporary Islamic economics, which concerns the concepts used in Islamic economics with special reference to the concept of poverty. The discussion is based on the belief that a real Islamic accomplishment in Islamic economics—in this case, in the alleviation of poverty—has to result from the rightly defined concept according to Islamic teaching. In so doing, this paper is divided into three sections. The first deals with the need to use Islamically redefined concepts in Islamic economics; the second deals with the redefinition of the Islamic concept of poverty; and the third deals with the implications of the Islamically-redefined concept of poverty on endeavors in poverty alleviation.

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The Need for Redefinition of Concepts in Islamic Economics In the realm of Islamic economics and its related fields—such as Islamic development, banking and finance—there is an apparent widespread use of western ethno-centric concepts. Such concepts like growth, development, consumer behavior, civil society, quality of life, wealth management, asset management, corporate social responsibility, etc., have been used arbitrarily without redefining them according to Islamic teachings. For instance, one may be studying the impact of Islamic practice on the accomplishment of Muslim entrepreneurs, but the concept of entrepreneurs and indicators of their accomplishment themselves are still based on the un-redefined, conventional concept and indicators (see, for example, Solahuddin bin Abdul Hamid 2011). Likewise, one may be studying the impact of zakat on the quality of life of the asnaf (zakat recipients), but the concept of quality of life has not been redefined according to Islamic teachings (see, for example, Wahid, Ahmad, and Noor 2004). Instead, the indicators of quality of life that are used are the conventional indicators that have been outlined by western ethno-centric institutions, such the United Nations, the World Bank, and the States’ Economic Planning Unit.1 In fact, in the case of the study undertaken by Wahid, Ahmad, and Noor (2004), the conventional indicators developed by western scholars named Burnel and Galster (1992) are recognized as the indicators that could measure the quality of life of the asnaf being researched.2 Similar problems can also be found in other studies relating to zakat. When studying the role of zakat in just income distribution, for instance, western tools such as the general equilibrium model, Pareto efficiency, Diamond criteria, Ponzi game, and Walaras’ law are used (see Al-Zoubi, Hassan, Al-Zu'bi, and Maghyereh 2008). Similarly, in a study on the performance of zakat institutions, 7S Mac Kinsey has been used as the tool of measurement, leaving conclusions regarding the performance of the zakat institutions at the discretion of the western measurement (see Salleh and Aziz 2011). Such a problem is also widespread in the case of poverty. The concept of poverty has been unquestionably accepted and adopted in its original conventional form, despite the use of Islamic institutions such as zakat and awqaf as the instruments in alleviating poverty. One, for instance, is keen in overcoming the problems of poverty through awqaf, but the concept of poverty is not being redefined according to Islam (see, for example Muhammad 2012, who develops an Islamic Micro-Investment Model to

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alleviate poverty in Nigeria). There are also authors who propose an alleviation of poverty through zakat but who use conventional economic logic to express their justifications (see, for example, Ahmad, Hassan and Shahed 2006, 19). To them, financing the poor through zakat is believed to be able to activate an economic cycle as developed by conventional economic theory. Financing the poor is said to be able to result in increases in consumption, aggregate demand, employment, output, and standards of living, leading eventually to the establishment of a high output economy. Yet the concepts of consumption, aggregate demand, employment, output, and standards of living have not been redefined Islamically. The base of the conventional economy advocates maximization of consumption, and output remains as it is. Zakat is used without the awareness that directly or indirectly it may strengthen the conventional economic system instead of an Islamic economic system as well as possibly developing an exogenous-cultured society that is alien to Islam. Even if there is awareness that poverty could not be seen merely from tangible goods and services and should include spiritual wealth and poverty, a construction of the concept of poverty based on such awareness has been purposely avoided (see, for example, Ahmed 2004, 20). Instead, the measurement of the impact of zakat on the alleviation of poverty is still dependent on two conventional measurements: firstly, on the Gross Domestic Product (GDP), and secondly, on the number of the poor in the economy. In a situation where per capita GDP is low while the number of the poor is high, the potential of zakat to alleviate poverty is said to be low (Ahmed 2004, 16). The meanings of per capita GDP and the poor however have not been redefined according to Islam. In consequence, based on the deliberations of the above trend, the output or the end products of the socalled Islamic endeavors are judged according to the conventional definition, not the Islamic definition.3 The advocates of the above approach normally hold to the argument that it is all right to do so as long as it is not contrary to Islamic aqidah and shariah (see, for instance, Ahmed 2002; Chapra 2001, 39). 4 Moreover, some of them argue that Rasulullah (pbuh)5 himself used to eclectically accommodate some of the practices of the jahiliyyah (ignorant) in order for them to be practiced by the Muslims; so, the encouragement of Muslims to learn from non-Muslims is implied. These two arguments in particular partly shape the accommodative-modification and methodological eclecticism approach, forming a kind of Islamic economics-named, fiqhbased neoclassical economics.6 However, contemplation on these arguments leads to the conclusion that such a belief suffers from at least two misleading contentions. Firstly,

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it is incorrect to believe that the western ethno-centric concepts that were adopted into Islamic economics do not really contradict Islamic aqidah and shariah. It may be true if it is only viewed merely from an operational level (fiqh), as many of the advocates see it. But if epistemological and philosophical levels (tawhidic) are taken into account, the answer is different. The western ethno-centric concepts are rooted in western ethnocentric epistemological and philosophical underpinnings, while Islamic concepts are rooted in Islamic epistemological and philosophical underpinnings (tasawwur) that are not only distinctive from but also contradictory to the former. Therefore, the Islamic concepts would also be distinctive from and contradictory to western ethno-centric concepts. It is partly because of this that the redefinition of the western ethno-centric concepts based on Islamic epistemological and philosophical roots is necessary. When this is done, the whole meaning of the concepts will completely change, and the question of adopting the so-called uncontradictory concepts therefore becomes a non-issue. What is left similar would be only the term, while the meaning is entirely different. In fact, some scholars of this school of thought even hold to the view that some concepts, such as tasawwur, could neither be replaced with another term nor translated into another language. Secondly, the accommodation of the jahiliyyah practices that Rasulullah (pbuh) undertook was done by incorporating a change in their epistemological and philosophical underpinnings, though some of the terms might have remain unchanged. This is the case, for instance, for practices like tawaf (circumambulation), marriage, zihar, qisas, inheritance, buying and selling, the concept of nobility (karam), war, social relationship, slavery, and ‘aqilah. As shown in Table 1, Mohd Shukri Hanapi (2012) in fact found that the concepts evolved only around their names and terms, while the structures and their roots have been reconstructed by Rasulullah (pbuh) based on Islamic aqidah, ibadah, and akhlaq. It is therefore incorrect to argue that it is all right to adopt the western ethno-centric concepts based on the argument that Rasulullah (pbuh) himself used to adopt the concepts practiced by the jahiliyyah. Table 1 clearly shows that they have been adopted through a change of their epistemological and philosophical roots, resulting in a change in the meaning of the concepts practiced.

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Table 1: Reconstruction of Jahiliyyah Practices Accepted in Islam No.

1.

2.

3.

4.

Type of Practices

Practiced Concept in Jahilliyyah

Practiced Concept in Islam

Tawaf (Circumambulation)

Executed in nudity and through piercing of spikes on the body. According to them, the tawaf could not be carried out when using clothes that were worn when making the sinful act (Ismail 2011).

It is obligatory to perform the Tawaf while all the physical bodily aspects (aurat) are covered (The Quran, 7:31).

Marriage

A man can marry as many women as he pleases. In fact, some of them had hundreds of wives (Musa 2009).

A man is only allowed to marry up to four wives at any one time. However, it cannot be practiced according to one’s whims and fancies such that women are oppressed (The Quran, 4:3).

Zihar (a husband equating his wife with one of his mahram such as his mother or sisters)

Zihar was a way to divorce the wife. One way for a husband to solve his problem of no longer wanting to be with his wife was to utter the zihar by equating his wife to his mother (Nasir 2010).

Zihar is not a way to talak (pronunciation of divorce); however, kaffarah (fine) is imposed (The Quran, 58:1-4).

Qisas (Retaliation)

When a member of a clan is murdered, then that clan can retaliate by killing the same number of members of the murderer’s clan (Nuralhadi t.t.).

Only the proven murderer is to face the death penalty, since Islam forbids killing without any lawful basis (The Quran, 6:51).

186

5.

6.

7.

8.

Concepts in Islamic Economics Revisited: The Case of Poverty

Distribution of Estate

Women were oppressed. They were not in receipt of inheritance from their husband or family’s estate. This negation of inheritance was carried out because women were regarded as weak and of no use to each clan or tribe (Smith 1990, 117).

Sale and Purchase

Filled with usury and fraud, especially in measurements of weight (Sobri 2009).

Karam (Nobility)

Nobility is earned because of wealth, stature, and having many children (Izutsu 1964, 36-38).

War

War is a result of pride and the ‘asabiyyah spirit. In addition, it is regarded as a noble profession.

Women have rights of inheritance on their husbands’ or families’ estates (The Quran, 4:11, 4:12 and 4:176). Sale and purchase are allowed and usury is forbidden. Furthermore, Islam provided the ethics of sale and purchase, such as requiring that measurements need to be accurate and precise (The Quran, 2:275). Nobility is due to taqwa (piety) to Allah SWT (The Quran, 49:13). War safeguards the sanctity of the religion, race and society from intrusion. A few guidelines that are obligatory to be followed are also provided (The Quran, 2:190, 2:193 and 2:224).

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9.

10.

Social Relations

Separated life within each clan and tribe. Each individual is very proud of his clan and prejudicial against the other clan. This caused individuals to be partial to one tribe regardless of whether they are in the right or wrong. This situation led to animosity amongst tribes.

Slavery

The master-slave relationship was full of oppression, humiliation and exploitation. As an example when a person failed to pay his debts or went bankrupt, then he could be made a slave. Slavery could also occur as a punishment to a criminal offense. It was also the case that if a man from one tribe was captured by a stronger tribe, the man together with his tribe could be subjected to slavery.

187

The Muslim society in Medina was able to successfully build an Islamic society regardless of race and tribes. Loyalty to tribes no longer existed and was replaced with the bond of brotherhood (The Quran 49:10). For example, Rasulullah (pbuh) successfully tied the kinship of brotherhood among the Ansar with the Muhajirin. The advent of Islam did not erase slavery, but Islam provided guidelines on the laws regarding slavery, since slaves are also humans whose intrinsic natures are the same as those of free men. Allah SWT forbids the exploitation of slaves by their masters (The Quran, 24:33).

188

11.

Concepts in Islamic Economics Revisited: The Case of Poverty

‘Aqilah (Compensation for Murder, or Blood Money)

Should a murder occur, the murderer was required to compensate (diyat) the family of the murdered. The compensation was collected from amongst members of the clan or tribe of the murderer.

The compensation is only to be paid by the men of sound mind from the father’s side (‘asabah nasab) (Hanapi and Abdul Latib 2003, 14-15).

Source: Hanapi 2012.

Redefining the Concept of Poverty The above discussion reflects a stance that is in favor of the necessity to redefine all concepts in Islamic economics according to Islamic teachings. In the case of poverty, undeniably there have been various attempts by Islamic economic scholars to define poverty. Nevertheless, they seem to tie their definitions to un-redefined conventional concepts, hence the definition. Ataul Huq (1996, 225) for instance defines poverty as “the level of living that lies below subsistence level.” Zainul Abedin Patel (1983, 4) defines poverty as “the insufficiency and the lack of the material means to live a tolerable and meaningful existence.” Monzer Kahf (2002, 22) views poverty as a situation where individuals “cannot support their needs by their own means.” The concepts mentioned in their definitions such as the level of living, subsistence levels, tolerable and meaningful existence, the needs, and the means are understood similarly to the understanding of the conventional concepts instead of redefining the concepts from Islamic perspective. An elaboration on the concept of poverty also normally concentrates on the definition of the poor (miskin) and the needy (faqir). Monzer Kahf (2002, 22) for instance says that a group of scholars defines the miskin as a person who has less than his needs in terms of wealth and income, whereas the faqir is the one who owns nothing. Another group of scholars, on the other hand, considers that the miskin are in a worse situation than the faqir. At a glance, the endeavor in conceptualizing the definition of the miskin and the faqir seems to be quite similar to what has been done by earlier scholars, such as Al-Rafi’I (n.d.), Imam al-Ghazali (1988) and Ibn Manzur (1996). Apart from defining the miskin and the faqir from an etymological perspective, they also deliberate on the levels of impoverishment of both groups. 7 Unlike the contemporary scholars, however, the elaboration of the earlier scholars contains a relatively higher focus on Quranic-based and God-related arguments. Imam al-Ghazali

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(1988), for instance, in defining the concept of miskin and faqir, argues that faqir is only attributable to human beings while wealth only belongs to Allah SWT. To him, the real absolute faqir is the one who does not feel in need of Allah SWT. This is in line with the Islamic worldview, which holds to the fact that all creatures are in need of their Creator; hence, any believer may style himself al-faqir ila llah or al-faqir ila rabbihi (the one in need of God, the one in need of his Lord) (Adam Sabra 2000, 9-10). The above concentration on the Quranic-based and God-related arguments exhibits the need to define the concept of poverty beyond the tangibles to include spiritual aspects as well. Undeniably, there are also contemporary scholars who are aware of the spiritual side of poverty. Among them are Siddig Abdelmageed Salih (1999, 91) and Munawar Iqbal (2002, 12), who say that Islam considers poverty as a test of man’s allegiance to his Creator. This is also supported by Habib Ahmed (2004), who quotes M. Umer Chapra’s (1980) statement that Islam has given equal emphasis to both the spiritual and worldly affairs, being aware that the concept of richness/poverty in Islam does not only represent deprivation of goods and services but also lack of richness/poverty in spirit. M. A. Mannan (1988) has in fact quoted a Hadith reported by Abu Hurairah in Muslim that says that “[r]ichness does not lie in the abundance of worldly goods but richness is the richness of heart itself.” Even so, almost all Islamic economic scholars do not go into in-depth discussion on the spiritual aspects of which they are aware, nor do they deliberate rigorously on the relationship between the material and the spiritual affairs in the context of poverty. For example, Habib Ahmed (2004, 20) is well aware of the broader concept of poverty in Islam, which involves the inclusion of the spiritual aspect. However, the awareness is just kept in mind, and he proceeds with his focus on the deliberation of the notion of deprivation in the economic sense. He holds to the statement by Afzalur Rahman (1974) that individuals are able to improve their spiritual lives by improving their material lives. M. A. Mannan (1988, 305-306) too shies away from the inclusion of cultural and spiritual poverty in order to just fixate on material poverty and Islamic responses to it, although he acknowledges that human poverty in Islam is concerned both with material as well as cultural and spiritual poverty, and thus, the abundance of goods does not alone ensure richness in Islam. In a nutshell, there are undeniably already discussions on the definition of poverty by some Islamic economics scholars. Nevertheless, a comprehensive Islamic redefinition of poverty is still desired, especially because of the exclusion of the in-depth deliberation on the spiritual aspects of poverty within Islam. Such a deficiency needs to be corrected

