2.4.1 The Development of the Economic System in Islam - Fall Of Capitalism and Rise of Islam | System Of Islam

2.4.1 The Development of the Economic System in Islam - Fall Of Capitalism and Rise of Islam | System Of Islam

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2.4.1 The Development of the Economic System in Islam

by Mohammad Malkawi14 min readViewed 98 times

If you open the Quran and browse its chapters looking for a Surah on the Islamic economy, you will not be able to find any. The closest you will get is Surah Al-Anfal (chapter 8), which was named and revealed in relation to the proceeds of war and contains few rules on the distribution of the proceeds. Similarly, Prophet Mohammad did not issue specific statements, deliver speeches, or make public announcements totally dedicated to what we can call today an economic structure. The texts which include references to economic and financial issues were revealed over the course of twenty-three years (the life span of Mohammad as a prophet). Quite often a reference of economic substance may be made in relation to an incident that required a rule or judgment of some sort. One example is the rule related to the ownership of conquered land, which was revealed in conjunction with the battle of Khaibar.56 So the full picture of the economic system needs to be constructed from verses in the Quran, statements of the Prophet, and judgments on specific cases. The following subsections present and address four major principles deemed essential to the development of the economic system in Islam.

Rizq (Wealth) and Its Role in the Islamic Economy

Essential to the development of the economic system in Islam is the concept of wealth known as Rizq in Islamic terms. What is wealth? And who is the provider of wealth? Islam maintains that the amount of wealth acquired by any human throughout his life is determined by Allah. People strive in this life to acquire exactly what Allah has prescribed to them. In his endeavor to acquire wealth, man has no knowledge of what could be allocated to him by god. But once he acquires any amount of wealth, it is essential that he believes that this wealth had been allocated to him by Allah.

Contrary to the “scarcity of resources” principle advocated by capitalism, Islam advances the principle of “abundance of resources.” In numerous locations in the Quran, the idea that Allah has created abundance of resources and created in them benefit for the people is repeated time and again. Islam wants to propagate the belief that the core resources in the world are not scarce, and that god has created more than enough for all the people to enjoy. Islam wants to create a mind-set which appreciates the abundance of resources and remembers at all times that these resources had been provided by god, the creator, in a manner that people can utilize them and make something good out of them.

In Surah Al-Nahl (chapter 16), the Quran enumerates many of the wealth resources and reminds of the fact that these resources were originally created by Allah. In verses 5-8, it says,

And the cattle, He has created them for you; in them there is warmth (warm clothing), and numerous benefits, and of them you eat. And wherein is beauty for you, when you bring them home in the evening, and as you lead them forth to pasture in the morning. And they carry your loads to a land that you could not reach except with great trouble to yourselves. Truly, your Lord is full of Kindness, Most Merciful. And He has created horses, mules and donkeys, for you to ride and as an adornment. And He creates other things of which you have no knowledge In the midst of the production cycle, people tend to forget that the very animals they raise (cattle, sheep, horses, camels) had existed in this world independent of man, and they have been created in a manner that man can tame these animals and utilize the benefits in them. In order to appreciate the inherent benefits of these animals, one can compare them with other animals in the wild, which cannot be utilized for food or transportation, for example, the lions, tigers, wolves, hyenas, and others.

The Quran continues the list of resources and the benefits created within them. In verses 10-13 in the same chapter (Al-Nahl 16), the Quran turns to water as a major resource used for irrigation, plantation, and drinking. The verses read thus:

He (Allah) Who sends down rain from the sky; from it you drink and from it (grows) the vegetation on which you send your cattle to pasture.

With it He causes to grow for you the crops, the olives, the date-palms,

the grapes, and every kind of fruit. Verily! In this is indeed an evident proof and a manifest sign for people who think. And He has subjected to you the night and the day, and the sun and the moon; and the stars are subjected by His Command. Surely, in this are proofs for people who understand. And whatsoever He has created for you on the earth of varying colors and qualities from vegetation and fruits (botanical life) and from animal (zoological life) Verily! In this is a sign for people who remember.

