Keynote Address by Mohammad Nejatullah Siddiqi (mnsiddiqi@hotmail.com)
Held at Jeddah, Saudi Arabia on May 26-27, 2004, under joint auspices of the Islamic Research and Training Institute, Jeddah and the Arab Planning Institute, Kuwait.
I begin by placing on record my appreciation of the very idea of holding this round table. I congratulate those who conceived the idea as well as those who worked to make it a reality. Thanks to their efforts here are some of the select few in the field devoting themselves to a stock taking of the past and to framing an agenda for the future.
Without wasting your time in preliminaries or pleasantries I plunge directly into the subject. My observations are divided, broadly speaking, into two parts: First I indicate what went wrong so that everybody is feeling the discipline of Islamic economics is, lately at least, not making the progress we expected it to make. Then I proceed to the second part of my deliberations, on what needs to be done.
Exercises in Islamic economics have been too much focused on fiqh. Whether it was the behavior of the economic agents such as the consumer or the entrepreneur, or the functioning of social institutions such as property or money, scholars sifted the vast treasure of Islamic jurisprudence for an answer to what ought to be….They did the same when asked to define the role of public authority vis a vis the economy involving such issues as taxation and public borrowing. From microeconomics to macroeconomics, management of money to public finances, in each field we worked to derive rules from fiqh. We did the same when confronted with such novel fields as economic development and international economic relations. The rules of conduct and policies devised by wise men of Islam to implement the guidance of Allah in certain specific situations were treated as the guidance from Allah applicable to all situations.
It can easily be seen that such an approach suffers from severe limitations. This applies with greater force in affairs of life most influenced by changing conditions of living. Technology is only one of these conditions. Equally important are population and other demographic factors. The accumulation of knowledge about the environment as well as about the self, as time passes and scientific progress takes place, is no less important. Also important are the changes in human perceptions and aspirations that take place as a result of historical experiences. It so happens that our social relations, especially economic relations, are the most affected by these developments. Even the behavior of economic agents cannot but be greatly influenced by these changes.
There are, broadly speaking, three ways in which fiqh rules relating to such matters as behavior of the consumer or conduct of a trader or the functions of the market inspector( muhtasib),etc. are formulated. We have either a text directly applicable to an issue or the issue is amenable to analogical reasoning on the basis of a text. The third way acceptable to some schools of Islamic Law if not all, is to look at the maslaha (benefit) intended or the darurah ( necessity) involved and issue a decree in response to them. The text itself may be a verse in the Quran or something reported from the Prophet (peace be upon him), a hadeeth.
The verses of the Quran directly related to the economy are few, and most of them, as we shall see subsequently, are laying down values and norms rather than laws or even rules of conduct. Most of the specific fiqh rules relating to economic transactions are based on hadeeth. But one cannot, despite recognizing the divinely inspired nature of the Prophetic rulings, accord hadeeth the same status in matters economic as one does to the Quran. There are a number of important reasons for this. The first relates to authenticity. Whereas authenticity of the Quranic text is guaranteed by Allah, the authenticity of a report about the Prophet has to be ascertained before it is accepted as such. Secondly, a reported ruling of the Prophet must be seen in the context in which it is issued, before it can be decided whether to generalize and apply it to everyone, every where, all the time. Lastly, all rulings of the Prophet are for realizing the objectives of Islam, the maqasid al- Shari ‘ah. When circumstances change it has to be ascertained whether the original ruling serves the purpose or needs modification. To one who may think this last is no different from the previous one, it can be pointed out that the latter entails modification in what was in fact intended by the Prophet to be general, as evidenced by some policy decisions of the second caliph, Umar ibn e Khattab, to be noted later.
