Fall Of Capitalism and Rise of Islam by Mohammad Malkawi

Before proceeding in the discussion of the Islamic political economy, I should note that the term political economy is used in the context which refers to the processes of production, consumption, and distribution of wealth as related to the economies of states. In this respect, political economy addresses the strategies and methods which directly impact the economy of states and the ability to achieve the economic objectives set forth by the economic system. Hence, the term political economy can be used within the framework of ideologies such as Islam, capitalism, or socialism. Therefore, the reader should not expect to see the term “political economy” being used in some verses in the Quran or statements of the Prophet. However, the subjects studied under the umbrella of political economy will be extracted and evaluated from original texts of the Quran and the Sunnah as well as from the consensus of the companions of the Prophet and the causal reasoning derived from the original texts.

The political economy addresses a myriad of subjects related to the sources of wealth, the nature of wealth, the methods of increasing wealth, and the methods of distributing wealth. In particular, the political economy deals with property ownership, currency, exchange rates, gold standard, Riba (usury), hoarding, trade and commerce, corporations, human labor, and satisfaction of human basic needs. Next we discuss the Islamic perspective on each of these issues and show how Islam manages the various economic resources to enhance production, regulate consumption, and eliminate poverty.

Before I proceed to describe the components of the Islamic political economy, I should note that historically Muslim scholars spent a good amount of effort compiling references to financial matters found in the Quran, the statements of the Prophet, the actions of companions, and the practices of various caliphs. Among the most prominent references is the book under the title Al-Amwal (translated as finances) compiled by Abu Obaid Al-Qasim Bin Salam who lived in the period 767-838 AC (AH 150-224). In the book Al-Amwal, Abu Obaid collected all references related to money, financial transactions, property ownership, money distribution, and related subjects. Al-Amwal is a very resourceful reference for any student or scholar seeking to understand the economics of Islam. Another major reference is the book under the title Al-Kharaj (translated as land taxation) authored by Imam Abu Yousuf Yakub Al-Ansari (730-799 AC, 81

AH 113-182). Abu Yousuf wrote Al-Kharaj based on the request of Caliph Harun Al-Rasheed, who was looking for a good reference for managing 82

the financial matters of the state. Al-Kharaj talked in details about the revenues of the state, the state budget items, and the means of distributing the wealth among the constituents of the state. Besides the financial matters addressed in the book of Al-Kharaj, Abu Yousuf included policies and strategies for managing the finances of the state.

In addition to the books of Al-Kharaj and Al-Amwal, the Islamic library has countless of references to financial matters embedded in the compilation and writing of various scholars within the schools of the prominent Imamas, such as Abu Hanifah,83 Ja’far,84 Malik,85 Al-Shafi’,86 and Ibn Hanbal.87 Throughout the history of the Islamic state of khilafah, the financial and economic matters in the state were resolved and addressed by scholars who were fluent in the process of deriving rules on various matters by utilizing well established tools for derivation. The rules derived by the scholars were utilized by the caliphs through a direct request as was the case when Al-Rasheed asked Abu Yousuf to provide a comprehensive set of rules. Alternatively, the ruler would just use the rules which have been derived over time by various scholars and have been established as laws through practice.

The scholars from the various schools of thought continued to address all matters in the state including financial and economic matters and provide the appropriate rules and laws. Almost without exception, each and every fiqh (Islamic laws) book would include specific chapters and sections on trade, loans, riba (usury), sale, land property, land taxation, war budgeting and funding, proceeds of war, zakah collection and distribution, partnerships, common or public properties, and much more.

Since the collapse of the Islamic state of khilafah in 1924, the systems of Islam were abruptly deactivated in the countries previously ruled by the Islamic laws. The economic and financial systems are no exception. The colonial powers of Britain, France, and other European countries introduced to these countries new laws and rules which replaced the Islamic ones. The only Islamic financial practice which survived during and after the colonial period was the practice of zakah, because in Islam zakah is considered a ritual and one of the pillars of Islam. Even the practice of the zakah during this period became more of an individualistic practice rather than a state-sponsored activity as used to be since the establishment of the first state in Medina by Prophet Mohammad (PBUH). As a result, the Islamic principles of the economic and financial system lost their practical norm in Muslim majority countries. Over time, the theoretical principles of the Islamic economy blurred and became rather fuzzy not only for the average Muslim, but also for some Muslim scholars and academics. This is a natural result for abandoning the implementation of the economic as well as the political system for almost a hundred years.

The few studies that addressed the economic system in Islam in the last few decades contributed in a significant manner to reconstruct an image of a system which has been clouded for over a century. One study appeared as early as 1953 under the title The Economic System in Islam88 by Taqiuddin al-Nabhani. Another book (The Perfect Political Economy) appeared in the early 1960s and addressed the political economy in Islam.89 In the early 1970s another book appeared under the title Iqtisaduna which stands for “Our Economy.” A fourth book (Al-Amwal in the State of Khilafah) appeared in the 1980.153 These books laid down a solid foundation for the Islamic economic system, although they seemed very theoretical given the political conditions in the Muslim world at the time these studies appeared. Interest in the subject of Islamic economy began to increase in the 1980s, especially after the Islamic revolution in Iran. The creation of the Islamic Republic of Iran created a sense in the region for the first time that the economic system of Islam has more practical merit than previously thought. Since then, tens of studies bearing titles such as “Islamic Economy,” “Economic Thinking in Islam,” “Economic Styles in Islam,” “Islamic Economic Methods,” “Islamic Finances,” “Finances of the Islamic State,” and the like showed up in the Islamic literature.