Along the same lines, the Quran reminds of the abundance of resources created in the seas, oceans, and rivers. These resources include the fish, the precious stones, and the ability to sail ships in the seawater. In verse 14, chapter 16, the Quran says,

And He it is who has subjected the sea (to you), that you eat thereof fresh tender meat (i.e. fish), and that you bring forth out of it ornaments to wear. And you see the ships sailing through it, that you may seek (thus)

of His Bounty (by transporting the goods from place to place) and that you may be grateful In a reference to the fact these and other resources are abundant and will not be in shortage at any point in time, the Quran says in verse 18 of the same chapter,

And if you would count the favors of Allah, never could you be able to count them. Truly! Allah is Oft-Forgiving, Most Merciful.

The idea here is that Islam was preparing to create a new society with certain values and attitudes. The people in the society are required to maintain humility and humbleness no matter how rich they become. Thus, it is important to remind them that the origin of the wealth they possess is created by god in the first place. Also, people are required to realize that no matter how much resources they consume or own, there will be more than enough resources for all; consequently, rich societies should not feel threatened if other societies grow to the same level of wealth and richness. This concept becomes very useful when compared to Engel’s law which tries to explain the reason behind soaring food crisis.60 Engel’s law, formulated by German statistician Ernst Engel, states that as people from developing countries make more money, they begin to buy more expensive food such as meat. This rise in affluence also results in more people consuming meat throughout the world. This creates a higher demand for grain and subsequent raise in their prices.

This analysis goes back to the scarcity of resources principle. When food is considered to be scarce or may become scarce, the prices should go up in order to limit the consumption of food by certain segments of the population. When the poor segment becomes wealthier and attempts to consume more of the already-scarce food, the market should increase the cost of food, eventually preventing the previously poor segment of the population from accessing the food resources.

The Islamic focus and emphasis on the abundance of the resources and the fact that resources are originally provided by Allah leads to a more relaxed view by all segments of the society and less competition for the consumption of food. While competition remains high for production, the competition for consumption may in fact decrease in an Islamic society. In this regard, Islam promotes the value of altruism, where Muslims are encouraged to leave part of their needs unsatisfied for the purpose of satisfying the needs of others.61

The concept of the resources being the creation of Allah has another dimension in the economic system of Islam, besides the preparation of people to be more giving, more thankful, and more appreciative of the wealth they acquire. This dimension is more philosophical in nature, which renders its expected results to be produced over a longer period of time. Islam maintains that god had created the universe (including the sun, the stars, the moon, the earth, and others) and had subjected its laws such that man can benefit from this universe. In contemporary civilizations, where religion is separated from life, the relationship between man and nature is described at best as one of defiance and insubordination, a relationship in which man struggles to overcome obstacles posed by the nature. It is common to talk about man defeating the laws of gravity when he was able to fly out into the open space.

The Islamic perspective on this issue is that god created the universe in a manner which allows man to be able to utilize its inherent benefits and powers. The word used in the Quran is Sakh’ar, which literally means “subjected or subordinated the universe to the commands and actions of man.” What this really means is that the laws and systems under which the universe operates are made in a manner that they can be discovered, and they can be utilized such that man can produce and extract the benefits in the universe. References to this concept in the Quran are numerous. For example, in Surah Al-Jathia (chapter 45, verses 12-13), the Quran says,

Allah is He Who has subjected to you the sea, so that ships may sail through it by His Command, and that you may seek of His Bounty,

and that you may be thankful. And has subjected to you all that is in the heavens and all that is in the earth; it is all as a favor and kindness from Him. Verily, in it are signs for a people who think deeply.

The fact that we can build ships that can sail in the seas is due to the way seas have been created in terms of water density, wave dynamics, wind speed, the depth of the sea levels, and other factors. Evidently, man is not the one who specified the requirements and specifications of the seas, oceans, and rivers; man discovered these specifications and found out how they can be used for ship sailing.

The point here is that Islam wants the people to believe and realize that all that is in the universe has been created in a manner to serve the better life of the people. Eventually, we the people are not at war with the so called “Mother Nature” or the universe. On the contrary, we are at peace; we are in a state of collaboration and cooperation. The universe and all the inherent laws within it are created in a manner to serve us the humans. This view is bound to promote the people to continuously seek further utilization of the available resources provided in the larger sphere of the universe. This concept is essential for continued discovery and innovation. When the Muslims understood these issues, and their civilization was intact, discovery and innovation were always on the rise.