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by the establishment of a redefinition of the concept of poverty that accounts for both material and spiritual aspects. One way is to begin with an investigation into the treatment of Rasulullah (pbuh) towards poverty itself. Four incidents could perhaps be an adequate basis for this redefinition. The first relates to a man who came to Rasulullah (pbuh) asking for help in fulfilling his needs, but who was asked by Rasulullah (pbuh) to work using an axe bought through a part of his income from the auction that Rasulullah (pbuh) himself held out of the man’s little belongings. The second relates to the allowance of Rasulullah (pbuh) for a group of poor Companions called ahlus-suffah to exist without having to work for material benefit. The third relates to the reluctance by Rasulullah (pbuh) to fulfill the request of a poor Companion by the name of Tsa`labah to pray for him so that he could be rich. Lastly, the fourth relates to the prohibition by Rasulullah (PBUH) on the intention of the rich Companion Sayyidina Abdul Rahman bin `Auf to become poor. The four incidents obviously reflect different treatment by Rasulullah (pbuh) of different people related to poverty. In the first incident, why did Rasulullah (pbuh) insist that the man work, while in the case of ahlussuffah it was not so? Why did Rasulullah (pbuh) discourage Tsa`labah to become rich, while in the case of Abdul Rahman bin `Auf, Rasulullah (pbuh) prohibited him from becoming poor? An investigation into these treatments leads to an interpretation that the treatments are actually related according to spiritual reasons; that is, the level of faith (iman) and piety (taqwa) of the persons with whom Rasulullah (pbuh) dealt. The man was asked to work because his poverty troubled him, with a possibility that he may subsequently trouble his community and endanger his faith and piety. The ahlus-suffah were allowed to exist “unemployed” (in the view of conventional economics, as they did not earn any income from their knowledge, dakwah and jihad, though they un-measurably contributed to the propagation of Islam) because they were contented with themselves, without decreasing their faith and piety and without having to trouble others. Tsa`labah was not permitted to be rich because, as history has proven, his faith and piety was destroyed by his wealth. He ignored his prayers (salah) and refused to pay zakat. Lastly, Sayyidina Abdul Rahman bin `Auf was not allowed to become poor because his wealth did not entangle him with worldly matters, and his faith and piety were not destructed by his wealth. Instead, his wealth was generously donated to Baitul-Mal for the sake of Islam and its ummah.

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The above interpretation leads to two conclusions. Firstly, poverty and richness are actually selective matters. This is in line with a Hadith Qudsi in which Rasulullah (pbuh) says: Some of My worshippers are only reformed and best fitted with poverty and if I to enrich them this will spoil them, and some of My worshippers are only reformed and fitted with richness and if I impoverish them this will spoil them.8

Secondly, redefinition of poverty based on Islam essentially necessitates consideration of the spiritual dimension (especially faith and piety embedded in one’s soul). If this is taken into account, an Islamic society could be divided into four categories. As is shown in Table 2, the first category composes those who are rich in both in faith and in wealth, as exemplified by Sayyidina Abdul Rahman bin `Auf. This is the most commendable group that should be made to include as many as possible. The second composes those who are rich in faith but poor in wealth, such as the ahlus-suffah. This is the group that could be left alone, for they would not create any troubles. The richness of their souls could control their material poverty. The third group composes those who are poor in both faith and wealth, such as the man who came to Rasulullah (pbuh) for help. This is the group of people to which most attention should be given. They are those most in need of help. Without help, their sufferings of both the soul and lack of wealth could lead to the emergence of troubles and chaotic situations in their communities. The fourth and the last group compose those who are poor in faith and rich in wealth, such as Tsa`labah. This is the second most problematic group. Without a good soul, the wealth of these individuals will not likely benefit others and could lead to exploitation, oppression, and other disordered situations. From this categorization, the poor and poverty could be identified and redefined exactly. The real poor are the third group: those who are poor in both faith and wealth. This is followed by the fourth group, who are rich in wealth but poor in faith. In other words, in alleviating poverty, the rich must also be included. They relate intimately with the poor, both in positive and negative forms. The relationship could be positive if they are not only rich in wealth but also rich in faith. On the other hand, the relationship could be negative if their souls are poor even though they are rich in wealth. The second group (who are rich in faith and poor in wealth) and definitely the first group (who are rich in both faith and wealth) should not be categorized as poor, as their richness in faith would make them rich in the real sense of life.9

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The measurements of poverty therefore do not only involve the tangibles (basic necessities and facilities) but also the intangibles (faith and piety). While the tangibles could be measured through indicators redefined through Islamic epistemological and philosophical underpinnings, the intangibles could be measured through the levels of faith such as iman taqlid, iman ilm, iman `ayan, iman haq, and iman haqiqah (from the lowest to the highest), and the levels of desire (nafs) such as ammarah, lawwamah, mulhamah, mutma-innah, radhiyah, mardhiyyah, and kamilah (also from the lowest to the highest). Both levels of faith and desire come with their distinctive characteristics that are unquestionably observable and scientific. Table 2: Categories of the Poor and the Rich CATEGORIES

SOUL

WEALTH

NOTES

1

Rich

Rich

The most commendable category. Should include as many people as is possible.

2

Rich

Poor

Could be allowed to exist out of their own choices, since they are able to live without burdening the state and society.

3

Poor

Poor

The most negative category, and the most needing of help. Substantial portions of the state’s allocation should be allocated for them.

4

Poor

Rich

The second most negative category. Substantial portions of the state’s allocation should also be allocated to them, despite their richness, so as to allow them to increase the richness of their souls, so that their richness could benefit the state and society as a whole.

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The construct of the above definition of poverty is based on the Divinistic worldview, which is strengthened by dogmas, holistic integration, a transitory state, and the instrumentalist nature of the worldview itself. Divinistic here refers to the acquiescence to and the inclusion of the Creator, the God, the One, and the Absolute in one’s dealings. Dogmatic refers to the acquiescent acceptance of a set of dogmas embedded in one’s belief system, particularly in religion. It is from within these dogmas upon which inter alia the spiritual dimension of poverty is based. In the case of Islam, the dogmas consist of the six Articles of Faith and the five pillars of Islam as have been mentioned earlier. Holistic integration refers to the amalgamation of the three all-embracing aspects of one’s relationship, viz. the vertical God-man relationship (hablum-minallah), the inward maninner self relationship, and the horizontal man-man-nature relationship (hablum-minannas). These three relationships encompass all aspects of human life, hence requiring a comprehensive consideration of all aspects of poverty, from the poverty of the soul to the poverty of wealth. The transitory state refers to one’s journey through life by living in this world as a temporary stopover before embarking onward to the eternal world, the Hereafter. The issue of poverty is therefore seen as a temporary problem. It might be regarded as a test from God, providing man with an opportunity to uplift his status in the eyes of God if he manages the poverty problem well via the Divinistic worldview. The instrumental nature refers to the usage of all of one’s actions as tools of worship, undertaking man’s function as servants (‘abd) and Vicegerent (khalifah) of God. This includes actions in alleviating poverty. These five bases of the construct of the definition of poverty will endow it with a new form of poverty management.10 Whenever the problems of poverty are managed within these epistemological and philosophical underpinnings, one is basically already bestowed with rewards from God, although they may not be visible with the naked eye.

Policy Implications of the Redefinition of the Concept of Poverty The above redefinition of poverty entails at least three policy implications. Firstly, the correct group of the poor is identified; hence, the target group of poverty alleviation could be established correctly. Secondly, with the establishment of the correct target group, the appropriate allocation of resources could be channelled to the real poor. In consequence, wastages of allocation could be avoided and an efficient use of the allocation could be guaranteed. Thirdly, diagnostics, prescriptions

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and implementation of poverty alleviation could be carried out correctly from a holistic perspective, combining both the tangibles and the intangibles.

Conclusion The above discussions have clearly shown that redefinition of all concepts in Islamic economics according to Islamic teachings is not only relevant, but more importantly, compulsory. It is unfair to highlight the importance and effectiveness of Islamic economic instruments but then base arguments on the concepts according to the exogenous western ethno-centric definitions. This paper has deliberated on the issue with special reference to poverty in favor of the redefinition of all concepts used in Islamic economics. Rarely has such an issue been addressed so far in this discipline. When it is discussed, studies only discuss the concept of Islamic economics itself, as was done by Rasul Shams (2004) and Dayangku Aslinah Abd. Rahim (2007); or the economic concepts of earlier scholars, for instance Ibn Taimiyah, as was undertaken by Abdul Azim Islahi (1998); or the concept of the Islamic economics system, as written by Jamal Khwaja (n.d.); but not the concepts to be used in presentday Islamic economics. It could be generally said that to this date, the concentration of Islamic economics is relatively much more focused on technicalities (fiqh) rather than on the paradigm (tawhid). It is thus high time now to strive to achieve a balance between the two.

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Rahman, Afzalur. 1974. Economic Doctrines of Islam. Volume 1. Lahore, Pakistan: Islamic Publications. Sabra, Adam. 2000. Poverty and Charity in Medieval Islam—Mamluk Egypt. 1250-1517. Cambridge, UK: Cambridge University Press. Salih, Siddig Abdelmageed. 1999. The Challenges of Poverty Alleviation in IDB Member Countries. Jeddah, Kingdom of Saudi Arabia: Economic Policy and Strategic Planning Department, Islamic Development Bank. Salleh, Muhammad Syukri and Osman Md Yusoff 1997. “The Poor People’s Perception of Poverty and Its Implications on the Realization of Islamic Development in Kelantan, Malaysia.” Humanomics 13(3/4): 215-244. Salleh, M. S. 2000. Pembangunan Zaman Rasulullah s.a.w: Antara Kemiskinan dan Kekayaaan (Development During the Time of the Prophet Muhammad p.b.u.h: Between Poverty and Wealth). Penang: Islamic Development Management Project (IDMP) of Universiti Sains Malaysia and The Mufti Office of Penang State Government. —. 2013a. “Six Challenges for Future Research in Islamic Economics.” Presented at 2nd International Conference on Islamic Economics and Economies of the OIC Countries, Kuala Lumpur, Malaysia, January 29-30. —. 2013b. “Spirituality and the New Form of Poverty Management.” The International Journal of Religion and Spirituality in Society 2(2). —. 2012. “Religiosity in Development: A Theoretical Construct of an Islamic-Based Development.” International Journal of Humanities and Social Science 2(14) 266-274. —. 2011a. “Islamic Economics Revisited: Recontemplating Unresolved Structure and Assumptions.” Presented at the Eighth International Conference on Islamic Economics and Finance: Sustainable Growth and Inclusive Economic Development From an Islamic Perspective, Qatar Foundation, Islamic Research and Training Institute of the Islamic Development Bank, and International Association of Islamic Economics, Qatar, December 25-27. —. 2011b. “Teras Transformasi Zakat” in Transformasi Zakat: Daripada Zakat Saradiri Kepada Zakat Produktif, edited by Muhammad Syukri Salleh, Mohamad Salleh Abdullah, dan Zahri Hamat. Pulau Pinang: Pusat Urus Zakat Pulau Pinang (PUZPP) & Pusat Kajian Pengurusan Pembangunan Islam (ISDEV), Universiti Sains Malaysia. —. 2004. “Menangani Kemiskinan Secara Islam (The Islamic Way of Handling Poverty)” in Pembasmian Kemiskinan Bandar dan Luar Bandar (Eradication of Rural and Urban Poverty). Edited by Mohamad

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Khairudin Mohamad and Ahmad Syahir Sarani. Petaling Jaya, 51-105. Selangor Darul Ehsan: Institut Perkembangan Minda (INMIND). Salleh, Muhammad Syukri. 1999. “Islam dan Kemiskinan (Islam and Poverty).” Pemikir 18: 153-174, October-December. Salleh, Sohaimi Hj. Mohd and Mohd Gunawan Che Ab Aziz. 2011. “Manual Pengurusan Agihan Zakat JAWHAR dan Cabaran Pelaksanaannya” in Transformasi Zakat: Daripada Zakat Saradiri Kepada Zakat Produktif, edited by Muhammad Syukri Salleh, Mohamad Salleh Abdullah and Zahri Hamat. Pulau Pinang: Pusat Urus Zakat Pulau Pinang (PUZPP) & Pusat Kajian Pengurusan Pembangunan Islam (ISDEV), Universiti Sains Malaysia. Shahbudin, Muhammad A. 1997. Peringatan Dan Perkhabaran Untuk Si Miskin Dan Si Kaya. Johor Bahru: Perniagaan Jahabersa. Shams, Rasul. 2004. “A Critical Assessment of Islamic Economics.” HWWA Discussion Paper 281, Hamburg, Germany: Hamburg Institute of International Economics (HWWA). Siddiqi, Muhammad Nejatullah. 1988. “From Contemporary Economics to Islamic Economics” in Today’s Problems, Tomorrow’s Solutions. Edited by Abdullah Omar Naseef. London, UK: Mansell Publishing Ltd. Smith, W. R. 1990. Kinship & Marriage in Early Arabia. London: Williams and Norgate Ltd. Sobri, Muhammad Asrie. 2009. “Mengenal Riba.” Accessed October 11, 2012. http://mashoori.wordpress.com/tag/riba/. Abdul Hamid, S. 2011. “Penghayatan Agama Sebagai Motivasi Keinginan Pencapaian: Kajian Usahawan Melayu MARA Kedah.” Ph.D Thesis submitted to Department of Aqidah and Islamic Thought, Academy of Islamic Studies, Universiti Malaya. Wahid, H., Ahmad, S., and Noor, M. A. M. 2004. “Kesan Bantuan Zakat Terhadap Kualiti Hidup: Kajian Kes Asnaf Fakir dan Miskin.” The Journal of Muamalat and Islamic Finance Research 1(1): 151-166.

