Contemporary Perspectives in Islamic Economics

We are lucky to live in times when the interest in a system alternative to contemporary economic system i.e. Islamic Economics is reviving. With each passing day new researches are being produced, academic articles are being written, centers are being set up, new books are being published and newer journals are emerging. The practical manifestation of this development of ideas in Islamic economics has also been commendable. Financial pundits and Islamic scholars have put their heads together for years to draft out practicable solutions for the Muslim community in specific and humanity in general and enable them counter the menace of the contemporary capitalist system. Fortunately, they have been successful to an extent; hence Islamic banks have appeared, traditional banks have started riba-free operations and demand for Islamic alternatives to traditional products (e.g. takaful in insurance & murabaha & mudaraba in banking) have surged.

While all this development in the discipline of Islamic Economics is promising, it has not come without challenges. Despite newer researches, a considerable gap still exists in certain dimensions of the field and the newer ideas have helped to create diametrically opposing opinions within the field instead of bringing existing ones closer. Resultantly, a unified definition of the discipline of Islamic Economics is yet to appear and a new learner gets trapped in the labyrinths of contending opinions before getting an idea of what Islamic Economics is.

It must hence be worthwhile to present before the readers an overview of contemporary perspectives in Islamic Economics in order for them to have a general understanding of the discipline of Islamic Economics. While these perspectives have their own peculiarities, they have some common features too. They have an interesting dimension with respect to time. While some of them can be traced back to early Islamic economists others have just started to appear hence to some extent one can make a timeline of the development of this discipline parallel to the development of these perspectives.

The first perspective treats Islamic economics as a collection of commandments and guidelines laid down in Islamic sources of law for management of economic life both of a single economic agent as well as of a whole economy where millions of similar economics agents live. Hence, in simple words, this approach means calls for governing the life of both an individual and a society by seeking guidance from the Quran and Sunnah. Ultimately proponents of this view suggest Islamic Economics to be the knowledge and application of Shariah doctrines relating to economics. The first step according to this perspective is tracing out the rulings regarding the economic life of an individual and a society. This list of commandments is then used to drive out economic theories that are grounded in ethical principles of the religion, Islam. These theories are shaped in a context of devising practicable tools for solving economics problems of human beings. The process can be summarized as a derivation of principles from Quran and Sunnah governing human economic matters, which are translated into general principles by the jurists and then transformed into various economic theories and policies to be applied in the real economic life of the concurrent time. The simplest example can be that of the prohibition of riba as entailed in the Holy Quran and Holy Sunnah. Islamic jurisprudence translates it into general principles as in which transactions it applies and in which it does not. Finally, Islamic economists put their effort into creating an riba-free banking products in line with the principles laid by the Quran and Sunnah and in conformity with rulings given by jurists.

Another doctrine proposes Islamic economics as a discipline to be broader than mere acquisition of some laws from Holy Quran and Sunnah and derivation of some principles to be applied in practical life based on them. This view instead suggests that Islamic Economics is a study of Economic objectives in Islam and the possible means to achieve those objectives. Hence Islamic Economics is not a mere application of some rules from Shariah. It instead is the management of economic life of individuals and a society in a way as to achieve the objectives of Islam. Hence this viewpoint advocates Islamic Economics as a goal-oriented discipline. As Hafas Furqani (2018) notes, these objectives according to Umer Chapra (1996)also, act as a paradigm in Islamic economics science in such a way as to assist human beings in achieving the ideals of life as perceived by those goals.

Yet there appears a third perspective that limits its role to the study of the economic life of an Islamic individual i.e. a Muslim. This by far has the narrowest domain and hence mere studies the behavior of a Muslim in making choice among scarce resources. As Furqani (2018) notes, the concept of human behavior in Islamic Economics is somewhat different due to differences in the conception of the nature of the nature of man, his mission and goal of life. Hence they propose different micro-foundations and a different scope for Islamic Economics. This different conception of an economic agent logically leads to different frames of thought and analysis. In simple words, this perspective of Islamic Economic thought presents a utopian Muslim instead of a materialist individual as an economic agent. While contemporary economics assumes an individual economic agent to be one that seeks his material welfare and maximizes his profit. This perspective in Islamic Economic thought models an ideal Muslim who adheres to Islamic doctrines as a representative economic agent. This hence changes the micro foundations of the field by changing the axioms related to representative economic agents in the economy. The ramifications of changes in assumptions are hence reflected on the macroeconomic level too. While economic agents in the capitalist system will be steered by self- interest and will maximize their profits, an economic agent in an Islamic economy on contrary will reflect behavioral traits of benevolence and brotherhood for fellow Muslims in the economy.

Conclusively, while some economists differ with the former perspectives the third one by far has been the most controversial one. The opponents believe that the focus of Islamic economics study should be the behavior of all human beings in general; only the solution, approach, and norms should be built in Islamic perspective. It probably has best been summarized by Abul Ala Maududi who notes; “Islam recognizes all those natural principles on the economic side of life which have always formed the foundation of the human economy, and it abolishes only those wrong principles, not by reliance on the state but through the maximum of moral instruction and a small measure of external force, which mankind follows when it falls a victim to satanic desires”.

The utopian conception of a representative Economic agent makes us fall short of Islam’s claim to have a system of Economics that serves all humanity and not just Muslims. Looking for ideal Islamic traits in making axioms about an individual economic agent has two problems. It firstly reduces the scope of the field to the Muslims by including only the behavior of individuals following Islamic doctrines in its analysis. Secondly, the conjecture of an ideal Muslim as a representative economic agent takes the field from a practicable sphere to a utopian demesne that hardly correlates with the behavior of economic agents in real life.

Note: The text has previously been published under ILKE opinions.