The abundance of resources principle and the subjecting of the universal resources to the human use form the second cornerstone in the economic system in Islam. In essence, this principle allows the economic system in Islam to promote production and enhance productivity, while it relaxes consumption. In other words, it is a society that competes for more production (to utilize what Allah had made usable) and for less consumption (to spare more for the poor and needy).

The Islamic view on poverty is best summarized by the statement “If poverty were a man, I would kill it.” This statement was made by Umar Bin Al-Khattab, the second caliph in Islam, and repeated by Ali Bin Abi Talib, the fourth caliph. Islam, over the course of its revelation, developed a categorical intolerance to poverty and hunger. Abu Dhar Al-Ghafari, one of the companions of the Prophet, is reported to have said, “I am most shocked by a poor man who cannot find food at home and does not come out with his sword in his hands.” The statements of Umar Bin Al-Khattab, Ali Bin Abi Talib, and Abu Dhar signify the level of intolerance for poverty and hunger in Islam. This view stems sequence from the fundamental thought established by Prophet Mohammad (PBUH) and the Quran.

Prophet Mohammad, in a direct reference to poverty and hunger, rejected the slightest possibility that one person would go hungry while the neighborhood he lives in has plenty. In the words of the Prophet, “Allah and his Messenger will disown a community which allows one of its members to sleep hungry.” This strong resentment of hunger and poverty was demonstrated in another statement by the Prophet, where he said, “He who resorts to his bed with full stomach while his neighbor is hungry is not a true believer.” Note how the Prophet skillfully links the rejection of poverty to one’s faith and belief. He does not simply make an administrative rule asking to provide food for the poor people in the neighborhood. Rather, he relies on the intellectual foundation of belief which he spent more than thirteen years putting together, one brick at a time. Then, he turns to this intellectual faith foundation and utilizes it by saying, if you truly believe in Islam as you claim, then you cannot allow your neighbor to go hungry. So the faith foundation is used to build this sense of responsibility among the members of the society.

Statements like these coming from the Prophet, the leader of a movement, and the head of state assert an important fact: poverty is not to be allowed in the Islamic society. The successors of the Prophet, the caliphs, took the same stand and continued to emphasize the need to sustain a poverty-free society. Note that the emphasis of the Prophet and his companions, when dealing with poverty and hunger, was focused on the specific individuals rather than on the community as a whole. The fact that a community is doing well in terms of economic status makes its members more responsible for the well-being of every member of the community. Under capitalism, the economic well-being of the community is measured by the economic growth; an increase in the GDP is interpreted as a sign of a healthy economy. Alarms begin to sound in a capitalist society when the economic growth slows down or halts for an extended period of time. In Islam, the alarm sound goes off when hunger persists within a community despite the fact that the community as a whole may have abundance of food and goods. Islam does not allow the community to rest as long as there is at least one hungry man or woman or child.

The Quran refers to two categories of poverty. One category is called the “Miskeen.” This is the category of hungry people who are unable to feed themselves or those who depend on them. The second category is the “Faqueer.” This is the category of poor people who do have some income but their income is not sufficient to take care of their daily normal expenses such as housing, health, education, transportation, and the like. Over the course of its development, Islam recognized other categories of people who might be in need for financial help and support, albeit their need can be temporary. In Surah Al-Tawbah (chapter 9), the Quran defined eight categories of people eligible to receive funds collected from the main charity institution in the Islamic state, the charity of the Zakah.65 (These categories will be discussed later in this book).

The act of feeding the hungry Miskeen received a great attention in the Quran, to the extent that it was raised to the highest status and equated it to the most sanctified rituals. If a Muslim becomes too ill to go through fasting during the month of Ramadan, Islam permits the Muslim to feed a Miskeen (hungry person) in lieu of each missed day. When a Muslim 66

violates certain rules, Islam required of him to feed poor hungry people to make up for the violations. If a Muslim breaks his fast during Ramadan without a valid reason, he has to pay retribution for this violation by fasting two consecutive months or feeding sixty hungry people for each violated day.67 If a Muslim swears by Allah that he will perform a certain task but he fails to fulfill his promise, then he is required to make up for this violation by feeding ten Miskeens.68 One of the ill practices before Islam was to allow the man to abandon his wife without officially divorcing her. Islam prohibited this act. One of the options placed by Islam to make up for this violation is to feed sixty poor and hungry people.