Notes 1

Among the indicators are transportation, communication, health, education, housing and social participation, plus water and electric supply, self-enhancement, a healthy life style, accessibility and freedom in obtaining knowledge, enjoying a standard of living that is above basic needs, and individual psychology in attaining social happiness.

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2 The indicators developed by Burnel and Galster (1992) involve the level of happiness and comfortability in undertaking the process of one’s living, which include food, education, health, housing, etc. 3 For another quite similar deliberation on the use of these conventional unredefined concepts in Islamic economics, see Salleh 2011b. 4 Ahmed (2002) argues that Islamic economics, as a distinctive blend of Shariah principles and conventional economics, takes the stand that as long as the concepts and principles of the conventional economics do not contradict Islamic principles, they can be adopted by Islamic economics. So claims Chapra (2001, 39). He says that Islamic economics may adopt the theories of conventional economics that have become a part of conventional wisdom, if these theories are not in conflict with the logical structure of the Islamic worldview. 5 The Prophet Muhammad, may peace be upon him. 6 Such a phenomenon to some extent is attributable, directly or indirectly, to the stance advocated by some earlier Islamic economists, such as, amongst others, Muhammad Abdul Mannan (1984), Muhammad Nejatullah Siddiqui (1988) and Monzer Kahf (1987). Muhammad Abdul Mannan uses an eclectic approach by lending the thinking of Western economics, while Muhammad Nejatullah Siddiqi and Monzer Kahf integrate the neoclassical approach with fiqh, leading to an approach known as fiqh-based neoclassical economics, an approach that built up the current mainstream Islamic economics. 7 Ibn Manzur (1996) for instance believes that there are three views on the levels of the impoverishment of the poor (miskin) and the needy (faqir). Firstly is the view that says that the faqir is better than the miskin, as is argued by Yunus, Ibn alSakit, Abu Hanifah and Imam Malik; secondly is the view that says the miskin is better than the faqir, as is viewed by al-Asma’I, Ahmad bin Ubayd, Abu Bakr, alFarra, Imam al-Shafii and Imam Ahmad bin Hanbal; thirdly is the view that says that both the faqir and miskin are in the same condition, as is held by Ibn al-`Arabi. The similar positions of the views of Imam al-Shafii and Abu Hanifah also have been mentioned by Adam Sabra (2000, 9-10). For further discussion on the definition of faqir and miskin, see also inter-alia, Muhammad A. Shahbudin (1997), Muhsin M. K. (2004) and Yusuf Qardhawi (1980) who hold to the view that in general there is not much difference between the faqir and the miskin. Both groups are suffering from a weak economy and suffering from impoverishment and deprivation. 8 Quoted from Adam Sabra (2000, 17). 9 For a detailed discussion on this, see Muhammad Syukri Salleh 1999, 2000 and 2004. 10 For further discussion on this new form of Islamic management of poverty, see Muhammad Syukri Salleh 2013b and Muhammad Syukri Salleh 2012.

ISLAMIC ECONOMICS ASSUMPTIONS REVISITED: CONTEMPLATING THE CONCEPT OF SCARCITY ZAKARIA BIN BAHARI AND AMIR WAHBALBARI

Introduction Conventional economics considers the concept of scarcity as the cornerstone of the economic problem. The economic problem arose out of the sphere of what to produce, how to produce, and for whom to produce. This is an indication of how resources can be managed and processed efficiently for producing goods and services to fulfill the maximum potential of unlimited human wants. The concept of scarcity has dominated the discussion of economics after the middle of the century (Fischer et al. 1988). Consequently, Asad Zaman (2009) added that almost all economics textbooks use the concept of scarcity as the fundamental defining concept of the economics problem.1 Nonetheless, and despite the central theme of the Islamic worldview on Islamic economics, many Islamic economists tend to define economics from the perspective of scarcity (Wahbalbari et al. 2013). Among those who accept the scarcity postulate are Monzer Kahf (1987), Muhammad Nejatullah Siddiqi (1988), Muhammad Abdul Manan (1989), Khurshid Ahmad (1992), Rafiq al-Masari (1998), Mohammad Umer Chapra (2001) and Habib Ahmed (2002) as stated by Saleh (2011). This section has introduced the topic, whereas the following seven sections present the types of scarcity and scarcity from the perspectives of institutional economics and the Quran. Furthermore, sections five and six present human wants and the meaning of economics in the Quran. Lastly, section seven concludes this paper.

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Types of Scarcity Worldview is one of the aspects that determine people’s thoughts, perceptions and ideologies. Apparently, scarcity tends to raise an ontological question with regard to resources and human wants. Obviously, humans by nature tend to observe and look to nature. People’s perceptions about nature are influenced by what they see and observe. Accordingly, Wennerlind (1999) has presented the classification of scarcity from the points of view of various economists. In his citation, Metaphysical Scarcity rises due to time limitation; Real Scarcity appears as a form of weak purchasing power to satisfy someone’s need and basic necessities; Contrived Scarcity is the result of big firms’ behavior when they intentionally limit their supply so that they can raise the price and profit; Accidental Scarcity appears in the form of insufficiency due to bad harvest, wars, or other exogenous shocks; Sartrean Scarcity belongs to Jean Paul Sartre, a French existentialist who saw scarcity as an insufficiency with respect to time, ideas, food and even consumers that inspire men/women to undertake praxis (established practices); Capitalist Scarcity is related to the emergence of certain capitalist institutions; Natural Scarcity attributes scarcity to the niggardliness of nature and its ecological system; Artificial Scarcity goes beyond real scarcity, in which a person can fulfill his/her needs but has yet to satisfy his/her wants (in this type of scarcity, needs and wants are differentiated); and Subjective Scarcity considers insatiable human wants as the cause of scarcity. This last type of scarcity was postulated by modern neoclassical economists, such as Lionel Robbins, Gerard Debreu, Kenneth Arrow and Douglas North. An innate human preference for more over less in every situation creates scarcity as an ever-present condition. In addition, Carl Menger and Leon Walras represent the “marginalist” version of scarcity in which both of them assumed that scarcity is a natural phenomenon. Hence, Walras argued that scarce things are appropriable because they are amenable to seizure and control and at the same time are exchangeable. Accordingly, “nature makes things appropriable, whereas mankind determines and carries out the appropriation.” Similarly, Carl Menger analyzed scarcity from two angels: the first aspect deals with the characteristics of a good, and the other aspect is the condition that makes the good scarce. He argued, “needs arise from our drives and the drives are imbedded in our nature.” Apparently, he has considered that scarcity is the result of natural phenomena, and people desire goods beyond the quantities that are required to satisfy their immediate needs due to future uncertainty. Therefore, people are forced to economize and make choices

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in order to satisfy their needs in as maximum a fashion as possible. Karl Polanyi and Nicholas Xenos referred to the commercial revolution in the eighteenth century as the turning point where conspicuous consumption and emulative desires have led to the collapse of the distinction between wants and needs in which luxury goods led to widespread scarcity. Furthermore, Alfred Marshall, Thorstein Veblen and John Maynard Keynes postulated that wants for material goods are continuously expanded by modern man’s desire for social distinction and particular consumption goods, such as clothing, houses, and means of transportation (Wennerlind, 1999). From the above classification, scarcity can be categorized into two categories. One category attributes scarcity to natural phenomenon (absolute scarcity), in which it is assumed inescapable, while the other category relates scarcity to human wants and needs (relative scarcity).

Scarcity from the Perspective of Institutional Economics Peach and Dugger (2006) have explored the writings of early insituitional economists that convey abundance rather than scarcity. Abundance is mainfested clearly in the writings of early economists, such as Adam Smith, Veblen and Mill. Institutional economists presented an alternative definition of economics that doesn’t indicate scarcity. They follow Allan Gruchy’s (1987, 21) definition of economics as “the science of the social provisioning process.” They refer to Adam Smith, Karl Marx, Thorstein Veblen and Kohn Maynard Keynes as “abundance economists.” In general, institutional economists consider the era of the industrial revoluton as the era of abundance creation. John Stuart Mill (1848) summarized most of the mentioned aspects by the institutional economists. He argued that abundance could be achieved through expansion of man’s power over nature, more preservation of property, increasing business capacities, and spreading cooperation. Moreover, affluence could be achieved either through producing more or desiring less, in which the gap between means and ends can be reduced by industrial productivity (Sahlins 1972). Furthermore, Daoud (2010), in his emphasis on the crucial role of socio-cultural mechanisms, mentioned that Malthus and Robbins tend to postulate that scarcity is natural and universal, in which they ignore the possibility of both the state of abundance and sufficiency. In addition, Matthaei (1984) considered scarcity a social product that can be abolished through social, economic and change processes. According to Kasser (2002), widespread materialism has prevailed in our contemporary time as people have started to compromise on community and family values for

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the culture of consumerism. Relevantly, neo-Malthusians criticize widespread materialism and consumerism. They advocate simple living as part of a higher level of existence; they stress cooperation, fulfillment in work, and spiritual development. Widespread consumerism is attributed to the human greed of freely choosing individuals, and the only way to overcome it is through elevating consciousness to a higher, non-material level (Matthaei 1984). However, the spirit of cooperation has tended to disappear as it has led to the increase in the gap between the rich and poor. Research today shows that nearly 66 per cent of people live in countries where the gap between the rich and poor is still expanding, not narrowing (Porritt 2007). In contrast, religion plays a vital role in reducing the gap between the rich and poor through the redistribution mechanisms of charity and donation, as well as through promoting the process of social provisioning.

Scarcity from the Quranic Perspective The Quranic verses were revealed in Makkah and then, after the Hijrah, also in Madinah. The former mostly relate to God’s bounties and His absolute power and wisdom in expanding or limiting the provision of His creatures (Wahbalbari 2010): It is Allah Who hath created the heavens and the earth and sendeth down rain from the skies, and with it bringeth out fruits wherewith to feed you; it is He Who hath made the ships subject to you, that they may sail through the sea by His command; and the rivers [also] hath He made subject to you* And He hath made subject to you the sun and the moon, both diligently pursuing their courses; and the night and the day hath he [also] made subject to you* And He giveth you of all that ye ask for. But if ye count the favours of Allah, never will ye be able to number them. Verily, man is given up to injustice and ingratitude. (The Quran, 14:32-34)

However, God sends resources in ascertainable measure because He is testing human beings. “And there is not a thing but its [sources and] treasures are with Us, but We only send down thereof in due and ascertainable measures” (The Quran, 15:21). And in sending the resources in a measured proportion, God sends it either in expansion or restriction. “See they not that Allah enlarges the provision and restricts it, to whomsoever He pleases? Verily in that are Signs for those who believe” (The Quran, 30:37). In contrast, the Madinah verses relate to rules that govern economic relations and behavior, such as giving zakah, moderation in expenditure,

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prohibition of riba (usury), and other matters. The following verse reflects the obligation of zakah: Alms are for the poor and the needy, and those employed to administer the [funds]: For those whose hearts Have been recently reconciled [To Truth]; for those in bondage and in debt; in the cause of Allah. And Allah is full of knowledge and wisdom. (The Quran, 9:60)

Furthermore, the next verse reflects prohibition of riba: O ye who believe! Fear Allah, and give up what remains of your demand for usury, if ye are indeed believers. If ye do it not, Take notice of war from Allah and His Messenger. But if ye turn back, ye shall have your capital sums: Deal not unjustly, and ye shall not be dealt with unjustly. (The Quran, 2:275-279)

Moreover, the following two verses indicate moderation in expenditure: Those who, when they spend, are not extravagant and not niggardly, but hold a just [balance] between those [extremes]. (The Quran, 25:67) Make not thy hand tied [like a niggard's] to thy neck, nor stretch it forth to its utmost reach, so that thou become blameworthy and destitute.* Verily thy Lord doth provide sustenance in abundance for whom He pleaseth, and He provideth in a just measure. For He doth know and regard all His servants. (The Quran, 17:29-30)

Obviously, the principle of moderation prevails in the abovementioned verses in that these two verses are related to economic activity. As a result, there is a strong link between the principle of moderation and economics. In fact, economics is about moderation and being neither extravagant nor niggardly. Therefore, Al-Quran Al-Makki postulates God’s Power in creating abundance of resources and in sending the resources in ascertainable measure to Human Beings. In contrast, Al-Quran Al-Madani appears in the form of divine rules that command and order human beings to behave in a certain way (Wahbalbari 2010).

Human Wants A want is something that is desired. It is said that every person has unlimited wants but limited resources. Thus, people cannot have everything they want and must look for the most affordable alternatives

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(American Psychological Association). Human wants are frequently associated with the concept of scarcity, which postulates that resources are limited but human wants are unlimited. Human wants are manifested through consumption. Despite the fact that neoclassical economics refers to the maximization of satisfaction and utility, it does not offer a concrete definition for human wants. According to Raiklin and Uyar (1996), the desires that take the form of urgency in acquiring goods and services to fulfill satisfaction are called needs, while wants include needs but go beyond them to reflect social and cultural status. Both “needs” and “wants” belong to the realm of personal consumption, which is the ultimate goal of the productive and distributive efforts of all economic systems, capitalist or otherwise. Both needs and wants are characterized by desires to satisfy and fulfill the acquisition of goods and services through consumption. Witt (2001, 26) stated that: [B]asic wants are part of the human genetic endowment. They can be satisfied temporarily either singularly or in more or less complex combinations by consuming appropriate items in suitable quantities, and the desire to satisfy the wants motivates the corresponding activity.

Neoclassical economics considers the theory of the individual consumer and his or her wants as one of the central theories in political economy. The social relations that were central in political economy were replaced by the concept of the economic man who is driven by insatiable consumer desires (Gagnier 2000). According to Pindyck and Rubinfeld (2001), the theory of consumer behavior describes how consumers allocate income among different goods and services to maximize their wellbeing. In order to best understand the theory of consumer behavior, three aspects should be highlighted: consumer preferences, budget constraints, and consumer choices.

