Economic Doctrines of Islam

Economic Doctrines of Islam: A Study in the Doctrines of Islam and Their Implicationsfor Poverty, Employment, and Economic Growth

By Irfan Ul Haq. Herndon Introduction:

Dr. Haq's book belongs to the same group of issue-oriented studies in Islamic economics that Umar Chapra's 1 books do.

.

However, unlike Chapra, who first provides a critical evaluation of the failed modern economic systems and then establishes the supremacy of Islam's economic development strategy, Irfan Ul Haq starts out with a comprehensive expository analysis of Islamic economic doctrines. He then relies on extensive personal interpretation to derive and then justify various policy prescriptions for the promotion of economic growth in an Islamic economy.

.

The book contains four parts, which are divided into fourteen chapters. The first five chapters in the first two parts discuss Islamic methodology and Islam's social and political order. The book's major theme is included in the third and fourth parts where the author discusses most of the economic issues and policies. Since the controversial policy-oriented economic subjects are covered in these parts, I will concentrate on the evaluation of these major economic subjects. These subjects include the proper role of the public sector, fard al-kifayah and its implications, interest free financing, land ownership and tenure, taxation, poverty, employment, and the policies to provide economic essentials.

Fard al-kifayah and Its Implications for Economic Policy
Land Ownership and Tenure
Interest Free Financing and Banking
Taxation in Islamic Economy
Poverty Employment and Economic Growth
Footnotes

Fard al-kifayah and Its Implications for Economic Policy

In discussing the principle of fard al-kifayah and the role of the Islamic state in providing public goods, Dr. Haq advocates a policy of nationalization of resources as an appropriate policy for an Islamic state to follow. The same policy is extended elsewhere to include price fixing and direct control of the grain trade, and by implication, of all other commercial activity.

.

Rather than providing a justification for such a policy on economic and Islamic grounds, he carries out his entire discussion on the assumption that big government has the capacity and the means to solve all economic problems. This thesis, in my view, contradicts the basic economic philosophy of Islam, which incorporates private initiative and free enterprise with a primary focus on the individual as a decision maker and khalifah of God on earth.

.

The author continues to overlook the fact that equity and efficiency are not complementary, but often competitive. An over-emphasis on the distributional justice of Islam creates an erroneous impression that in the Islamic worldview, economic growth and development are relegated to a secondary role. This is not only incorrect, but it also contradicts the very thesis of his book. Elsewhere I have elaborated on the Qur'anic view of man and its implications for his economic role.2

.

Land Ownership and Tenure

In the beginning of chapter 10, the author correctly notes that Islam allows land accumulation without any restrictions and recommends a balanced economic life for a Muslim without indulgence in opulence, luxury, and expensive pleasures. A Muslim is portrayed as a person who works hard, is productive, saves his money, invests it profitably, and assists the needy.

.

However, I find the author's discussion of land ownership and land policy unacceptable both on rational economic as well as on Islamic grounds. The author's assertion that the Qur'an does not mention anywhere man's ownership of land as being a part of his wealth, in itself, does not make land a public property. If it were so, the Prophet would have declared all land to be publicly owned. He not only refused to interfere with the existing land holding structure, but he left the tenure system alone without imposing even the slightest restriction on the size of land ownership.

.

It should be recognized that private land ownership without any limit or restriction is allowed and encouraged in Islam. The author's single citation about the expropriation of Bilal Ibn al-Harith's land by Caliph 'Umar is a description of a very special case. It refers only to that portion of land which he failed to cultivate. Islamic law imposes only three specific obligations on the landlord: (a) to pay all taxes, (b) to engage in a sharecropping rather than in a fixed-rent arrangement, and (c) to make certain that the land is acquired, accumulated, and maintained in ownership within the bounds of Islamic moral and legal law.

.

As for the newly developed or reclaimed lands, the Islamic government has every right to allocate these to the general public within the framework of the prevailing time and space environment. However, when the land is sold to an individual, it becomes a part of his wealth.

.

It cannot be expropriated without a just and fair compensation. In order to justify his position, the author also cites another hadith attributed to the Prophet: "If anyone has land, he should cultivate it himself, or lend it to his brother for cultivation or otherwise release it from his ownership" (p. 63). Interpreting the release from ownership to mean giving it to the state for free or even to agree to the state's expropriation is too far-fetched. Also, in recommending small land holdings, the author is endorsing the failed strategy of reliance on small subsistence farming, which should be tolerated only temporarily.

Interest Free Financing and Banking

In this section, there are two instances where the author creates confusion. The first instance is when he uses inaccurate definitions, and the second instance occurs when he draws a wrong policy conclusion. He uses the expressions "unearned income" and "fixed rent" in an incorrect context (p. 119). His discussion leaves one with the impression that these two sources of income are completely forbidden in Islam, which is far from the truth.

.

Another instance where he draws a judgmental policy conclusion is when he recommends nationalization of banks on the basis of an undefined, theoretical concept of "social profitability." We find no support from economic theory or the experience of the developing or socialist world to indicate that nationalized banks contribute to social profitability. Instead, banks in the public sector are often found to be economically inefficient, bureaucratic, unresponsive to public needs, and an embodiment of waste and misallocation of economic resources.

Footnotes:
1 - Umar Chapra, Islam and the Economic Challenge (Leicester, UK: IIIT, 1992).
2 - "The Role of Public and Private Sector in an Islamic Perspective," in Proceedings of the Fifth International Islamic Economic Seminar (Herndon, Va: IIIT Publications, 1993).

Source: http://www.islamonline.net/iol-english/qadaya/economy5/economy-1.asp