These types of practices ordained by Islam are meant in the first place to show how important it is to fight hunger in the society. Islam clearly sent a signal that hunger should be dealt with by all means. In the meantime, Islam recognizes that in a complex society where people have variant capacities and capabilities, and with all the dynamics of war and peace, the diversity of economic prosperity and downturn, it is possible for some people to fall behind and become unable to afford the basic needs. Thus, Islam wanted to bring this issue of caring for the poor and needy to the daily rituals and practices of the people.

To further signify the importance of dealing with hunger, Islam declared that the poor and needy have certain right to the wealth of the wealthy. In two locations in the Quran, the Quran makes the following statement: “Give to the kindred his due and to the Miskeen.”69 In other words, the wealth that should be paid to the poor by the rich is not a form of taxation; rather it is an obligation upon the rich and a right for the poor as affirmed by Allah. This concept is further explained in Surah Al-Ma’arij (chapter 70, verses 24-25), where it says, “And those in whose wealth there is a known right for the ones who are deprived of it.” The “known right” is a reference to the annual rate (2.5%) of one’s wealth to be given to the poor and needy.

In Surah Al-Haqqa (chapter 69), the Quran vigorously deplores and deprecates anyone who does not take the necessary steps to facilitate the feeding of the poor and hungry. The Quran equates this deplorable behavior with the act of disbelieving in Allah the great.70 In its struggle with the polytheists of Mecca, Islam exploited the greedy nature of the society of Mecca and denounced their ill treatment of the poor and deprived people.71 Islam continued to pound on the issue of hunger in Mecca, which presumably was prevalent during the time when Islam was still rising. In a direct hit, the Quran addressed one of the elites in Mecca challenging him to spend his wealth to better the lives of his relative orphans, or the lives of the desperate poor.72 In Surah Al-Maoon (chapter 107, verses 1-3), the following criticism was made against Abu Jahl, one of the chiefs of Mecca at the time: “Have you seen him who rejects the religion of Islam? That is he who repulses the orphan (harshly); and urges not on the feeding of Al-Miskeen.” In contrast, the Quran highly praised the ones who generously spend in order to feed and provide for the needy and hungry. It gives high value for those who give food, in spite of their love of it, to the Miskeen, the orphans, and the captives. And they do so not anticipating any worldly return, except the pleasure of Allah.

The point Islam wanted to make early on is that poverty of each individual in the society is considered a problem of highest priority. It is ranked above and beyond the rituals and must be resolved if the faith and belief in Islam was to prevail. In his book The Perfect Political Economy, Al-Maliki concludes that the main problem addressed by the Islamic economic system is the poverty of the individuals in the society.74 Before instituting laws, regulations, and mechanisms to resolve the poverty of people, Islam raised the level of awareness among its constituents regarding poverty and hunger. Further, Islam highly valued the trait of giving and spending for providing food and commodities for those who could not afford them. By heavily criticizing the anti-Islamic society in Mecca and denouncing its practices as being unfavorable to the poor, needy, and orphans, Islam placed a burden upon the Muslims to rid their society of similar practices. No wonder, then, that the caliphs of Islam vowed to kill poverty!

Within the framework of capitalism, the material value is the only value that has weight and significance. And the materialistic value of a product is defined in terms of the benefit it carries to people and in terms of its exchangeability with other products or things. When the value of a product is measured in terms of money, then the value of the product is called the price.

Islam has a totally different approach for value definition. First, Islam recognized two broad categories of values, one category is related to the actions taken by people, and the other is related to the things and commodities. Within the first category, Islam recognizes four types of values which should be attained when the human performs an action. These values are the spiritual, moral, human, and the materialistic values. The value in this respect refers to the objective sought by performing the action.