It seems the great jurists were themselves fully aware of these limitation of their work, especially when it came to matters economic. This is evidenced by their reference to ‘urf and ‘aadah, conventions and customs, that change not only over time but across space too. Thus, Imam Shaf ‘i changed his fatwa on some issues when he moved from Baghdad to Cairo, referring to these differences. In a similar vein, we find some jurists claiming that the situation confronting them was a novel one, having never arisen earlier. They then proceeded to give a fatwa never heard before. One such example is Imam al Haramain al Juwaini (d.478 H/1085CE). He legitimized the ruler levying taxes on the wealthy, over and above zakat. One of the justification cited was threat to the security of the country and lack of financial resources required for meeting it. It is, therefore safe to conclude that a finite body of rules framed over the earlier centuries of Islam to enable Muslims live as Allah wanted them to live could not be used to derive from them general rules applicable in later times without first checking their background in socioeconomic conditions, etc. But the fact is many of us proceeded to do precisely that. That some went beyond and tried to apply the rules themselves to situations entirely different from those in which they were framed is also true. And that makes our task more complicated.
Even those of us who showed an awareness of the need to complement the fiqhi approach by the maqasid approach in order to deliver a meaningful agenda for economic development in modern circumstances, failed to deliver, generally speaking. Having rightly proclaimed elimination of poverty and reduction of inequality to be objectives of Shari ‘ah, they felt constrained by fiqh when it came to the means to these goals. Macroeconomics as developed in Islamic framework is largely affected by this crippling deficiency. Worse still, with the passage of time the constraining influence of the detailed rules and regulations of fiqh seems to have all but extinguished the spark of maqasid-inspired thinking. One has only to compare the emphasis on poverty elimination and inequality reduction in the early Islamic economic literature with the almost total neglect of these subjects during the recent years to feel the change.
As a matter of fact even those who frequently made recourse to maqasid al-Shari ‘ah got trapped into the classical treatment of maqasid. At the time it was launched it was a remarkable achievement. To have shown that the various ahkam (laws, rules, regulations) were not disparate pieces but an integrated body designed by the Lawgiver to enhance human weal was a great step forward in understanding. It paved the way for ijtihad in new circumstances not covered by earlier rulings. It also indicated what to do when an old ruling becomes counter productive and must be abandoned in the overall interest of the system. But, with all praises, it is dated. It was a fruit of human intellect between 5th and 8th centuries after Hijrah (11th to 14th CE). To expect it to serve with the same efficacy after six more centuries is to expect too much.
The classical treatment, largely by Ghazali ( d. 505H/ 1111 CE ) and Shatibi ( d.790 H/1388 CE) put the maqasid into the strait jacket of the so called five necessities (daruriyat khamsa ):life, religion, progeny, reason and property. These five were graded into three levels of realization: essential, needed and contributing to perfection or completion (daruri, haji and tahsini or takmili ). But, as Ibne Taymiyah ( d.728 H/1328 CE) pointed out, it was a one sided treatment:
‘Some confine masalih mursalah to protection of life, property, honor, reason and religion. But that is not correct. Masalih mursalah require us to acquire benefits and keep harm away. The protection of the things listed by these people relates to only one of the two kinds of masalih mursalah. The other kind involves realization of positive benefits, in worldly matters as well as in religion’.( Ibn e Taymiyah, 1983,vols 4/5, pp.174-75 )
That maqasid al Shari ‘ah could not be confined only to protection (hifz), preserving what people had or saving them from harm, rather they must include broader measures ensuring welfare was asserted by Ibn e Qayyim (d. 751 H/1350 CE), who emphasized justice and equity. Furthermore, he insisted that the means to justice and equity could never be captured by a finite list. Reason will guide us how to ensure justice and equity in changing circumstances.( Ibn e Qayyim, n.d, vol. 4 pp.309-11 ). Izzuddin Ibn Abdussalam (d. 660 H/1262 CE) preceded these scholars in noting that ‘Most of the benefits and harms in this world are recognizable by intellect. This applies to many shari ‘ah rules too.’ ( Izzuddin Ibn Abdussalam, 1934, p.4 ).
It can clearly be seen that the more one is focused on the second of the two functions of study of maqasid, i.e. their being a help in new ijtihad, the more the importance of the points noted above.