The Meaning of Economics in the Quran According to Rothbard (1995), the word economics originates from the word Oikonomia, a Greek term that means household management. However, the Arabic meaning of the word economics is Iqtisad. In the Quran, the word Iqtisad appears in two forms: Muqtasid and Aqsid (while the word Iqtisad is a noun form). For the sake of illustration, we will cite the two verses in Arabic to show the word Muqtisid and Aqsid in a highlighted manner (Johan and Porter n.d.).

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Firstly, Muqtisid is an adjective, which appeared in Surah Fatir in the context of describing the behavior of three types of people, where Muqtisid is one of the types of behaviors: Then We have given the Book for inheritance to such of Our Servants as We have chosen: but there are among them some who wrong their own souls; some who follow a middle course; and some who are, by Allah’s leave, foremost in good deeds; that is the highest Grace. (The Quran, 35:32) We [God] bequeathed this Quran to the best nation and it is the nation of Prophet Muhammad that we choose from among various nations. According to the majority of Muffasrin, the people are of three types in terms of reading and implementing the Quran: the disobedient, the pious and between these two is the Muqtasid. (The Quran, 35:32, trans. AlSabouni 1981)

In the above translation, the word Muqtisid is translated to mean a middle course between those who are wrong in their soul and those who are good in their deeds. Another derivation of the noun form of Iqtisad is Aqsid, in which it is a verb form that stresses order. And be moderate in thy pace, and lower thy voice; for the harshest of sounds without doubt is the braying of the ass. (The Quran, 31:19) Be middle in your walk between fast and slow. (The Quran, 31:19, trans. Al-Sabouni 1981)

According to Wahbalbari (2010), conventional economics tends to define economics as the science of efficiency, whereas economics from the Quranic perspective advocates moderation. Whether the resources are expanded or restricted, the Quran postulates moderation in expenditure and behavior, meaning that the Quran focuses more on the aspect of moderating wants in contrast to conventional economics, which highlights the efficient management of limited resources. From the Quranic perspective, moderating wants leads to efficiency, as a person tends to make the best choices in managing the available resources to fulfill his/her basic needs and permissible wants. Furthermore, moderating human wants ensures waste avoidance as God postulates in The Quran: “Eat and drink: But waste not by excess, for Allah loveth not the wasters” (7:31). Therefore, Islamic economics should be viewed from the perspective of God’s power in creating absolute abundance and sending resources in

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ascertainable measures that motivate (and command) human behavior to obey the Divine rule in respect of what is obligatory, recommended, permitted or abhorred, and to do so in ways that express the rule and virtue of moderation (Wahbalbari 2010). To implement the Divine rule of moderation in expenditure and wants, there must be strong basis on Tawhid as the central paradigm for Islamic economics (Bahari 2012). This concept of the Tawhidi paradigm is very important to every Muslim, because such a concept makes a Muslim observe Allah SWT always in his/her actions and behaviors, especially regarding how to consume, produce and distribute goods and services. By complying with a belief in the oneness of Allah SWT, Muslims tend to submit to God’s rules and commands, such as moderate expenditure and avoidance of waste and spending for unnecessary products. Moreover, Saleh (2011) mentioned that through various spiritual training and practices, unlimited wants could be controlled and minimized. As a result, the pattern of consumption would therefore be based on needs rather than on wants. Resources are sufficient if they are related to needs rather than wants. In addition, Saleh (2011) elaborated based on the concept and categories of nafs in relation to the exploitation of resources and consumption of goods and services. Indeed, the nafs (soul) desires and wants the evil. “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” (The Quran, 12:53). However, the soul can be purified: “By the Soul, and the proportion and order given to it; And its enlightenment as to its wrong and its right; Truly he succeeds that purifies it, And he fails that corrupts it!” (The Quran, 91:7-9). If a person has succeeded in purifying his/her soul, he/she will gain the pleasure of Allah SWT: To the righteous soul will be said: O [thou] soul, in [complete] rest and satisfaction! Come back thou to thy Lord, well pleased [thyself], and wellpleasing unto Him! Enter thou, then, among My devotees! Yea, enter thou My Heaven! (The Quran, 89:27-30)

According to Daoud (2011), deflating human wants can overcome scarcity and realize relative abundance. In his analysis, he referred to the ethical practice of the Modus Vivendi of Material Simplicity (VMS).2 The Buddhist ethical practice of VMS enables people to deflate their wants and make their material resources abundant relative to their wants (Daoud 2011). The resulting surplus can be channeled to the society as a part of the process of social provisioning. There are several verses from the Quran that promote and advocate cooperation. “Help ye one another in

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righteousness and piety” (The Quran, 5:2). It is manifested clearly in several verses that postulate charity and donation for the poor and needy: And the likeness of those who spend their wealth 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. (The Quran, 2:265)

Furthermore, the tradition of the Prophet Mohammed (pbuh) includes a story that shows how the surplus can be utilized: Jabir said: A man came to the Prophet (pbuh) and said, “I have a dinar.” He said, “Spend it on yourself.” The man said, “I have another.” He said, “Spend it on your child.” The man said, “I have another.” He said, “Spend it on your family.” The man said, “I have another.” He said, “Spend it on your servant.” The man said, “I have another,” He said, “You know best how to spend it.”

In conjunction with the above hadith, Asad Zaman (2009) mentioned that the economics problem could be solved through limiting wants. According to him, the prohibition of envy and avoidance of tabzeer3 could help to limit wants. When people spend based on unlimited wants, people tend to spend on luxury products, which stimulates them to envy each other. One of the features of the capitalist economic system is to promote expenditure. The best mechanism that promotes expenditure is advertisement. Accordingly, advertisement creates a sense of fulfilling human wants and desires. Consequently, excessive advertisement creates competition among people in order to fulfill a certain social status, which in turn makes them buy unnecessary goods and services. At the end, the surplus will be wasted for satisfying human wants, which are not limited in nature. The concept of scarcity indicates that the resources are means to achieve the end of satisfying the maximum possible of unlimited human wants. Such objective of satisfying unlimited human wants eliminates the surplus and realizes the so-called relative scarcity. As a result, relative scarcity as it is postulated by conventional economics is not a universal and central condition that governs the relationship between nature and human beings. Rather, it is a social product that appears as a phenomenon that can be abolished through moderating human wants and expenditure.

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Conclusion To summarize and conclude, conventional economics tends to center its enquiry on the efficient use of scarce resources in order to fulfill the maximum possible of unlimited human wants. Consequently, many Islamic economists tend to define economics from the perspective of efficiency in managing resources rather than moderating unlimited wants. By investigating Quranic verses, it has been found that Al-Quran AlMakki shows the power of God to create and provide resources continuously for human beings. At the same time, Al-Quran Al-Madani commands moderation in expenditure behavior, which indicates that wants must be moderated. The word for economics in the Quran indicates moderation, and through moderation, waste of resources will be avoided and efficiency will be achieved. Therefore, Islamic economics should be the science of moderation rather than efficiency, because moderation is the prerequisite of efficiency. Relative scarcity as it is postulated by conventional economics is not a universal and central condition that governs the relationship between nature and the human being. Rather, it is a social product that appears as a phenomenon that can be abolished through moderating human wants and expenditure.

Acknowledgment The Authors gratefully acknowledge ILKE Association of Science Culture Education, Association of Entrepreneurship and Business Ethics (IGIAD), and Scientific Studies Society (ILEM), USM Research University Team Grant and USM Fellowship Funding Scheme.

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Matthaei, Julie. 1984. “Rethinking Scarcity: Neoclassicism, Neomalthusianism, and Neomarxism.” Review of Radical Political Economics 16(2-3): 81-94. Mill, J. S. 1848. The Principles of Political Economy with Some of Their Applications to Social Philosphy. London: Longmans. Peach, J., and Dugger, W. M. 2006. “An Intellectual History of Abundance.” Journal of Economic Issues 40(6): 693-706. Pindyck, R. S., and Rubinfeld, D. L. 2001. Econometría: Modelos y Pronósticos. Mexico: McGraw-Hill. Porritt, J. 1848. Capitalism as If the World Matters. London: Earthscan. Raiklin, E., and Uyar, B. 1996. “On the Relativity of the Concepts of Needs, Wants, Scarcity and Opportunity Cost.” International Journal of Social Economics 23(7): 49-56. Rothbard, M. N. 1995. Economic Thought before Adam Smith. Aldershot, England: Edward Elgar. Salleh, Muhammad Syukri 2011. “Islamic Economics Revisited: ReContemplating Unresolved Structure and Assumptions.” Paper presented at 8th International Conference on Islamic Economics and Finance, Center for Islamic Economics and Finance, Qatar Faculty of Islamic Studies, Qatar Foundation, Doha, Qatar, December. Salleh, Muhamad Syukri. 2003. Pengurusan Pembangunan Berteraskan Islam: Konsep dan Perkaedahan, Siri Syarahan Umum Perlantikan Profesor, Universiti Sains Malaysia, Pulau Pinang. Siddiqi, Muhammad Nejatullah. 1989. Muslim Economic Thinking: A Survey of Contemporary Literature. Translated by Mohd. Amin Abdullah, Kuala Lumpur: Dewan Bahasa dan Pustaka. Wahbalbari, Amir Ahmed. 2010. “The Concept of Scarcity and Its Implication on Human Behaviour: Searching the Quranic Perspective.” Review of Islamic Economics 14 (1): 147-171. Wahbalbari, Amir. Zakaria Bahari and Norzarina Mohd-Zaharim. 2013. “The Concept of Scarcity and Its Influences on the Definitions of Islamic Economics: Integrating Critical Realism.” Paper presented at the Islamic Economics and Economies of the OIC Countries (ICIE 2013) Kuala Lumpur, Malaysia. Wennerlind, Carl. C. 1999. The Historical Specificity of Scarcity: Hstorical and Political Investigations. Unpublished Ph.D Dissertation. The University of Texas, Austin. Witt, U. 2001. “Learning to Consume—A Theory of Wants and the Growth of Demand.” Journal of Evolutionary Economics 11(1): 23-36. Zaman, Asad. 2009. “Scarcity: East and West.” Journal of Islamic Economics, Banking and Finance 6(1): 87-104.

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Notes 1

Among them: there is no economic problem where there is an absence of scarcity and where there are alternative uses of available resources; economics is the study of choices regarding the given scarce resources; economics is the study of how society handles its scarce resources; and goods and services are limited and wants are unlimited. 2 For further discussion on Modus, see Daoud, A. 2011. “The Modus Vivendi of Material Simplicity: Counteracting Scarcity via the Deflation of Wants.” Review of Social Economy LXIX(3), 276-305. 3 Tabzeer is to spend only on what is entirely unnecessary, illegal or haram.

THE POLITICAL ECONOMY OF INSTITUTIONALISM: A METHODOLOGICAL PROCESS PREMISED ON ISLAMIC TEXTS LUBNA SARWATH

Background We observe in current times that the world is taking shape according to the thoughts of a few nations and institutions, especially those dominated by a corporate-democracy culture. The result has been the vertical growth of a minority and the debasement of a majority, including erosion of peace, ethics and the environment. On the other hand, there is a quest for a sustainable reference framework at all levels of sciences and knowledgeformation. Now, the onus rests on the advocates of the Oneness of God, or the tawhidi episteme, to contribute analytical literature on theory and practice with applied facts of institutionalism. This paper follows along this direction. This paper discusses the unique features of institutionalism that arise from its being premised on the concept of unity of knowledge. The law of unity of knowledge is deduced as the worldview from the transcendental concept of the Oneness or Unity of God (Tawhid). The elements of institutionalism are presented in terms of its episteme, the discursive institution, the procedural methodology, the application, and the concept of wellbeing. Empowering institutions with the methodological construct of a consultative participatory institution and a learning/knowledge-building process at all levels of hierarchy can serve as the first long step towards the much needed consultative participatory discourse, broad-based governance, transparency, and equitable development.

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Definitions: Institutions and Institutionalism In line with the theme of this paper, institutions are defined as the vibrant media that reinforce and give sustainability to an epistemically premised intellection of organizational behavior, consistent theoretical principles, and policy implementation. Institutionalism is the theme that is carried from strategic levels through policies to the individuals, via institutions. Institutionalism is understood and implemented as a medium of consciousness that carries a given episteme into human experience. The schematic breakdown of the inherent methodology of institutionalism can be expressed as: Institutionalism = Substance (Episteme) + Structure (Form) + Sustainability (Continuity) + Application + Inference From the above schema is derived the function of the institution as entity in specific world-systems with diverse problems: Institution = Substance (Episteme) + Structure (Form) + Governance (Consciousness) + Application + Sustainability (Continuity)

A Critical Assessment of Institutionalism based on Occidental and Tawhidi Epistemic World Views A quick assessment of literature on institutionalism and institutions reveals drastic differences between the occidental and the Islamic schools. Prescriptively and normatively, the occidental theories in general are found wanting due to lack of a unified and integrated world-system approach. The Islamic literature on the other hand ranges from Muslim scholars being influenced by the Greek rationalist philosophies to scholars whose reasoning is premised on tawhid.

Occidental Worldview Reason, observation, pure thought, experience, intuition, and historical materialism are characteristics of the varied epistemes for economic and social theories of the occidental school. These theories are rational and empirical. They are derived from world-systems and re-used as tools to understand the world-systems within the functional scope of the theory, which admittedly is reductionist, hence unrealistic, and cannot be prescriptive.

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The survey of occidental literature across time throws light on a general approach adopted by theorists, economists and scholars. The theorists analyze the prevalent conditions, generate hypotheses, and frame theories with the objective of improving the existing material conditions of the individual and society. The generated theories that withstood the tests of empiricism and falsifiability are admitted into the scientific knowledgebody as recognized doctrines (Abu Ubayd 2007, 11). According to Popper (Boland 1989, 129 (1959/61, 40)), theory is scientific only if it is capable of being tested by experience. Thus, what has been observed is that the flow of knowledge building is within itself from general to particular and particular to general. The theories are premised on an episteme that is not original and not irreducible. At the ontological level, the institutions are transmitters of the epistemes that are restricted in ambit and un-encompassing in scope. Therefore, the result at the ontic level is anything but a unified and interactive institutional setup.