Spiritual values are associated with acts whose only purpose it to please god, the creator. For example, the acts of prayer, fasting, and pilgrimage are ordained upon the Muslim and should be carried out in a certain order. These actions have no value except to please Allah, and consequently to satisfy the instinct of worshiping embedded within the human self. A Muslim does not perform prayer in order to exercise his back, although prayer may benefit the back muscles. Rather, a Muslim performs prayer for the sole objective of pleasing his god. The Quran says, “Establish the prayer for my remembrance.75” Similarly, a Muslim does not fast during the month of Ramadan in order to lose weight, although he may lose weight while fasting. But he performs fasting only to win the pleasure and satisfaction of Allah. It is reported that Prophet Mohammad had said, “Allah says: all your actions belong to you, except fasting. It is mine; and I am the one who provides the rewards for fasting.” The Quran confirms that fasting had been prescribed upon people so that they may have piety for Allah.76

The second category of values is related to moral values. Islam defines certain acts whose sole objective is to achieve a moral value. This is an attempt to create in the society the tendency to perform actions for the purpose of achieving moral objectives. For example, Islam urges a Muslim to develop kind character, honesty, trustworthiness, truthfulness, and generosity. Islam also urges a Muslim to get rid of certain morals such as being mean, miser, jealous, envious, and greedy. These moral values stand on their own merit and considered viable objectives which should be sought and achieved on their own. The value of kindness is extended to include animals. It is reported that Prophet Mohammad had told of a woman who brought on herself the anger of Allah because she locked up a cat without feeding her. He also spoke of a man who deserved the reward from Allah because he went out of his way to get some water for a thirsty dog. When he was asked whether a Muslim can be rewarded if he is kind to an animal, he replied by saying, “If you are kind to any living being, you will be rewarded.” When a Muslim says the truth, or returns the trust to whom it belongs, or stands up for what is right, or rejects the oppression, he does so for the very reason that these values are good values and he has to maintain them. Why would a Muslim comply with these moral objectives and try to achieve them? Of course this goes back to the main intellectual foundation, which tells the Muslim that these objectives are defined by Allah, and therefore by complying with them, a Muslim in essence is obeying Allah.

The third category of the values is the human value. By this, we mean the value related to helping and supporting humans in general. Examples include saving the life of a human who happened to be caught in fire, or drowning in water, or wounded in an accident, or any similar incident. It also includes honor, dignity, and integrity values. Human values are essential for creating collaboration and support within the society. The Quran talks about the act of feeding the poor, or the captive, or the orphan without expecting anything in return. Islam prohibits hiding knowledge, since knowledge is for the benefit of all humans. The Quran highly praises the believers for the fact that they repress anger and they pardon the mistakes of fellow men.77 In a reference to the significance of a human value, the Quran speaks of the dignity and honor bestowed upon the children of Adam.78 The human value is sought on its own, irrespective of any other value.

The fourth category is the materialistic value. This is the most commonly known value and shared by all people and ideologies. In their trade, work, investments, farming, hunting, and similar acts, people seek to attain the materiel benefit returned by such acts. Islam recognizes profit seeking and the benefits of material acts. Since the pursue of material benefit is the most natural behavior of humans, Islam did not need to overemphasize this type of value; on the contrary, it needed to reduce the human zeal and aggressive behavior in his endeavor to achieve the materialistic values.