The classical treatment was a wonderful, though one sided, scheme for a systematic study of the corpus of Islamic jurisprudence existing by that time. Also of some help into extrapolating it into new but near situations. But you could not make a social science out of it in the closing years of the twentieth century. One was, at the least, expected to expand the classical list by paying heed to the points noted above. As a matter of fact recent works on the subject, like those by Allal al Fasi and Ibn Aashoor, insisted on the primacy of justice and equity in any list of maqasid.( al Fasi, 1963 ; Ibn Aashoor,1366 H )
Unfortunately this did not attract the attention of those who were trying to model the behavior of economic agents like the consumer, the producer, etc., in the light of Islamic jurisprudence. Some who proceeded to postulate consumer behavior in Islam in the light of the classical scheme arrogated to themselves the right to decide what was daruri (necessary) and what was not for a Muslim living in modern times. Those who attempted to set profit margins acceptable in Islam on the basis of opinions rooted in the social reality of an agricultural society a thousand year ago unnecessarily constrained themselves by things human in place of going straight for the divine. Examples abound.
The malaise was not confined to behavioral issues only. Fiscal policy and gender relations too remained chained to a socioeconomic reality long extinct. Ideas like Jiziyah being projected in Islamic public finance as a permanent source of income or women being confined within the four walls of their homes could find their way in a twenty first century vision of Islamic living only when little attention was paid to the objectives of Shari ‘ah correctly understood.
There is also a need to distinguish between the objectives of Islam as a way of life and the objectives of Islamic Law. The former involves aspects of personality and society the latter does not cover. Also, the former has a larger box of tools than available to the latter. Envisioning Islamic economy in twenty-first century is better done with reference to goals of Islam as a way of life rather than being done with reference to the goals of Islamic Law. This will enable us to handle issues like poverty and inequality that a Law-based approach has failed to handle.
Then we take up the example of the Prophet, peace be upon him. How he conducted himself as a consumer, as head of a household, a producer of wealth through trade, as head of state looking after the welfare of his people by guiding them in their economic activities, supervising and sometimes regulating their market, managing public property, etc., etc. These, the Sunnah, are best understood as conduct and policy directed at realization of the objectives and values in the Quran , some of which we have noted above.
The next thing to focus on is the contemporary reality, the current environment. Is there sustenance for all, and dignity, and…and? How to realize the Islamic values and achieve the Islamic ends in economic life in our times? That is the question we have to answer. It is in answering this question that we consult fiqh. It is a great help, an indispensable source, but not the only one. When it comes to identifying the appropriate means for realization of a certain end, current state of human knowledge and technology may have things to offer no old treasure possibly could.
It is not the purpose of this paper to go further and deeper into the how of answering the above question. That is a big task and must be taken up separately. My immediate concern is to point out that what transpired during the last half century was not always in the sequence indicated above. For many if not most of the scholars fiqh came first and the contemporary reality came next. They sought to lay down how the rules and regulations detailed in our fiqh compendiums are to be implemented here and now. That by doing so the values and ends enshrined in the Text would be realized even in the contemporary conditions was taken for granted. It was an article of faith. In other words, it was assumed that maqasid al- Shari ‘ah could be realized in today’s environment by putting into practice all the rules of personal conduct and public policy that are there in the books we inherited from our glorious past. The task our scholars defined for themselves was, therefore, to find out what was there in these books, and what would be the mechanics of implementing it.
To be honest, these were no ordinary tasks. We have too many books, belonging to different schools of fiqh. It often required not only lot of labor but great ingenuity to cull out a single piece capable of securing universal acceptance. That can easily be discerned by going through the proceedings of various fiqh councils and research seminars during the last fifty years. Great credit goes to these scholars. No less stupendous was the task of creating artifacts and inventing vehicles for real life practice of what the books handed down. Earlier pioneered by certain individuals, that is the task the Shari ‘ah Boards of Islamic financial institutions have been performing lately. We must recognize their services in making the practice of an unconventional way of banking and finance a universal reality.