Islamic Worldview The Islamic school by and large has the shariah (Islamic law) as the carrier of the tawhidi episteme for the understanding and functioning of the world-systems. The Quran and sunnah form the referential framework for deducing various guidelines. These guidelines form the basis for institutional constructs viz. shura, hisbah, 1 and others, in the varied yet unified world-systems. The endogeneity of ethics reinforces the factor of accountability in this world and the Hereafter. Some quick examples are appropriate here. In the tawhidi epistemic regimes, a dynamic interaction between money and real economy eliminates/disallows banks from the parking of funds in the guise of savings. Markets are self-governed with ethical endogeneity. The unity of knowledge that makes systems converge in a unique way institutionally across ethico-polity-market-social systems is a study within institutionalism. Under the tawhidi epistemic principles of equitability, assets (whether liquid or fixed) held as wealth are taxed. Money held without investment is self-exhausted by the levy of the instrument of zakat. Thus, active investment in the real economy is encouraged with wide ramifications on the economy. The ethical institutions of zakat (wealth-tax) and israf (wastefulness) cut down wanton spending and wasteful consumption. The endogeneity of ethics through the recursive shura learning process between individual and

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institutional collectives enables avoidance of the squandering of the “economic surplus” generated by the community. The spendinginvestment-return institution of the tawhidi epistemic policies gradually replaces the institutions of bank-saving and concomitant financial interest. Crisis-averting measures are thus built-in (endogenous) to the Islamic theory of institutionalism viz. the epistemic guidelines, such as automatic avoidance of speculation and short-selling of assets causing irrelevance for hedge funds, derivatives, and futures to exist. Money and real economy in the presence of spending in the good things of life according to the maqasid as-shariah (objectives of Islamic Law) establishes automatic economic balance and stability. In the tawhidi epistemic IIE-learning process methodology, non-linear aggregations are formed by pervasively complementary interrelations between polity-market interactive variables and institutional agents guided by the overarching institutionalism of the tawhidi episteme. Now learning processes occur with evolutionary equilibriums through the diversity of choices. Such equilibriums are determined by consensual preferences under the impact of institutional guidance and instruments characterized by a balance conveyed through the enactment of the divine law (shariah) at play in the organization of institutions and world-systems. Social trust is part of ethics that are endogeneized in the institutional construct of the unified world-systems. Here, trust is generated out of belief that is endogeneized in preferences and choices by institutionindividual interactions, as these are abundantly and widely represented, and they glide into mutual cooperation (dynamic consensus). The trust is supported by the coincidental features of transparency and accountability in Islamic institutions, e.g. Islamic banks that produce trust (Harahap and Basri 2005). Thus, the ethics of trust can act as social lubricant in the democratic institutional developments of current times. Ethical and moral endogeneity; a unified but complex approach to the functioning of the world-systems; the shura as platform for broad-based consensus at all institutional levels prompting transparency and broadbased development; an evolutionary learning process in continuum with a call back to the episteme in every learning process ad-infinitum, thus ensuring epistemic ethics-induced variables; along with overall accountability all together form the unique features that drive the functionality of the world-systems.

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The Scientific Research Program of Unity of Knowledge in the Islamic Perspective “Theories of Unity of Sciences” and “Theories of Everything” (Barrow 1991, 200-210) are the rationalistic empirical investigations for “something” that can qualify at the same time as the Ultimate, the Irreducible, the Origin, the Self-Sustainable, the Absolute and the Everlasting. Knowledge-flows between the mind’s limited capacities within and the observational experiential knowledge without are both premised on the rationalism/rationalist aspect of the ontic being. The abstraction of the factor of ethics by such thought-processes and institutions has eroded the overarching, reinforcing affect of ethics from the policy framing or decision-making of the socio-scientific and politicoeconomic constructs. The matters that are essentially ethical and moral were thus discovered out of the bounds of social and economic political environments, causing devastating repercussions. Tawhid is the unicity precept or the Oneness of God. In this paper, the precept of Oneness of a God that is Absolute, Irreducible and Selfsustainable is the premise for the theory of Unity of Knowledge. The tawhidi episteme of unity of knowledge extends universally from the sciences of the sub-conscious mind to cosmic-universal sciences. The tawhidi epistemic methodology premised on the tawhidi episteme has the Interaction-Integration-Evolution (IIE) learning process2 as the functional tool applied in the ontic system. The IIE process permeates the unifying features of the tawhidi methodology. The tawhidi epistemic learning-process for knowledge-flow is firstly a recognition and acknowledgement of the overarching unity of knowledge and unity of world-systems. Secondly, it makes the epistemic features functional in accordance with the socio-scientific unifying theories.

Institutionalism from a Tawhidi Point of View It is the vibrancy and dynamics of the institutional structure that determines the establishment of the new paradigm or the scientific revolution under the tawhidi worldview. Institutionalism ushers in a new concept on a universal scale via the institutional structures. As Choudhury remarks in The Universal Paradigm (2007, 23), the way to “liberation” from the existing non-substantive theories to one in “harmony” with the universally applicable tawhidi epistemic unity of knowledge is through learning processes and institutional structures.

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“Amr bil ma’ruf wan nahee ‘anil munkar”3 (enjoining what is good and forbidding what is bad), “hisbah” (administration), and “shura” (mutual consultation with consciousness) are a few of the tawhidi epistemic institutional structures. In institutionalism, epistemology forms the driving consciousness of various artifacts of worldly systems. The unique epistemic features establish the tawhidi epistemic presence and give direction and momentum via institutional guidelines. The consciousness of underlying complex interactions indicating the extent of unification is the unique epistemic feature of the general theory of institutionalism. Institutionalism here does not rely on informal “learning pressure” (Sztompka 1999, 134). It has a formalized IIE learning process methodology as its core functional part for knowledge-formation and knowledge-flows, based on tawhidi epistemic methodology. The knowledge-formation and the knowledge-flow from episteme-premised sources to the ontic systems are ensured through the process of “learning.” In the theory of institutionalism, “learning” implies intense conscious discursions on the evaluation of knowledge-flows and the newly deduced tawhidi epistemic knowledge-flows, on the platform of shura. This learning process is recursive, and thus, knowledge-flows are qualified as dynamic, novel and experimental, lending themselves for testability as demanded by the scientific method. Such a learning process disallows gradual epistemic-detachment and dismisses the static nature of knowledge that abounds in conventional theories of institutionalism. According to tawhidi epistemic institutionalism, all unified systems are “learning systems” in process, as opposed to the de-unified systems (competing and differentiated) that are non-learning, and hence deknowledge, systems. Novelty in the new processes evolves out of the learning experience but remains premised on the self-same and unique tawhidi episteme. The evolving systems, post-interaction and postintegration, with tawhidi epistemic guidelines cause transformation. The intensity of such a total phenomenological learning process is directly proportional to the knowledge-flows in the order of institutionalism.

The Episteme in Institutionalism Episteme as Exogenous to Institutionalism The episteme of institutionalism is “Unity” (Oneness of God and equivalently unity of Divine knowledge). It is also referred to here as the precept of unicity further deduced as unity of knowledge and unity of world-systems.

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Institutionalism recognizes the episteme as exogenous to the worldsystems. Tawhid as an episteme is irreducible, and this establishes its infallibility. While the attribute of deducibility and un-changeability reinforces its invariant exogenous status, tawhid as an episteme for unity of knowledge and unity of world-systems is the premise for the theory of institutionalism. Hence, the features of unicity, unification and unified world-systems permeate the institutional constructs.

Endogeneity of Ethics in Institutionalism Institutionalism premised on unity of knowledge considers firms and organizations as organisms that can generate organic unity amongst the systems. The shura institutionalizes itself at every nodal point of decisionmaking vertically and horizontally across systems and organizations. Thus, the shura works from the micro-institutional level to the macro global level of interactions into networked institutions. Policy variables are the main change agents through institutionalism, and institutions echo the market dynamism of intrinsic interrelationships and continuous interactions. Interactions initialized among agents, institutions and socio-economic environments are sources of continuously regenerating preferences. Thus, ethics and morality are endogenous variables in a scientific method in this new order. Such endogeneity incorporates preference changes. The interactive agency-individual preferences induce ethics and values into real economic variables, such as prices, quantities, incomes, wealth, growth and output, wage distribution and the earning of profits, policy variables, and institutional programs. The endogeneity of ethics and values changes positively the preference behavior and tastes of both consumers and suppliers, thus altering the nature of demand-supply relationships across learning fields of pricequantity relationships, all being embedded in a vast field of endogenously active forces.

The Discoursing Institution of Shura The Quranic verses in Chapter Forty-Two titled A’Shura are the episteme for the institution of shura explicated in this paper. The verses do not indicate or restrict the applicability and functionality of shura for an isolated political order or problem. Shura is an example of the cognitive form of tawhidi epistemic textual guidance in every socio-scientific inquiry. Through the inter- and intra-systemic interactions, irrespective of the issues and problems at hand, the shura is treated as a platform that

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makes interactions happen. Thus, in this milieu of change and transformation, the positive attribute of the theory of institutionalism is the possibility of evolutionary equilibriums and processes caused by evolutionary knowledge generation. Thus, the transformation and reconstruction capacity replaces de-unified thought processes and systems of falsehood by unified systems or Truth.

The Presence of a Discursive Body with Diverse Representation in the Tawhidi Institution A discursive body with broad-based representation in terms of knowledge and functional background is essential for a unified approach to resolving any systemic issues. The shura as a discursive body becomes the interface between the episteme of unity of knowledge and unity of the ontic world-systems. The discourse ensures knowledge-formation and knowledge-flows. The recursive flows of knowledge in circular causation type episteme-ontology-ontic-episteme in continuity are what make experiments, novelty and innovations possible on the scale of knowledge and its applicability. Shura as the discursive body is the platform for this function. Members of the shura are shar’ees. The shura is an epistemic institution. Hence, its unified characteristics entail that it is diversely represented in all terms possible, viz. functionality, demography and knowledge of shariah. Knowledge generated in the shura enjoys acceptability on the basis of its proximity to the episteme and not on the basis of numeric strength of demographic representation. While the wellbeing objective is evaluated, the evaluated wellbeing status becomes the feedback in and across the shura continuously. This recursivity ensures that the knowledge transformed as policy guidelines does not become static. The feedback is treated with the episteme again to generate new knowledge and new knowledge-induced socio-scientific realizations ad-infinitum to the Hereafter. Figure 1 below illustrates the interaction process that takes place in the institution of shura with knowledge-formation as well as tawhidi epistemic knowledge transmission, for transformation of world-systems into organically interrelated, and thus, unified ones, in the good things and social contracts of life.

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Figure 1: The IIE-learning Process for Tawhidi Epistemic Knowledge-Formation in Pursuit of Wellbeing

S H U R A

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VARIABLES OF WORLD-SYSTEMS INTEGRATED WITH EPISTEMIC KNOWLEDGE

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WELLBEING OF VARIABLE EVOLVED AFTER ș INTEGRATION

IIE (INTERACTION-INTEGRATION-EVOLUTION) LEARNING PROCESS METHODOLOGY FOR EPISTEMIC-KNOWLEDGE BUILDING

This figure depicts the flow of tawhidi epistemic knowledge from the institution of shura to various entities/variables of the world-systems. The objective is to increase interactions and advance the degree of unification, which is the measure of wellbeing adopted in the study on institutionalism. Tawhidi conscious discursions are conducted by the shar’ees (members of the shura) in the shura. The epistemic knowledge deduced by the shar’ees is the (ș). The (ș)-variable now interacts with the variables of world-systems viz. X1, X2, X3, Y1, Y2, Y3, which are subjected to interand intra-systemic interaction possibilities. This establishes cause-effect linkages in the complex network of interrelations between the variables representing the good things of life. Furthermore, we observe that the epistemic (ș)-variable interacts and integrates with the world-system

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variables to form new tawhidi epistemic embedded variables viz. X1(ș), X2(ș), X3(ș), Y1(ș), Y2(ș), Y3(ș). The knowledge-flow from the institution of shura through the IIE-learning process to the wellbeing evaluation stage of W(ș) is a continuous one. The learning process always begins at the epistemic level by recalling throughout the shura learning experience. This normative and participative procedure enables that the policies are always anchored to (ș) and do not drift away from this epistemic concept of unity of knowledge and unity of world-systems. The wide representation and broad participation with underlying inter- and intrasystemic interactions is what generates the transparency, accountability, judicious responsibility and broad-based development organically.

The Recursive IIE-learning Process in the Institution of Shura Knowledge-building or Learning Process in the Shura The knowledge-forming process recalls to the episteme at the end of each learning process on a continuum. Such recursive processes are called the IIE-interactive, integrative and evolutionary processes. The knowledge-body generated through discussion is based on the episteme. In the IIE-learning process, knowledge from the tawhid episteme is deduced and further subjected to varied dynamic complex interactions by way of consultative discursions held in the institution of shura. The simulated wellbeing of the entity is evaluated in the shura. The unique feature of this knowledge-forming-cum-learning process is its recursive path, which is initiated at the end of each learning-process viz. epistemeshura-IIE-process-episteme on the path of endogeneizing the epistemic value of the unicity precept achievable through increased intensity of interand intra-systemic interactions, integration and creative evolution.

Interactions within the Unified Systems The worldview methodology of tawhidi unity of knowledge and its IIE-type phenomenology in explaining all reality remains unique across problems and issues. The theory of institutionalism recognizes worldsystems as being unified and assures its universality. The complementary relations between the variables are both premised on and reflect unity of knowledge. What is deduced is that the world-systems are diverse but essentially linked and interactive. Hence, systemic issues cannot be treated in isolation.

