There is a misconception in some sections that establishment of Islamic economy means establishment of Arab economy as it existed 1400 years ago at the time of Prophet Muhammad (peace and blessings of Allah be to him). This is not correct. Islamic economy would be totally up-to-date in its method of organisation and use of technology. Only the principles and framework will be derived from the Qur’ān, the teachings of the Prophet and the practices of early days of Islam.
Similarly, it is wrong to say that Islam does not give an economic system. We recognise capitalism as an economic system, though its basic characteristics are only the recognition of private right of ownership and freedom of economic activities for the individual. Likewise, socialism is treated as an economic system, even though its only basic characteristic is the social ownership of means of production. Islam gives us a much more comprehensive guidance in economic matters such as prohibition of interest, compulsory levy of Zakat, freedom of work and enterprise, concern for the poor, distinction between the Halal (permissible) and Haram (prohibited) in income, consumption and production and so on.
As such Islam undoubtedly gives mankind an economic system not found in other religions. An economic system does not mean only the details of organisation, which are more or less the same in all economic systems.
It is also necessary to bear in mind that an Islamic solution to the same problem may be more than one. There can be alternate solutions or models for the same problems or issues. This is particularly true of new issues. The difference can be acute in such sectors as land reform and role of government in economy. As long as the alternate solutions proposed by Islamic scholars through Ijtihad remain within the explicit framework of the Qur’ān and the Sunnah, the alternatives should be considered Islamically valid and legitimate.
The Islamic economy which was established by the Prophet and developed by the Khulafa-i-Rashideen in Medina is the first model of Islamic economy in so far as basic principles and values are concerned. This should always remain as a reference point along with the Qur’ān and the Sunnah. We should remember that the Prophet freed the pre-Islamic Madinite economy from Jahiliya, or all un-Islamic practices. As such, none can say that what was allowed in Madinite economy is not permissible today, or what was not permitted in that economy is permissible now.
GOALS OF ISLAMIC ECONOMY
The goals of an Islamic economy are establishment of Adl (Justice), to attain Hasanah (good) and Falah (welfare) in this life and the life hereafter; to establish Ihsan (gracious conduct or kindness) in economic affairs; establishment of Maroof (proper or good acts, institutions) in economic life; elimination of Munker (evil, wrong or injurious practices from economic life); freeing humanity from unwanted burdens and shackles and to make life easier for them; achieve maximum economic growth; maximise employment to ensure maximum distribution of wealth in society; achieve universal education; encourage cooperation in society; and favouring weaker sections to establish them in life.
The Following ayats of the Holy Qur’ān clearly point out the aforesaid objectives of Islamic economy:
(a) Allah enjoins on you justice and gracious conduct. (Surah Nahl: 90)
(b) When we give them power on earth, they establish prayer, give Zakat, enjoin Maroof and prohibit Munkar (Surah Hajj: 41).
(c) He (the Prophet) enjoins them to follow right things and forbids them from evil, he makes pure things lawful for them and impure things unlawful, he relieves them of their burdens and frees them from shackles that bound them (Sura Araf: 157).
(d) Our Lord grants us good in this world and in the hereafter. (Surah Baqara: 201)
(e) We desired to show favour into those who were depressed in the earth, and to make them leaders and to make them inheritors and to establish them on earth (Sura Qasas: 5-6).
(f) Co-operate in acts of piety and virtue and do not co-operate in acts of sin and transgression (of laws of God) (Sura Al-Maida, Ayat-2)
(g) So that wealth does not circulate only among rich people of you (Sura Hashr: 7).
There are many other verses of similar nature in the Holy Qur’ān which clearly establish the aforementioned goals of Islamic economy.
As regards achieving maximum economic growth, we can point out that Islam does not allow any owner to keep his agricultural land uncultivated for a long time. Islam also encourages cultivation of barren land. Umar-bin Abdul Aziz directed his governors to lease all uncultivated state lands to one who could cultivate against even one-tenth share of the crop. This indicates Islam’s concern for maximum utilisation of resources for maximum economic growth. (Dr. Yusuf Al Qaradawi: Al Halal Wal Haram).
Islam also encourages maximum distribution of wealth as has been indicated in Surah Hashr. Universal education has been enjoined by the Prophet in his famous saying “Education is compulsory on all Muslims, male or female.” Education helps gainful employment which helps in better distribution of wealth. (S.N.H. Naqvi: Ethics and Economics: An Islamic Synthesis, First edition, Chapter-5, Islamic Foundation, U.K.)