The reason we have this round table today is that nobody is satisfied by that much of achievement. If it is the goals of Shari ‘ah we want to realize, we still have a long way to go. And more important than that, the road we are traveling on is not the one to take us there. We may implement all the rules and regulations relating to the economy in our books and still find ourselves far from being near our goals. The reasons are very simple. Keeping in view the objectives of Shari ‘ah related to economic life, appropriate means have to be discovered/invented after a careful understanding of today’s environment. They could not have been there in our books because today’s environment is so different from the environment in which these books were written.
I cannot go on like this for long due to the obvious time constraints. It is therefore time to refer back to the document circulated before this Round Table. I wish to address the two questions posed on page 5 of that document.
Do we need a distinct theory?
If so, what is constraining their development and how to remove those constraints?
Economic theory as we know it today has three features that concern me in today’s discussion. Firstly, it is focused on the individual, society or community appears as a mere aggregate, having no independent significance. Secondly, the individual is motivated by self-interest and focused on private gain. Thirdly, maximization is the norm in this individual pursuit of profit in enterprise/satisfaction in consumption. For the last three hundred years this has been the paradigm for economics as well as the economy. There is no doubt that it has spurred unprecedented developments in both, the ‘science’ of economics as well as the economy itself. However, the immense progress made in the production of wealth has been accompanied by increasing inequality in the distribution of income and wealth and a rise in relative poverty, within nations as well as between nations. The paradigm has also been responsible for imperialism, colonialism and, their most recent form, superpower hegemony. Peace has been lost, crime and corruption are rampant and levels of anxiety are high, even in the rich countries. Even the main beneficiaries of progress, the rich, complain of stress and insecurity. Neither family nor community could escape the chilling indifference of the existing paradigm. Nobody seems satisfied with the current state of the world.
I submit that all the three features of the conventional economics are unacceptable. They do not represent the reality of human existence and they are not how Islam looks at the matter. I do not reject them entirely, for each one of them has some element of truth. But they need modifications resulting in an entirely new paradigm. Here is how I would put the matter:
There is no individual without society. Not only that it takes two individuals to bring one into existence and raise him/her to be characterized as an individual, even this three-some can hardly survive without a community. So the first modification called for is to view the individual as a member of society. This amounts to introduction of social good or public interest in the model at the very outset. Secondly, care for others tempers self interest. Pursuit of private gain must avoid harming others. There is also the possibility of helping others. Both remain in focus without endangering survival of the individual decision maker in which case the desirability of helping others becomes ineffectual. Lastly, maximization of private gain is constrained by the demands of the above: serving public interest, avoiding harm (including environmental damage) and helping others. In other words, maximization is largely replaced by balancing of various interests: the self, the society and the physical environment. I think this modified version approximates the reality of human existence better than the conventional one depicted earlier. I also find it to be in harmony with the Islamic vision of life.
One may well remark that some of these can be discerned at the policy making level even in conventional economies. But the important point is that for Islamic economics these are core considerations. They must inform theory as well as practice. An economic theory that whittles down self interest at the very outset and saddles it with care for others, introducing public interest (including the future generations) and defines as the goal of the economy not higher and higher GDP but balanced growth with equitable distribution, will be very different from the one we have. It will certainly be distinct, though not entirely different.
I will now take up the second of the two questions posed on page 5 of the conference document: What constrains the development of distinct theory. There are two main factors constraining the development of a distinct theory of economics at the hands of the Islamic economists. The first relates to an understanding of the contemporary reality, the second relates to a faulty approach to the shari ‘ah sources. Both constraints reinforce one another resulting in a logjam in our thinking, so to speak
It is very difficult to elaborate on the first point in a short presentation. Everyone will agree that the ground reality in human economy is very different today than it was during the first four centuries of Islamic history, by which time the codification of shari ‘ah law was almost complete. But the agreement hardly goes beyond this generality. Cite any specific change and you will be confronted with a battery of citations relating the new to the old. So, nothing is entirely new and the old rules can somehow accommodate the newest eventualities! Recourse to the goals and a role for intellect in devising suitable new means for realization of these goals remains, therefore, in abeyance.
