Islamic Economics: Strengths and Weaknesses

[mota bhai 2,675]

interesting blog post about how an economy might be run based on islamic principles. excerpts below, link at the bottom.

Developmental and economic policies in developing world and in Western economic theory have been largely value neutral; in the case of Muslim countries, this means they have been neutral towards Islam. Development in this sense has been geared towards goals such as increased growth, industrialization, and productivity which are not particularly related to the economic and moral growth of individuals or society. In fact, aiming for increased development in this sense entirely ignores the teleological purpose of Islam. Thus, according to Dr. Ahmad, the purpose of Islamic economics is to replace the value neutrality of contemporary economics with the value fulfillment goals of Islam.

This line of thinking is similar to the understanding of other Islamic thinkers ... in viewing Islamic society through the lens of Tawhid, or oneness, which holds that Islam is a comprehensive system, holistic and applicable in all areas of life. Since Islam deals with the problems of man, it cannot separate economic problems from other problems.

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An economy which revolves primarily around growth can produce high levels of stress among its individuals. Individuals would not have as much time to pursue cultural and interpersonal activities and a society that is value neutral will often find itself facing the question of what its goal and purpose is.

Thus, it is advantageous to have an economy that is rooted in values and is tied to goals, though to the rational economist, these may seem arbitrary. However, as pointed out by Mawdudi, solving economic problems might not solve other problems one faces in life, such as philosophical or social problems, and in fact, some economic solutions may lead to other problems for people.

Therefore, if a system does attempt to solve economic problems in a way that it solves other problems as well in the process, this can only be beneficial in a social and psychological sense. If the purpose of human existence is for the individual to be fulfilled and happy, then is follows that material comfort is simply not enough for this to come about.

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Another strong point of ... Islamic economics ... is the idea of man as the deputy (khalifah) of God on earth; the practical benefits of this concept are that it moves the focus of the economic system more closely towards individuals rather than production and growth and that it emphasizes the societal aspects of the economic system.

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The concept of a khalifah establishes the principle that individuals, as deputies of God, have obligations to each other and to property in general. Such a system could be more environmentally conscious and conducive to social cooperation and interrelationships with each other. As people, by nature tend to be social animals, an economic system that takes into account mutual obligations might come more “naturally” to people than one envisioning people as atomized individuals competing for scarce resources.

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The main weaknesses of a system of Islamic economics derive from the fact that a modern system of Islamic economics has not yet been fully implemented and it is as yet unknown whether such a system would work, from an economic perspective.

An economic system not based around the concepts of growth and production might not be able to produce enough wealth to adequately provide for the material needs of a population. On the basis of numerous cases, a certain amount of industry and services are necessary for a modern economy, which necessities a move away from traditional modes of production. It is unclear how ... Islamic economics can be reconciled with the assembly line type production or institutions such as modern finance. Many of the wealth creating policies of governments and banks involve economic processes that utilize lending and debt; it is hard to imagine a modern economy without some transactions that are in violation of Islamic principles. Furthermore, it should be noted that the Western growth and developmental model has been successfully implemented by non-Western countries such as Japan which has managed to retain much of its native culture and traditions, so it is not entirely impossible for Muslim countries to pursue a standard developmental model while retaining their cultures, though this might require a reinterpretation of Tawhid.

http://oikumeneurasia.wordpress.com/2013/09/14/islamic-economics-strengths-and-weaknesses/