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The continuity and speed of the knowledge-flow process causes complex positive effects on knowledge viz. unification, justice, ethical endogeneity and equitability. The prevailing negative knowledge or deknowledge viz. self-interest maximization, materialism, consumerism, profit maximization, and hedonism are phased out of the system. Such a replacement of the latter category with the former category of positive knowledge is most crucial in present times. This transformation is to restore justice and balance in production, consumption, ownership and distribution to attain life-fulfilling regimes of development and to revive the positive elastic input of ethics, altruism, accountability, transparency and spiritualism in the world-system at large. The purpose of the shura learning process is to generate policy formulations that advance complementarities and participatory developments in the market, society, economy and all related underlying subsystems. The mutual interactions of economic agents with policy agents and variables ultimately cause an integration of the epistemic value. This is carried from the shura institution through the political-legislativeeconomic institutions. Peace is essentially a result of the institution of justice and the values connected with the institutions of justice viz. equitability, fairness, transparency and accountability ensured by the participatory interactive process conducted in the echelons of shuras.

The Application The learning processes of the shura represent highly decentralized decision-making processes in form yet highly centralized in substance with respect to their tawhidi epistemic focus. This is a typical scenario characterized by the unification of systems based on unity of knowledge, which enables permeation of the order of balance, justice, equitability and social wellbeing into the world-systems through the ethics and values of the tawhidi episteme. In fact, the agents and variables face the constant inductive-deductive experience of endogenous persuasion rather than coercion.

The Wellbeing Criterion in Institutionalism In institutionalism, along the trajectory of knowledge-formation for system development, there will be no final optimality in knowledge-flows. There will always be innovations and new simulations of wellbeing. The criterion to tread the path is that of learning interaction between

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complementary and participating entities and their representative socioscientific variables. The wellbeing criterion is estimated through the complementarities of various system variables/entities. The highest number of complementary interactions is the ordinal value allotted to the measure of wellbeing. The recursive-learning process of knowledge-formation is the course of reevaluating simulated wellbeing. It reflects the result of the increase in complementary interactions to assess the systemic unity. The simulated wellbeing is judged by the degree of unity or the intensity of the underlying interactions. Further policies are designed to attain the unification of systems. At present, sectored Gross Domestic Product (GDP) has been adopted as a measure for a country’s wellbeing. Whereas wellbeing encompasses societal factors, GDP is chiefly about the statistics of market economics. Environment, work and life standards that could measure wellbeing by the happiness of the country’s inhabitants are not inclusive in the current GDP. These dizzying statistics are deceptive. Wellbeing is measured not by growth figures but instead by what a nation stands for in its interactively unified and balanced development path. The growth figures are regard the part of the nation that is surging ahead financially while leaving a huge social section behind. GDP figures are a disguise attributing the growth to the section left behind because of social upheavals. Growth is not being complemented by policies that allow the benefits to percolate to every section of society. In criticizing the GDP system while addressing the Indian Institute of Technology (IIT) in Chennai, India, Nobel Laureate Amartya Sen emphasized that technical expertise should be used to address illiteracy, poverty and malnourishment. The focus should be on the creation of a nation with people having access to basic entitlements, as well as to growth benefits directly reaching the poor. More emphasis should also be directed toward many more factors, which count for wellbeing as a measure of the degree to which the variables attain their organic unity by means of complementarities and the participatory behavior of the entities and between their representative variables.

Conclusion A new trend seems to be emerging among political economists and sociologists in their comprehension regarding the scope and power of institutionalism and institutions that can lead to defining the socioeconomic and political patterns with wellbeing as the objective criterion

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for attainment. There exists considerable rhetoric on empowering the individual at grassroots levels, because the scope of the individual is global. However, the potential is channeled toward the profitmaximization of corporate-conglomerates driven by self-interest. Thus, the individual is pampered with consumerism, debt financing, materialwelfare consciousness, and the like. The essential groundwork of the tawhid-premised institutionalism is formation of preferences and material choices based on moral consciousness.

References Abu Ubayd. 2007. Kitab-ul-Amwal- The Book of Finance. Translated by N. M. Ghiffari. New Delhi, India: Adam Publishers. Ahmed, Akbar 2002. “Ibn Khaldun's Understanding of Civilizations and the Dilemmas of Islam and the West Today.” Middle East Journal 56(1): 20-45. Ali, A. Y. 1946. The Holy Quran, Text, Translation and Commentary. 2 volumes. New York, USA: Hafner Publishing Company. Ansari, J. 1986. The Political Economy of International Economic Organizations. Brighton: Wheatsheaf Books Ltd. Barrow, J. D. 1991. Theories of Everything—The Quest for Ultimate Explanation. Oxford: Clarendon Press. Boland, L. A. (1989). The Methodology of Economic Model BuildingMethodology after Samuelson. London. New York: Routledge. Brown, Sarah. 2008. “End of Chicago Free-market Ideas?” Al Jazeera News, November 3. http://english.aljazeera.net/news/americas/2008/11/200811322402998396 5.html. Buchanan, J. M. 1999. “The Relatively Absolute Absolutes” in The Collected Works of James M Buchanan, Vol. I: The Logical Foundations of Constitutional liberty, Indianapolis, IN: Liberty Fund, 442-454. Chang, H. J. 2002. Kicking Away the Ladder-development Strategy in Historical Perspective. London: Anthem Press, Wimbeldon Publishing Company. Choudhury, M. A. 2007. The Universal Paradigm and the Islamic WorldSystem: Economy, Society, Ethics and Science. Singapore: World Scientific Publishing Co. Pte. Ltd. —. 2004b. The Islamic World System: A Study in Polity-Market Interaction. New York & London: Routledge Curzon.

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Choudhury, M. A., and Sarwath, L. 2011. “Sustainability by Interrelating Science, Society and Economy in Embedded Political Economy—an Epistemological Approach” in the Systemic Dimension of Globalization. Edited by Pachura, and P. Rijeka. Croatia: InTech. Cook, R. C. 2008. “Economic Democracy and a Guide to the 2008 Presidential Election.” Global Research, January 10. www.globalresearch.ca/index.php?context=va&aid=7762. Harahap, S. S., and Basri, Y. Z. 2005. “Socioeconomic Disclosure of Islamic and Conventional Banks: Bank Syariah Mandiri and Bank Lippo Indonesia” in Money and Real Economy, edited by Choudhury, M. A. Leeds, UK: Wisdom House Publications Ltd, 219-236. Hilali, M. T., and Mohsin, K. 1996. Interpretation of the Meanings of The Noble Quran. Riyadh, Saudi Arabia: Darussalam. IDB. 1996. “What is Islamic Economics?” Part II—Islamic EconomicsIDB Prize Winners’ Lecture Series No. 9, 1996. Jeddah, KSA: Islamic Development Bank, Islamic Research and Training Institute. Lucas, J. R. 1995. “The Unity of Science without Reductionism.” Lecture given in Dubrovnik, April 11. http://users.ox.ac.uk/~jrlucas/unity.html. Myrdal, G. (1987). “Utilitarianism and Modern Economy” in Feiwel, G. R. ed. Arrows and the Foundations of the Theory of Economic Policy. Hampshire, UK: The Macmillan Press Ltd. O’Donnell, J. J. 1965. Outline and Criticism of Communist Theory from Marx to Mao. New York: Thor Publications. Sarwath, L. 2011. Institutional Political Economy—Islam and the Occident: Methodology with a Case Study of Sultanate of Oman. Unpublished doctoral thesis, Faculty of Economics, Islamic Economics and Finance, Trisakti University, Jakarta, Indonesia. Sen, A. 1986. Poverty & Famines: An Essay on Entitlement and Deprivation. Oxford, UK: Oxford University Press. Stiglitz, J. 2002. Globalization and Its Discontents. New York: W. W. Norton & Co. Inc. Sztompka, P. 1999. Trust: A Sociological Theory. Cambridge and New York: Cambridge University Press.

Notes 1

The Hisbah is a religious institution under the authority of the state that appoints people to carry out the responsibility of enjoining what is right (whenever people start to neglect it) and forbidding what is wrong (whenever people start to engage in it). 2 For explanations of IIE learning process, see Section 5. 3 The Quran, 9:71.

CONCLUSION: RETHINKING ISLAMIC ECONOMICS TAHA EöRI

While studies in the area of “Islamic economics” have been undertaken for more than half a century, in recent years the field has grown and evolved. Conferences, seminars and workshops have been increasing in number; publications such as academic journals and compiled works have been diversifying; and new masters and Ph.D programs in the area of Islamic economics and finance have been created across different universities In the 1970s, idealist Muslim scholars founded the basic principles of Islamic economics. In response to colonial area studies in economics, these scholars sought to create a new system that would be suitable for the belief systems of Muslims. Their efforts led to the founding of the theoretical and ideological facets of Islamic economics. Their studies, which constitute the conceptual definition and content of Islamic economics, serve as the pioneering research in this field by specifying the framework and the subtitles of the field. Despite these theoretical and ideological efforts, in the 1990s, academic studies were conducted primarily in the field of banking instead of putting forth conceptual and systematic debates. In these years, interest-free banking emerged parallel to the scientific studies. The focus on understanding the financial issues of Islamic economies developed in response to issues associated with two trends: the fast economic growth of densely populated Muslim countries; and the accumulation of dollar reserves in petrol-generating Islamic states. At the heart of the financial research were two questions. First, how best can Islamic states make use of their existing capital? Second, how can these states find the necessary funds to finance high-cost investments, such as infrastructure? The search for answers to these questions generated an interest in interest-free banking, the basic principles of which were founded in the 1970s. The pace of economic growth has inspired new interests in interest-free banking and in Islamic finance studies at both the individual and

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governmental level. The basic agenda of second-generation Islamic economists and new researchers in the field is driven by concerns about the ability to meet growing demand. Islamic economics started out with the motivation to be an alternative for the dominant financial understanding of the age. However, the studies of interest-free banking and “Islamic finance” have in the present limited the field of Islamic economics to the search for an alternative solution in order to meet the current financial demand. Certainly, the faultless execution of the financial system is related to the expectations for growth and development of the countries that are improving on the macro level as well as to the need for capital of the micro level entrepreneurs so as to operate their activities. The system of interest-free banking has thus taken its place in the sector for such kinds of financial needs of the Muslims. However, the current limitation of the field of Islamic economics studies—which normally should be striving to develop a universal system—to the realm of banking will not serve the needs of the Islamic world in the long run.

The “Financialization” of Islamic Economics1 The rise in interest-free banking activity is related to the diversity of products and expanding demand emerging in the sector. However, there is a need to contemplate the factual reasons as to why new researchers and new graduate programs are focusing primarily on “Islamic finance.” In the mainstream system, an understanding of finance is seen as an important component of a professional’s career. Both among the academics and the professionals who are already working in the system, the studies of finance are rising in popularity because these studies meet the current needs of the sector and the consumers. In this context, institutions of interest-free banking that open the way to meet the everyday needs of Muslims as well as developments in this area comprise an applicable subsection of Islamic economics with opportunities for promising career growth. As such, the accumulated funds in the hands of the Muslims and their financial demands have even lead Western banks to maintain interestfree banking activities. The fact that conducted studies can find their answers in the applied area and that they have an effective impact in the short run is a worthy reason for the studies in this area to increase. It is certainly important to conduct research in order to meet the specific demands emerging in a society. However, the total shift of the conducted studies towards this area presents problems for Islamic economics. While there is a need to undertake many issues of economics individually and to enforce new

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debates, the overwhelming “financialization” of current Islamic economics studies gives rise to a loss of identity (Islahi 2013). The financialization of Islamic economics has led to the deepening of the financial system and the production of financial tools that are nearly identical to the conventional system and to which the field initially set out to propose an alternative. These kinds of tools, by enabling the capitalist system’s permanent maintenance and then by integrating Muslims into this system, bear dangers for the future. The identification of finance with Islamic economics and the reduction of the field to the demand of interest-free procedures have caused the other basic postulates of mainstream economics to emerge in the minds of Muslim individuals. Such basic conjectures of modern microeconomics as the habit of consumption, rationality, and the motive to gain profit are being normalized in Muslim minds. The ingraining of modern financial engineering studies in Islamic economics has caused the banking sector to develop rapidly. It should be remembered that banking activities do not pursue social goals; rather, they are profit-based (Islahi 2013). Islamic finance is also driven by profit. Although the Islamic Development Bank—which is identified as the pioneer of Islamic banking—was founded with the aim to develop Islamic states, its desired outcomes have not been realized. There have been recent and increasing criticisms of the bank, claiming that its activities have tended to focus more on commercial aims. Thus, the bank cannot fulfill the requirements of an ethical economic system, having diverged from its original development aim (Asutay 2007). However, ontologically, the act of assigning development missions to banks must be reconsidered. Banks are the chief and most productive institutions of a capitalist system, given their ability to maximize profit. Since banks are institutions founded with the motive of profit, and thus, operate accordingly, it is against their nature to bear a different purpose in an Islamic economics system. Islamic finance institutions that bear the structural qualities of the conventional banks display similar behaviors. It would be wrong to expect more from an institution that operates in the area of “capital.” What is essential is to create a comprehensive Islamic economics system and to found distinctive institutions that are better suited to the aims and missions of this particular economic system. The financialization of Islamic economics is in fact also related to the tendencies of the young researchers studying in this area. As stated in the first paragraph, Islamic economics studies have increased in the last decade, and young Islamic economists have started to voice their opinions. However, studies have shown that these researchers are inclined to study the area of finance. The issues of banking and finance saturate the subjects

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of articles, compiled works, or studies presented in different forums. In the studies, the other issues related to Islamic economics—except for its methodology, basic concepts, and financial institutions—do not attract much attention. This trend runs parallel to the rising demand for banking services as illustrated above. The needs and possibilities of the sector offer young researchers new opportunities. At this point, it is necessary to motivate and support young academics in order to direct them to the study of areas outside of finance. This process will require exceptional appreciation and support. In international platforms dedicated to areas outside of finance, new studies must be rendered possible and young researchers should be given priority to conduct them. Otherwise, the current market will limit the potential of Islamic economics to be a scientific area that is critical of conventional market economics, as it was originally envisioned to be. Although rapid developments occur in financial markets, it will not be possible to talk about an Islamic economics with no constitutive ethical basics and framework (Asutay 2007, 3).