The price paid for this ‘conservative’ stance is immense. In a world in which pockets of absolute poverty still exist, a world in which some countries are poorer today than they were in the past, and where increasing inequality within nations as well as between nations threatens civilization as never before, Islamic economics fails to focus on the one issue which has always been the focus of the Prophetic Message: Justice and Equity. As I argued in the earlier parts of my presentation, primacy of rules and regulations over goals and objectives is largely to blame.
That was macroeconomics. Islamic microeconomics has also suffered from a timidity born from the fear of losing one’s moorings once the cozy assumptions of self-interest coupled with maximization are relaxed. The sciences of mathematics, statistics, and econometrics as of now do not offer the balancing individual (or the balancing policy-maker) the kind of sophisticated tools they offer to one maximizing an easily measurable variable like dollars. The acts of caring about others, serving the social interest while protecting one’s own, and avoiding doing any harm to man, animal or the physical environment are not a rarity. They have never been, as evidenced by our folklores, other art forms and history. But they are not the current subjects of research in economics and the tools of research in our discipline do not suit them. Even Islamic economists failed to come up with historical evidence and current empirical data on that kind of behavior, with some notable exceptions. Core Islamic concepts related to microeconomic behavior like israf, tabzeer, i‘tidal, samaha, naseeha, rifq and ihsan were rarely the subjects of textual, linguistic, exegetical, historical and empirical research even in the universities with departments of Islamic Economics. This kind of research is, however, a must for delineating the evolutionary and dynamic nature of these concepts, something often lost in the dense fog of dated fiqh rules that are diverse and full of differences. The importance of these moral concepts lies in their closeness to the objectives of shari ‘ah as compared to the rules that may have been made for their realization in a particular cultural milieu at a particular time and place. One who puts these concepts aside in favor of any set of rules runs the risk of losing the way to the goal of fairness flavored with generosity. As already pointed out in the earlier part of this presentation, many of us seem to have committed this mistake.
Let me emphasize that it is not merely a case of ‘variation in values’ or in ‘rules of behavior’ –the view ascribed to a group of Islamic economists as noted on page 4 of the conference document. A departure from maximization and from focus on private gain as well as from focusing on the individual, ignoring the social dimension, changes the paradigm. The fact that Islamic economists have so far failed to rewrite the theories of consumer behavior or that of the firm owes itself to insufficient historical and empirical research coupled with the inability to devise analytical tools suited to the study of morally informed behavior and the quest for balance between competing claims. These deficiencies themselves, i.e. lack of appropriate research and dearth of suitable tools, are caused by our misconceptions about the nature of Islamic economics.
Islam is primarily about a spiritual view of life and a moral approach to life’s problems, including the economic problem. The contentment Islam promised man[1] is rooted in this spiritual and moral framework. Islamic economics in an anxiety-ridden world bereft of peace and tranquility owes it to itself to project this dimension above other dimensions. But most of us have been busy competing with conventional economics on its own terms, demonstrating how Islam favors creation of more wealth, etc. We have had enough of that. It is time to demonstrate how modern man can live a peaceful, satisfying life by shifting to the Islamic paradigm that values human relations above material possessions.
Let us now turn to some other aspects of the problem in hand. The conference document points out the need of focusing on certain institutions common to almost all contemporary Muslim countries and communities, e.g. Zakat, Waqf and Islamic financial institutions (like banks, investment companies and insurance companies working according to shari ‘ah rules). Apart from the obvious need for separately subjecting these to detailed studies, there is a need for an integrated view. Could they taken together be the harbingers of a new approach to welfare as well as finance, an approach that eludes the conventional system because the two, welfare and finance, find themselves in opposite camps, sometime hostile to one another. A financial system eagerly guarding its independence from state regulations (oriented towards certain social goals) and claiming rights to access all corners of the global village without admitting any responsibility for welfare of the peoples involved has become a major headache for mankind. Welfare activities of modern states serve at best as palliatives, and that too within the national boundaries. The system for taking care of the poor among nations improvised in the wake of Breton Woods arrangements seems to be collapsing under the strong currents of globalization. Could an integrated view of zakat, waqf and Islamic financial institutions indicate a new way to link the poor, the rich and the profit-making middlemen to serve society better? It must be noted at this juncture that Islamic economics views finance as subservient to exchange (of real goods and services), rather than the other way round as it appears to one watching the current state of affairs. I notice a great opportunity here.
