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Islamic Economics: Strengths and Weaknesses

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The conceptualization of Islamic Economics by Dr. Khurshid Ahmad of Pakistan is an innovative and interesting departure from contemporary, standard Western economics. This is primarily because his conceptualization is based on different premises than contemporary Western economic thought. Overall, the strengths of his conceptualization of economics outweigh the weaknesses if interpreted in a holistic perspective and on balance it is definitely worth a shot.

According to Dr. Ahmad, 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.[1] 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.[2]

This line of thinking is similar to the understanding of other Islamic thinkers such as al-Faruqi 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.[3] Since Islam deals with the problems of man, it cannot separate economic problems from other problems. This is, however, exactly what has happened. The Pakistani thinker Abu Mawdudi noted that

 the economic problem of man which was, indeed, part of the larger problem of human life, has been separated from the whole and looked at as if were an independent problem by itself. And gradually this attitude has taken such a firm root that the economic problem has come to be regarded as the sole problem of life.[4]

Viewed through this lens, in a psychological sense, Dr. Ahmad’s conceptualization of economics is strong. It should be noted here that other than the obvious concerns about crime and national security, the primary concerns of most governments and societies today are economic. In developing countries, the goal is to achieve greater growth and development while in developed countries; economic concerns of growth or distribution of wealth are of extreme importance. Therefore, public discourse and policy is largely taken up by issues of an economic nature. Growth is pursued without a thought given to other aspects of life, despite the costs of growth.[5] If the individual sees a public square increasingly devoid of non-economic value, public and social life could become increasingly transaction oriented and mechanistic, contrary to the seemingly more social nature of people or harmful to the quality of public discourse which would increasingly be less oriented towards the pursuit of existential issues. 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.

In addition to this very important strength of Dr. Ahmad’s conceptualization of Islamic economics, there are numerous other strengths to his views. Related to the psychological strengths, Dr. Ahmad’s conceptualization contains an important strength in terms of methodology. He rightly points out that the methodology of the natural sciences has increasingly been applied to the social sciences over the past two centuries for a variety of reasons despite the fact that human beings have “their own will, volition, choice, motivation, perception, options” and as such, studying human behavior is different than studying physics.[6] Therefore, it is important to keep in mind the normative aspects of social science. Modern social sciences such as economics unfortunately, for the most part, do not take a holistic or normative approach towards their field of study and even if they do, they make assumptions about human nature such as self-interest and rational choice that may not be applicable in a wide variety of cultural and social settings. Dr. Ahmad’s approach is thus more grounded in daily reality than the field of contemporary economics which is increasingly dominated by abstract mathematical modeling with very little regard to the actual humans themselves. By wedding together the fact that people in Islamic societies will largely have normative viewpoints derived from Islam with an economic system based on Islam, Dr. Ahmad’s conceptualization welds together an economic system with its social base (normative assumptions) which, from a methodological point of view, makes a lot of sense since it provides a better model of human behavior than a model that would operate on assumptions divorced from social reality.

Another strong point of Dr. Ahmad’s conceptualization of Islamic economics, related to the previous ones, 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.[7] By placing man in such an exalted position, it decreases the role of ideas of socioeconomic forces in determining the economic and social future of societies. While these forces may well be real, they need not be deterministic or self-fulfilling prophecies.[8] In other words, if enough people adopt the attitude that certain economic values are to be desired, then it is unlikely such a society will easily adopt an alternative or alien system. Furthermore, 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.[9] 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.

Whether or not this conceptualization of Islamic economics is strong or weak is largely contingent on what one believes the ends of human life are. If the ends are normative and value oriented, as Dr. Ahmad, Mawdudi, Faruqi and others believe, and then it is likely that this conceptualization of economics will seem attractive. On the other hand, if one believes that life or economics are value neutral propositions, then this conceptualization of economics may not be as attractive. Firstly, some may simply not wish to accept the premises on which it is based- the normative system of Islam or at least the non-theological and ethical aspects of Islam, those dealing with economics and the like. However, 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 Dr. Ahmad’s theory of 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.

Another disadvantage of Dr. Ahmad’s conceptualization of economics is that certain aspects of Islamic economics such as the dependence of mutual cooperation are from a legal standpoint, hard to enforce and not inspiring of confidence. Stable and predictable property rights is held to be one of the prerequisites of a successful economy on the basis of the idea that people will invest in property they knew is theirs. This idea, however, is somewhat contradicted by Dr. Ahmad’s concept of Islamic ownership which holds ownership to be an act of stewardship, which if misused, can be taken away.[10] The potential for this idea to be improperly applied and for the idea of misuse to be misinterpreted for the advantage of certain people is a weakness of this conceptualization of ownership.

A final disadvantage in the Islamic approach to economics is that it could run the risk of becoming a set of narrow rules and regulations based on traditional jurisprudence and interpreted by ulama whose education and experience does not extend beyond traditional studies. This is contrary to the expressed wishes of Dr. Ahmad and other Islamic thinkers such as Faruqi that Islamic economics ought to be a framework and value-pattern for individuals and professionals (and policy-makers) to formulate and understand development rather than a specific list of rules derived from particular verses of the Qur’an.[11]


[1] Gauhar, Altaf, (The Challenge of Islam. Chapter 18: Islam and the Challenge of Economic Development by Khurshid Ahmad. London: Islamic Council of Europe, 1978), 342.

[2] Gauhar, 341.

[3] Esposito, John L., and John O. Voll, (Makers of Contemporary Islam. Chapter 2: Khurshid Ahmad: Muslim Activist Economist. New York: Oxford University Press, 2001), 50.

[4] Esposito and Voll, 49.

[5] Gauhar, 343.

[6] Abu Rabi’, Ibrahim M, (Islamic Resurgence: Challenges, Directions, and Future Perspectives, A Round Table with Khurshid Ahmad. Tampa: World and Islam Studies Enterprise, 1994), 77.

[7] Gauhar, 346.

[8] Gauhar, 344.

[9] Ibid.

[10] Esposito and Voll, 51.

[11] Esposito and Voll, 49.


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Written by Akhipill

September 14, 2013 at 10:19 PM

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