Islamic Economics and the Methodological Search The classical theory of economics rises out of the knowledge and scientific works that have been produced from the 16th century to the present. Parallel to debates rooted in philosophy, developments in social and commercial life have led to the formation of the mainstream economics system of today. This process helped develop the model of a human who puts preferences into an order, and thus, makes rational choices. In this debate, which started with the acceptance that humans are creatures that constantly follow happiness, the search for happiness is linked to beneficial gains. It is claimed that the more benefit a human has gained, the happier he or she should be. Given this argument, scholars and philosophers that discuss the issue of benefit have equalized this to the elimination of needs. Consumption patterns that eliminate needs and give satisfaction will raise the benefits available to consumers. These patterns thus raise the degree of happiness in humans. The conception of a rational human that emerged out of this debate has transformed into the concept of a human who optimizes the benefit he gets and chooses by putting different options in order. Mainstream economics subscribes to this conception of humans and has developed mechanisms and institutions that are in line with such a conception, leading to the arrangement of economics with such structures as individual freedom and competitive markets. Two general actors have emerged from this process:

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the consumer, who is seeking to increase his benefit, and thus, his happiness; and the entrepreneur, who is seeking to maximize his profit. Entrepreneurs who follow the conception of humans as consumers seeking benefit will always run after profit, and thus, will accumulate capital, make investments, and produce and enable the system to maintain itself. Beyond this point, addressing the system of Islamic economics should first begin by addressing its understanding of the “human” and the economic activities of this human. The purposes of an individual’s economic activities will be contrasted against classical economics, which constitutes a relationship between benefit and happiness. What should be taken into consideration while doing this is that the conception of a human should not be only as a Muslim individual but should also cover all of humanity? An economics system that is informed by Islamic teachings should be created in a form that serves humanity as a whole. If Islamic economics studies—which must cover all the issues of economics, beginning with the conception of the human—are limited to studies that concern only one sector, such as banking and finance, the system will remain insufficient. For an economics system that has many basic principles, it is inadequate to improve upon just one of them. In spite of the first forty years of Islamic economics research, the field still lacks a specific union of the methodology and concepts as a whole. As such, even in the sectors of banking and finance, there is no well-defined and singular method that relates to the Islamic law (Shariah Law) (al-Jarhi 2012). The use of different canonical approaches has led to different applications or to the change of financial tools over time. In this context, the items discussed by Abdulazeem Abozaid in his article for this book are illuminating. According to his article concerning the canonical tools that can or cannot be used in developing financial products, “Islamic law politics” (al-siyasah al-shar’iyyah) and fatawa (legal opinions given by jurists or muftis) pertaining to the Islamic financial sector are mentioned. The author has criticized this methodology by pointing out that this method cannot be used by everyone and in every case. The use of different tools by different scholars violates unity in the finance sector. Outside of the banking sector, we see the deficiency and incapability of methodological discussions relating to the economics field. Asad Zaman and Syruki Salleh discuss this problem in their articles for this book. Asad Zaman redefines the scope of the “micro” and “macro” distinctions— which are the basic divisions of economics—by adding to them a new class: meso-middle-economics. On the other hand, Salleh claims that the concept of poverty should be redefined and criticizes the articles produced in this field from the point of view of Islamic economics. These two

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examples demonstrate that there is not yet a unity of method in Islamic economics. It is natural for different approaches to be constituted in an economic system of which the basic principles are determined. However, the emergence of diversions in a theoretical approach that has not yet completed its basic formation is problematic for the extended idea of a system. The existence of a unified Islamic economics methodology will render it possible to create a common language between academics who specialize in the formation of economic systems and scholars who specialize in the basics of Islamic teachings. Without such a common language, researchers that examine the issues of Islamic economics from their backgrounds in different disciplines will develop divergent theories. Such divergence will hinder the healthy formation of an Islamic economic system (Haneef and Furqani 2011).

The “Capitalization” of Islamic Economics In contrast to the meanings of “capitalization” in finance and accounting, capitalization here means the transformation of religiousvalue-based consumer demands into commercial commodities. Capitalization also relates to being a member of the current market under the heading of Islamic economics. At the same time, Islamic economics’ engagement in the capitalist system is mentioned. “Islamic economics” is defined by Asad Zaman as the “struggle to implement the orders of Allah pertaining to economic affairs in our individual lives (micro), in our communities (meso), and at the level of the Ummah (macro)” (Zaman 2015). Here, fulfillment of economic activities and relationships in conformity to Allah’s orders is taken as the central goal of Islamic economics. Moreover, Muhammad Arif (1986) defines Islamic economics as the analysis of Muslim activities that use/arrange resources in order to reach “happiness.” In this definition, Muslim activities and the economic facet of these activities are the central factors. Definitions of Islamic economics can be enhanced in this way (see Khaf n.d.) The basic point illustrated in definitions of Islamic economics is that economic activities should conform to Allah’s orders and to the Prophet Muhammad’s (pbuh) sunnah. However, as stated above, developments in Islamic finance markets to date have evolved to be more suitable for “capitalist” market conditions; and thus, they integrate primarily with these markets (Asutay 2007, 3). The improvement and deepening of the markets and coordination of Islamic banking activities even in conventional banks such as HSBC in their sub-modules can be shown as an indicator of this situation.

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Trends in the consumption of commodities run parallel to capitalist developments in the finance sector. Along with globalization and the increase of incomes, there is an increase in the demand for commodities for consumption that are suited to Islamic beliefs. A new class of entrepreneurs has emerged to produce and sell products that will meet this demand. However, the approach of Muslim businessmen in developing and marketing products suitable for Islamic beliefs has been transformed into an open, commercial challenge to the West, rather than being an economic system or the search for an alternative order. Muslim merchants who have started to compete with their Western equivalents both on a local and global scale have developed products conforming to the emerging demands; but on the other hand, they have started production activities that encourage consumption and create their own demands. With the entrance of the current economic system into the competition of the production-consumption cycle, these financial activities—with or without intention—have transformed into being parts of the capitalist market. In this context, despite the discussions occurring in the epistemological area of Islamic economics, a parallel “market” with the name of “Islamic economics” has started to emerge in the contemporary market. In the year 2013, a report was prepared by Thomson Reuters (2013) with the support of an enterprise undertaken by the United Arab Emirates under the name “Dubai: The Capital of Islamic Economy” and by the company Dinnar Standart that works on “Halal Markets.” This report evaluates the potential of “Islamic economics” on a global scale and the new possibilities for investment. In the summary of the report, by emphasizing the importance of the potential of Islamic economics and the permeability of global economics, it is stated that Muslims spent 1.62 trillion U.S. dollars on food and lifestyle expenses in the year 2012. For this reason, it is stated that halal food and lifestyle markets have an important potential that cannot be overlooked. The report claims that the value of “Islamic” products will rise in the future in relation to the expenses of food, travel, clothing, and even media and cosmetics. In addition, the basic motivating power of Islamic economics is stated to be “demography, economical growth, Islamic values/teachings and commerce increasing among the OIC” (Thomson Reuters 2013). Islamic states that have young and growing populations and developing economies are regarded as possible markets for investment. They are dynamic in comparison to the old and static Western states, which are integrated completely into the capitalist economic system. Such global/multinational (cosmopolitan) companies as Nestle, Carrefour and Tesco are beginning to respond to the belief-based demand of

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consumption in Muslim markets by forming products and services that meet standards of “halal” consumption. Given that markets operate on the presupposition that both consumers and producers make rational choices in order for them to maximize their respective benefits and profits, in this new situation, demand for “halal” consumption has pushed producers to maximize “halal” consumption in order to augment their own profit in markets where this demand can be found. The original aim of the founders of Islamic economics was to create an economic system that can serve as an alternative to the conventional capitalist system. Instead, it has given way to a conventional system in which existing economic relationships have merely been “Islamicized.” In spite of the scholarly discussions and the existing literature in Islamic economics, the current Islamic economic system has progressed in a completely different direction. The market economy dissolves the different ideas/outputs into its mentality and just maintains the current system’s permanence. The market economy has changed the demand for a beliefcentered economic system into the demand for belief-centered consumption. Thus, the search for an “Islamic economics” has become part of the current market; the economy may be described as “Islamic,” but its components fit into the contemporary economic system. Consequently, a discipline that set out to critique the capitalist economic system and provide an alternative has instead contributed to the continuation of the capitalist economic system. Studies in Islamic economics can have important implications both for those who share an Islamic belief and for all of humanity. They have the potential to develop alternative systems and practices that could enable a more righteous economic lifestyle and distribution of services and products. New studies in this area should look to past studies seeking alternative systems in order to remain aware of the responsibility that they inherit. The struggle to achieve an “Islamic” economic system originates from belief, and the teachings of this belief system ascribe responsibilities to Muslims to act and speak according to religious values and principles. The discussions that will shape the economic lives of Muslims will bear the consequences of the actions to which they have led those Muslims. Accordingly, Islamic concerns as to the contents of the economic system should inform the formation of theories of Islamic economics. It is vital for scholars of Islamic economics to remain aware of Islamic values and jurisprudence. In this context, even if the current studies have diverged from the original intent of the study of Islamic economics, past studies can guide future researchers. Dynamic and qualified researchers, particularly from the younger generation, should be encouraged to move beyond

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studies of finance and banking. With this book, it is our hope that we can move the study of Islamic economics beyond the issues of banking and finance to develop a more genuine alternative to the contemporary capitalist economic system.

References Al-Jarhi, M. A. 2012. “Gaps in the Theory and Practice of Islamic Economics.” Paper presented at Workshop On the future of Islamic Economics, Jeddah, Islamic Economics Institute, King Abdulaziz University, November 12-13. Arif, M. 1985. “Toward a Definition of Islamic Economics: Some Scientific Considerations.” Journal of Research in Islamic Economics 2(2): 79-93. Askari, H., Iqbal, Z., Krichene, N., and Mirakhor, A. 2012. “Risk Sharing in Finance: The Islamic Finance Alternative.” Singapore: John Wiley and Sons (Asia), Pte. Ltd. Asutay, M. 2007. “A Political Economy Approach to Islamic Economics: Systemic Understanding for an Alternative Economic System.” Kyoto Bulletin of Islamic Area Studies 1(2): 3-18. Haneef, M. A., and Furqani, H. 2011. “Methodology of Islamic Economics: Overview of Present State and Future Direction.” International Journal of Economics, Management & Accounting 19(1): 1-26. Islahi, A. A. 2013 “First vs. Second Generation Islamic Economists: Deviations and Differences in Thoughts.” Paper presented at 9th International Conference on Islamic Economics and Finance, Accessed 10 December 2014. http://9icief.sesric.org/presentations/Day1/Session1/2-52%20%20Abdul%20Azim%20%C4%B0slahi%20%201st%20vs%202nd%20Generation%20Islamic%20Economists.doc. Kahf, M. (n.d.). “Islamic Economics: Notes on Definition and Methodology.” Accessed December 14, 2014. http://monzer.kahf.com/papers/english/paper_of_methdology.pdf Thomson Reuters (2013). State of the Global Islamic Economy 2013. Report. Accessed December 14, 2014. http://www.zawya.com/files/islamic-reports/tr-state-of-islamiceconomy-2013.pdf.

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Notes 1

This concept is at the same time used by Islahi (2013) by also referring to Askari, Iqbal, Krichene, and Mirakhor (2012).

CONTRIBUTORS

Abdulazeem Abozaid holds a Ph.D and Masters in Islamic Financial Law; three BAs in Islamic Law, Arabic Language and English Literature; and two higher studies diplomas in Islamic Law and Human Sciences. He worked as a lecturer at Damascus University and the International Islamic University Malaysia, then as a Shariah expert and trainer at Emirates Islamic Bank and as a Shariah board member and consultant for Islamic financial institutions. In 2012, he headed the Shariah Department of Oman Arab Bank in Muscat, Oman. Currently, he is an Associate Professor in the Islamic Finance Program at Qatar Foundation. He has conducted many workshops and trainings and contributed to the writing of new Shariah standards. His expertise in Islamic Finance is demonstrated by his release of four books and many articles. Fiqh Al-Riba, published in 2005 at 632 pages, is his masterwork. Zakaria Bahari is an Islamic Economics and Finance lecturer in the Islamic Development and Management and Economics Department, School of Social Sciences, at Universiti Sains Malaysia. He has experience with consulting, research, and teaching in Islamic Economics, Islamic Finance, Financial Economics, Islamic Assets Management, Economics Development, Money, Banking and Capital Market, and Consumer Behavior. He provided consulting services to the Ministry of Youth and Sport of Malaysia, Penang State, Kelantan State, and Terengganu State. Dr. Bahari received his BA in Economics Development from Universitas Hasanuddin, South of Sulawesi, Republic of Indonesia. He received an MA in Economics and a Ph.D in Financial Economics from National University of Malaysia. He is currently a Deputy Director at the Centre for Islamic Development and Management, Universiti Sains Malaysia. He has 10 papers published in refereed academic journals to his credit. Dr. Bahari has supervised six doctoral theses and 14 master theses. A frequent traveler, Dr. Bahari gives lectures and workshops in Malaysia and abroad and has presented over 40 research papers at conferences.

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Contributors

Masudul Alam Choudhury is a naturalized Canadian. He obtained his Ph.D in Political Economy of Human Capital Investment and his Masters degree in General Economics from the University of Toronto in 1973 and 1977, respectively. His field of specialization is mathematical treatment of various political economic problems from an epistemological viewpoint, with special focus on Islamic political economy and the world system. Professor Choudhury earned his M.Phil in Mathematical Statistics and M.Sc. in Mathematics from the Quaid-e-Azam University (1969, 1968), and his B.Sc Hons Maths from Dhaka University (1967). Professor Choudhury has won several awards, ranging from University awards (Distinguished Research Award, Best Service Award) to international awards (Rockefeller Foundation Award at Bellagio Research and Conference Center in Italy). Professor Choudhury’s publications are too many and diverse to be listed here in their entirety. The most recent publications (2006-2008) are five volumes on Science and Epistemology in the Quran (The Edwin Mellen Press), each volume being differently titled. Professor Choudhury’s The Universal Paradigm and the Islamic World-System was published by World Scientific Publications in 2007. In 2008, he published with co-author M. Shahadat Hossain a work entitled Computing Reality from Aoishima Research Institute, Japan. He has also published many international refereed journal articles. He will be researching Islamic Economics Post Orthodoxy during his Visiting Professorship in Social Economics in the Social Economy Centre of OISE, University of Toronto. His most recently accepted book is God-Conscious Organization and the Islamic Social Economy (Gower, Ashgate Group). His book entitled Tawhidi Epistemology and Its Applications was published in March 2014 by Cambridge Scholars Publishing. Professor Choudhury edits the international refereed journal entitled Humanomics: International Journal of Systems and Ethics (HIJSE) (Emerald). Taha E÷ri received his BA in Economics from Bo÷aziçi University (2008) and his MA in Economic Policy (2011) from Istanbul University. He is a Ph.D. candidate and Research Assistant at Istanbul University’s Department of Economics. He is studying the political economy of Arab revolts, focusing on the case of Egypt. Currently, he is a visiting scholar at George Mason University. He has published articles on Turkish and Middle East economies in academic journals and conference papers. Moreover, he reads and researches on Islamic economics as a second area of specialization. He is part of the editorial board of the semi-annually published Journal of Human & Society.