This brings me to another point I wish to make. Islamic economics needs to come closer to the peoples in general and the Muslim peoples in particular. Its focus must be what concerns people most, not what appears to be more important in theory. This should cause no qualms even to the purists as the former would lead to the latter in due course, if the theory is well conceived. If it is unemployment and, therefore, lack of purchasing power that is troubling someone it makes little sense to subject him or her to a lecture on zakat or interest free banking. Unfortunately that is exactly what we have been doing. No wonder the audience is losing interest.
Islamic economics has done a great service by providing Muslims with a way to do banking, investment and insurance without involving riba/interest. In doing so they might well have presented to mankind an alternative to conventional finance that instead of serving production, exchange and distribution of wealth seems to have made them subservient to finance. That was the achievement of Islamic economics in seventies through nineties of the last century. But before that it had done a job that can be rated even higher. Islamic economics during the forties through sixties of the twentieth century performed the unique service of weaning away the Muslim masses from the lure of socialism and capitalism and restored in their elite the confidence that their economic problems could be solved within the framework of Islamic teachings. But every age brings new challenges. With these two achievements to our credit we must proceed further to meet the yet unsolved problems of poverty, inequality, hegemony and anxiety, convinced that nothing short of a new approach to economics will do the job.
I cannot close without addressing an issue bothering the sponsors of this Round Table. As articulated on page 2 of the conference document, ‘Islamic banks took their own course which caused frustration’ to Islamic economists. ‘They do not see a direct relationship in this development and the claim that Islamic economics promises a paradigm to give a better economic future to mankind’. That sentiment is widely shared.
Modern finance tends to develop as an independent activity, complete with its objectives and methods, orchestrated by a distinct set of players. It is undoubtedly part of the economy but it does not necessarily share the goals of the economy. True to the conventional paradigm, its objective is to maximize profits. Thanks to the stock exchange and financial engineering and numerous innovations, modern finance has evolved methods to pursue its objectives with little regard for the over-all goals of the society. I suspect what is happening to Islamic finance is part of that game. We can hardly wish it away without changing the paradigm.
I also suspect that part of the reason for the alienation from Islamic economics comes from the way jurists function. Their dependence on fiqh details and the inhibition they feel in going directly to maqasid has led them into some kind of financial engineering. As in case of modern finance, financial engineering is bound to be very different from social engineering. Financial engineering is not inspired by social goals. It is propelled by financial goals—monetary gains. One has to be fully cognizant of the social importance of finance to feel the need of subjecting it to social considerations. I am not sure those without a deep knowledge of modern financial environment posses that virtue—our jurists included.
So, where do we go from here? Be faithful to the Islamic paradigm and work hard to launch it worldwide, is my answer.
References
‘Allal al-Fasi (1963) Maqasid al-Shari ‘at al-Islamiyah wa Makarimuha,Maktabah al-Wahdat al-‘Arabiyah, Al-Dar al-Baida’
Al-Shatibi, Abu Ishaq (n.d) Al-Muwafaqat fi Usul al-Shari ‘ah,Cairo
Ibn e Aashoor, Mohammad al-Taher,(1366) Maqasid al-Shari ‘at al-Islamiyah, Tunis
Ibn e Tyamiyah, Taqiuddin Ahmad (1983) Majmu ‘at al- Rasa’il wa’l Masai’l, Beirut
Izzuddin Ibn e Abdussalam (1934) Qawa‘d al-Ahkam fi Masalih al-Anam, Maktabah Husainiyah,Cairo.