BASIC CHARACTERISTICS
Islam has allowed freedom of work and enterprise. This is evident from the Madinite model of Islamic economy. A reading of the chapter of a Hadith collection in respect of agriculture, gardening, business etc. will establish this. The Qur’ān also clearly states that “Allah has made business lawful for you” (Surah Baqara: 275).
Islam also allows economy to cooperate freely according to the market forces subject to Islamic restrictions and guidelines on production, distribution, marketing, investment trade, exchange, wages, etc. The state can also further interfere in this free economy to restore equilibrium and establish justice and other Islamic objectives. In Islamic economy, there is an “allowability constraint” in every idle (a term introduced by Dr. Naqvi in his above mentioned book). An entrepreneur can produce only permitted things. Profit should be normal in such an economy after giving proper wages to labourers in accordance with Islamic principles. Some forms of trade practices, exchange, investment, and land tenancy in agriculture are prohibited in Islam. It also disallows monopoly and hoarding as social evils.
The aforesaid restrictions make “Free economy in Islam qualitatively different from capitalism. Islam cannot be said to be capitalistic only because it allows forces of demand and supply to operate in the economy. Forces of demand and supply are fundamental economic forces which were operational in all ages even before capitalism. State supervision of economy to ensure justice and remove market distortions is a basic part of Islamic economic policy. It is part of Islam but in theory Capitalism does not accept it.
In Islam God is the true owner of all things. The Qur’ān says: “To Allah belongs whatever is in the heavens and whatsoever is in the earth.” (Ale-Imran) However, Allah in His mercy allows human beings to inherit wealth, own it and use it subject to His laws as evident from the following verses:
i) The land belongs to Allah. He allows it, to be inherited by whomsoever he pleases. (Surah Araf: 128).
ii) Do they not see that we have created for them – among the things fashioned by us – cattle of which they become owners? (Surah Yasin: 29)
Islam, therefore, allows man as Vicegerent, to inherit from Allah (that is to own) wealth. This is indeed a trust for proper use.
In early Islam there were three kinds of ownership; private, community and state ownership. The books of Hadith are full of accounts of individual ownership. This was the standard ownership.
Some important things like water, canals, pastures and graveyards were community properties. The state owned the mines, rivers and large tracts of land. After the conquest of Syria and Iraq, these lands were made state lands and were not allowed to go into private ownership. (Tafhimul Qur’ān, Surah Hashr).
There is no bar on state ownership of enterprise in Islam. The basic economic institutions can be or should be brought under state control, if required to establish social justice or protect the interests of the community.
Islam protects lawful property and is in favour of confiscation of unlawful property. There are many instances of takeover of unlawful property during the period of Caliphs Omar and Omar bin Abdul Aziz. Lawful property can be taken over by the state only for valid social reasons after due compensation. During the last Hajj, the Prophet announced the principle of protection of lawful property. The Qur’ān says, “Don’t eat each other’s property wrongly.”(Surah Nisa: 29).
Islam prohibits interest. This requires a total reorganisation of the economy, banking, investment, exchange, business and international trade. A big effort is under way in the Muslim world in this direction. A body of literature has already come up on this subject.
Islam has made Zakat compulsory on the wealth of rich Muslims. This is spent for the weaker and distressed sections of the society. Zakat not only distributes wealth between the rich and the poor of society, it also influences investment, savings and allocation of income and resources.
A rich body of literature has come up in recent times on Zakat. The Zakat and Ushr ordinance of Pakistan can be particularly referred to in this connection.
This is a special feature of Islam. Zakat is one institution which testifies to this. In this connection we may refer to Ayat 5-6 Surah Kausar as it is particularly significant, where Allah, the Almighty has expressed this desire to show favour to the depressed. Islamic economy shall establish all possible institutions to carry out this desire of the Almighty.
Islam has not left the distribution of inheritance on the whims of a person. In Islam a person cannot favour one over the other of his relations for temporary or subjective reasons as is the rule in the West. Islam distributes inheritable property among several groups of people: children, husband/wife, parents, brothers and sisters in certain situations.
This distribution has taken care of different groups keeping in view their social role, requirements and proximity of kinship relationships. For those who remain outside the list of inheritors, Islam has provided wasiat (will) for all such relations if they are in a distressed condition. A person can execute will up to one third of his property for distressed relations or others outside the inheritors.
Time and again as we veer from the clear injunctions of Allah, we hark back discouraged and crest-fallen. Islam provides us the principles of social behaviour in our economic life. It is up to us to develop the technology for the implementation of such principles.