In a general reference to man’s natural love of material benefits, the Quran states in Surah Al-Imran (chapter 3, verse 14), “Beautified for men is the love of things they covet; women, children, much of gold and silver, branded beautiful horses, cattle and well-tilled land. This is the pleasure of the present world’s life; but Allah has the excellent return (Paradise with flowing rivers) with Him.” Recognizing the need to pursue the materialistic benefit besides the spiritual values, the Quran states in Surah Al-Qassass (chapter 28, verse 77), “But seek, with that (wealth) which Allah has bestowed on you, the home of the Hereafter, and forget not your portion of lawful enjoyment in this world.” The point is that Islam moves to create a society with multiple dimensions. The society does not flourish and prosper with the materialistic aspect only. Capitalism provided an excellent example where material progress by itself, no matter how big the progress is, does not provide the peace and tranquility yearned for by the people in the society. The rates of divorce, suicide, poverty and hunger, and crime soar high when the materialistic values dominate the society at the expense of human, moral, and spiritual values. Islam realizes that humans by the very instincts created within them would naturally pursue the satisfaction of their instincts. For example, a father and a mother need not be reminded vigorously of the need to love and care for their children. They do that in a very natural way, except during family crisis. Children, on the other hand, need to be reminded and encouraged to maintain their love to their parents and to care for them, especially when they are old. The children’s roles towards their parents are not as natural as it is for parents towards the children. Recognizing these variations in the roles, the Quran places extremely high value on taking care and looking after parents. Being nice and obedient to parents comes next to worshiping Allah, as stated in the Quran.79 On the other side, the Quran warn the parents not to lose their good faith while attending to the needs of their children.

The value of a thing, a product, or a commodity is the benefit inherent in this thing. This benefit according to Islam is not a measure of the human labor invested in the product as proclaimed by Marx. Neither is it a measure of the demand by the consumer or the supply by the producer or both.

Islam maintains that the reason behind the benefit in a given matter is the set of properties and characteristics of that matter. For example, the benefits of the iron are due to the properties of the iron which are determined by its atomic structure. This structure is what makes iron behave differently from gold or copper. Without this atomic structure which defines the basic properties, matters could not have produced the benefits which give the matter its value. It is true that the human needs to exert effort and labor to produce the final product which is deemed useful by the consumer. But it is also true that there are some material objects which do not require any human labor to be beneficial; water, forests, meadows, air, sunlight and heat, and wind are just examples of material objects which provide value without any need for human labor or effort.

So the real cause and reason for any material benefit is the original property of the object. This property is initially created by Allah. And the value of any product is directly related to the original properties of the components of the product, and without these properties, the product cannot provide any value. In this regard, the value of any material object is real and not relative. And this value is a measure of the benefit inherent in the object. This measure is determined at the time when the benefit is being evaluated by people.

The fact that different people may demand or value the benefit of an object differently at different times and under different conditions does not change the value or the benefit of the product. For example, the value of a telephone device is that it enables the communication between two people in two different locations. This benefit is the same whether the communication is needed for an emergency, or for a chat, or even for cheating.

The level of demand, urgency, or scarcity of the product has an impact on how much the human is willing to give in exchange for the product. This is what the economists correctly identify as the price. And the price of the product is not the value of the product, and is not a measure of the benefit of the product. The fact that the price can be negotiated for the same product, and can fluctuate over time or even at the same time (in auctions), or for different people, shows that the price is not and cannot be a measure of the benefit of the product. It is true that capitalists have recognized this difference, but only when they divided the value into two categories (benefit and the price). So price should not have been confused with the value in the first place.

The main difference between the Islamic view of value and that of capitalism or socialism is that Islam believes that the origin of value benefit is the creation made by Allah. Hence, no matter what the final shape of the material object or product is, Islam continues to recognize and admit that this product is sourced by Allah. Therefore, when Allah allows or prohibits the use of the product in a certain setting, a Muslim submits because the product could not have been produced without its initial properties which are created by Allah. Similarly, a Muslim submits when Allah asks him to give part of the products to other people named by Allah. With this understanding, a Muslim would not say, “Why should I spend and feed the poor; after all, I made the wealth with my own knowledge and skills,” as was proclaimed by Qarun.80

The Islamic view of values, whether the value of actions or value of things, provides a comprehensive view by which a balanced society can be created. The spiritual, moral, and human values supplement the materialistic value in the sense that the economic growth in the society would not lead to wide disparities, greed, arrogance, poverty, high crime rates, suicide, and moral bankruptcy. The value definition in the Islamic ideology constitutes the fourth cornerstone in the Islamic political economy and economic system The political economy of Islam will be the subject of the next section. It should be noted that this political economy would not be productive or even practical without the four principles discussed in this section, namely, that the Rizq (wealth) of individuals is provided by Allah, that the resources used to increase the wealth are abundant and created by Allah, that poverty must be swiftly dealt with, and the existence of spiritual, moral, and human values alongside the materialistic values.