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Abul Hassan is a Research Scientist II and Associate Professor teaching Islamic Finance at the Centre of Research Excellence for Islamic Banking and Finance in the Department of Finance and Economics of King Fahad University of Petroleum and Minerals. He received his M.Sc in Financial Economics from Loughborough University, UK in the year 1998 and a Ph.D in Finance from the Durham University Business School, UK in the year 2005. After his Ph.D, he taught at: Durham University (as a tutor); Staffordshire University, UK; the University of Brunei Darussalam, Brunei; and Gloucestershire University (Markfield Institute), UK. He has held academic positions in different capacities, from tutor to Senior Lecturer. Dr. Hassan has published 21 research papers in many international peer-reviewed journals, including World Economy (ABS RANK 2), Journal of Emerging Market Finance (ABS Rank 2), Journal of Derivatives and Hedge Funds, International Journal of Islamic and Middle Eastern Finance and Management, and Humanomics. Dr. Hassan was recognized as “Best Outstanding Reviewer” by the Emerald Group for its journal, Humanomics, for the year 2010. Currently, he is conducting research with two research funding projects in the area of Islamic banking and finance. Fahim Khan received a Masters degree in Political Economy and a Ph.D in Economics from Boston University, and a Masters degree in Statistics from Punjab University. Dr. Khan has more than 40 years of experience in economic policy, institutional capacity building, and advising and consulting. While working for the Ministry of Planning, Government of Pakistan, for 13 years in various senior positions, his notable work included rationalizing the highly overvalued currency and developing and using econometric models for the macroeconomic planning of the country. He played an instrumental role in establishing the School of Economics at International Islamic University, enhanced the research capacity of the Islamic Research and Training Institute of the Islamic Development Bank, and established a Business Centre at the Riphah International Islamic University. He has published 12 books and several articles in refereed international journals. His last publication is from Edward Elgar (UK), released in February 2010, with the title Islamic Banking and Finance in the European Union: A Challenge. He has advised several national and international bodies on issues relating to economics, finance, and shariah. In 2000, his services were borrowed from the Islamic Development Bank to be the adviser to the Governor of the State Bank of Pakistan and to be the member/secretary of a high level commission on financial sector reform.

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Necmettin KÕzÕlkaya is currently an Assistant Professor in the Faculty of Theology at Istanbul University. He earned his BA in theology from Marmara University, Faculty of Theology, in 2001, and his MA in Islamic Law from the same university in 2005. He received his Ph.D in Islamic Law from Selcuk University, Institute of Social Sciences, in 2011. His research interests relate to Islamic studies, especially Islamic law and economics. He focuses on the history of Islamic law and sub-genres of Islamic law, such as qawƗ‘id and furnjq. He also works on Islamic economics and contemporary issues from the legal perspective. His research has appeared in many leading academic journals. He is a scientific advisor for numerous academic journals and serves on the editorial boards of many academic journals. ùennur Özdemir received her BA in Labor Economics and Industrial Relations from Ankara University (1988). She received her MA in Sociology (1990) and Ph.D. in Sociology (2001) from Middle East Technical University. Currently, she is working as an Associate Professor at Ankara University, Faculty of Political Science. She has worked as a Research Fellow for the Social Democrat Party. She was a visiting scholar at the University of Michigan for two years. She published her Ph.D. dissertation in a volume called Transformation of Anatolian Capital and Widening of Turkish Modernism (2006). In addition, she has also published Islam and Class: Alternative Methods of Struggle (2014). Her work focuses on relations between Islam and the economy, and she has published many articles in refereed international journals and chapters in different books. Lubna Sarwath completed her Ph.D in the Islamic Economics and Finance Department of Trisakti University, Jakarta, Indonesia on “Institutional Political Economy—Islam and the Occident: Methodology with a Case Study of Sultanate of Oman.” She is currently a Visiting Lecturer at Trisakti University, Jakarta, Indonesia, and a reviewer and editorial assistant for Humanomics, a journal of Emerald Publications. She is also the director of POINTE (Platform for Occidental, oriental and Islamic Networking in Teaching and studying Economics), Hyderabad, India. She is studying Islamic institutional political economy. Muhammed Syukri Salleh studied Rural Development at the University of East Anglia (UK). He completed his Ph.D on Islamic-based Development at the University of Oxford (UK) in 1991. He is currently a Professor of Development Planning and Management and Director of the

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Centre for Islamic Development Management Studies (ISDEV), School of Social Sciences, at Universiti Sains Malaysia. He has published many books and articles on Islamic economy and development. Amir Wahbalbari is an Islamic behavioral economist. He received his Ph.D from the University of Science, Malaysia. The title of his Ph.D thesis is “Scarcity Thinking and Human Wants: Re-examining the Concept of Scarcity in Economics.” He holds a Masters of Science in Finance, specializing in Islamic banking and finance (2009), and a Bachelor of Economics, specializing in Islamic economics (2006), from International Islamic University, Malaysia. He studies Islamic economics and finance, heterodox economics, social psychology, and the philosophy of economics. He has written several papers on the concept of scarcity from various dimensions of mainstream economics, heterodox economics, social psychology, and Islamic economics. His Masters dissertation was titled “The Concept of Scarcity and Its Implication on Human Behaviour: Searching the Quranic Perspective.” He has presented his work at several conferences and has published several articles in journals and chapters in books. Asad Zaman received his BS in Mathematics from the Massachusetts Institute of Technology (1974). He received his MS in Statistics (1976) and Ph.D. in Economics (1978) from Stanford University. He has taught at leading universities, such as Columbia University, the University of Pennsylvania, Johns Hopkins University, California Institute of Technology, and Bilkent University (Ankara). Currently, he is the Vice Chancellor of the Pakistan Institute of Development Economics. His textbook, Statistical Foundations of Econometric Techniques (Academic Press, NY, 1996), is widely used as a reference in advanced graduate courses. He is managing editor of International Econometric Review. He has published many publications in top ranked journals, such as Annals of Statistics, Journal of Econometrics, Econometric Theory, Journal of Labor Economics, etc. His publication “Islamic Economics: A Survey of the Literature” has had a deep impact on the field. His works have been widely cited, with more than 500 citations, as per Google Scholar.

INDEX A Adam Smith, 14, 66, 202 Alfred Marshall, 14, 202 al-siyasah al-shar’iyyah, 170, 231 Al-Ghazali, 175, 188 Amartya Sen, 156, 157, 158, 224 aqidah, 5, 183, 184 B Baitul-Mal, 190 C capitalism, 65, 66, 67, 78, 83, 84, 89, 104, 113, 116, 118, 119, 121, 122, 123, 124, 125 charity, 56, 64, 80, 93, 123, 125, 126, 141, 148, 152, 203, 208 Christianity, 59, 60, 102, 105, 110, 114, 119 civil society, 94, 182 consumer behavior, 21, 26, 27, 43, 52, 53, 182, 205 corruption, 89, 116, 141 D darurah, 170, 172, 173, 174, 179 debt, 82, 175, 187, 225 E ecological, 20, 201 economic choice, 37, 25, 32, 33, 40, 45, 48, 49, 56 entrepreneur, 24, 25, 29, 30, 31, 34, 35, 36, 43, 49, 83, 88, 125, 182, 228, 231, 233 epistemic knowledge, 140, 218, 220, 221 epistemology, 83, 132, 156, 218

ethics, 8, 22, 67, 70, 87, 88, 91, 92, 94, 96, 105, 109, 110, 112, 113, 115, 147, 186, 213, 215, 216, 217, 219, 223 evolutionary learning, 133, 134, 135, 136, 139, 140, 141, 143, 145, 146, 147, 148, 149, 151, 152, 153, 155, 156, 157, 161, 216 F fatawa, 166, 170, 175, 176, 177, 178 figh, 5, 6, 9, 13, 14, 56, 95, 112, 165, 168, 169, 170, 172, 173, 174, 175, 177, 179, 180, 183, 184, 194, 199 usul al-fiqh, 6 fiqh schools, 168, 173, 175, 180 Shafi’i Fiqh school, 175 Hanafi school, 180 futures markets, 37 G gharar, 81, 82, 166, 167, 173 H hadith, 5, 66, 69, 73, 82, 88, 114, 179, 180, 189, 191, 208 halal, 73, 121, 124, 128, 166, 167, 233, 234 Hanafi law, 110 haram, 73, 126, 166, 167, 212 hisbah, 215, 218 homo economicus, 61, 89, 121, 123, 125 homo Islamicus, 61, 62, 78, 89, 96, 104, 121, 123 human behavior, 13, 15, 16, 17, 18, 19, 20, 21, 23, 29, 30, 32, 34,

Islamic Economics 38, 40, 42, 45, 46, 48, 52, 53, 207 I Ijtihad, 165, 166, 167, 168, 169, 174, 177, 178, 179 interest, 5, 43, 81, 82, 83, 85, 93, 107, 121, 123, 166, 169, 173, 176, 227 interest-free banking, 227, 228 interest-free loan, 176 investment, 65, 80, 83, 93, 126, 159, 215, 216, 233 Islamic banking, 80, 83, 85, 93, 166, 170, 172, 173, 174, 175, 176, 177, 229, 232, 239, 241 Islamic economics, 5, 12, 13, 14, 15, 16, 17, 21, 51, 56, 57, 58, 59, 60, 61, 62, 70, 72, 73, 77, 78, 79, 80, 83, 84, 85, 86, 89, 90, 91, 92, 93, 94, 95, 96, 102, 103, 104, 106, 114, 118, 119, 120, 121, 122, 123, 124, 128, 181, 182, 183, 184, 188, 189, 194, 199, 200, 206, 207, 209, 227, 228, 229, 231, 232, 233, 234, 238, 240, 241 Islamic finance, 83, 93, 165, 169, 171, 175, 177, 227, 228, 229, 232 istihsan, 180 istisna, 167, 173 J jahiliyyah, 183, 184 jihad, 77, 102, 103, 104, 105, 106, 107, 109, 112, 119, 121, 124, 126, 128, 190 John Maynard Keynes, 202 Judaism, 105, 106 K knowledge-flow, 135, 136, 217, 218, 222, 223 knowledge-formation, 213, 218, 220, 223, 224

243

L liberalism, 114, 117 M Maqasid al-Shariah, 168 market system, 49, 88 maslaha, 168, 170, 174, 175, 180 microenterprise, 148 mudarabah, 173 musharakah, 173 Muslim jurists, 81, 82, 166, 168, 177 Muslim scholars, 82, 83, 84, 214, 227 N neoclassical economics, 62, 85, 86, 91, 154, 183, 199, 205 necessity, 165, 170, 172, 173, 188 O Ottoman, 8, 71, 77, 111, 115, 120, 121, 123, 125 P philanthropy, 132, 133, 141, 142, 145, 148, 149, 150, 151, 152, 156, 159, 160, 161 profit, 3, 35, 38, 62, 63, 67, 83, 84, 85, 88, 176, 201, 223, 225, 229, 231, 234 public interest, 165, 168, 170, 171, 179 Q qadîm, 8 qiyas, 167 Quran, 1, 2, 3, 4, 12, 56, 58, 59, 61, 62, 63, 64, 65, 66, 68, 70, 72, 73, 74, 78, 81, 82, 84, 95, 103, 104, 105, 106, 114, 116, 119, 120, 128, 133, 138, 164, 165, 166, 185, 186, 187, 200, 203, 204, 205, 206, 207, 208, 209, 210, 215, 225, 226, 238

244 R rationality, 17, 18, 64, 81, 86, 147, 156, 174, 229 riba, 81, 82, 84, 166, 167, 169, 173, 174, 204 S sadaqa, 93 salam, 76, 173 scarcity, 22, 43, 69, 87, 181, 200, 201, 202, 205, 207, 208, 209, 212, 241 self-interest, 88, 89, 92, 223, 225 shariah, 6, 16, 70, 80, 88, 90, 165, 166, 167, 168, 169, 170, 171, 172, 173, 174, 175, 176, 177, 178, 179, 180, 199, 231, 237 shariah boards, 166, 170, 171, 172, 177 shariah policy, 165, 170, 171, 172, 177 shura, 172, 177, 215, 216, 218, 219, 220, 221, 222, 223 socialism, 78, 83, 84, 123 sunnah, 109, 114, 180, 215, 232 T tawhid, 120, 194, 214, 219, 222, 225 Thorstein Veblen, 202

Index U ummah, 59, 64, 69, 70, 71, 72, 77, 114, 171, 190, 232 unemployment, 12, 17, 23, 39, 41, 42, 43, 51, 155, 159, 160 unity of knowledge, 132, 134, 136, 138, 141, 142, 143, 144, 145, 146, 147, 149, 151, 152, 153, 155, 157, 158, 161, 213, 215, 217, 218, 219, 220, 222, 223 W wage, 24, 43, 57, 155, 219 waste of resources, 26, 27, 32, 34, 38, 39, 43, 45, 209 wellbeing, 15, 16, 20, 21, 22, 25, 26, 27, 28, 29, 31, 32, 37, 40, 46, 48, 50, 51, 52, 53, 56, 57, 83, 87, 89, 132, 133, 141, 142, 143, 144, 145, 146, 147, 148, 149, 151, 152, 154, 156, 157, 159, 160, 161, 173, 205, 213, 220, 221, 222, 223, 224 Z zakah, 56, 80, 81, 85, 86, 91, 93, 116, 123, 124, 129, 203, 204