THE ECONOMIC SYSTEM OF ISLAM BY Dr. M. UMER CHAPRA ADVISER ISLAMIC RESEARCH AND TRAINING INSTITUTE ISLAMIC DEVELOPMENT BANK JEDDAH

1.INTRODUCTION THE WORLD IS FULL OF SEVEN BILLION HUMAN BEINGS THEY ARE ALL EQUAL BY VIRTUE OF THEIR BEING KHALIFAHS OF GOD JUSTICE AND BROTHERHOOD ARE AMONG THE MOST FUNDAMENTAL TEACHINGS OF ISLAM THESE DEMAND THAT THE WELL-BEING OF ALL MUST BE ENSURED IRRESPECTIVE OF THEIR RACE, SEX, FAITH OR NATIONALITY ISLAM GOES EVEN BEYOND THIS. IT REQUIRES US TO BE A BLESSING FOR ALL OF GOD’S CREATION ( رحمة للعلمين ), THAT IS, TO BE A BLESSING NOT ONLY FOR ALL HUMAN BEINGS BUT ALSO ANIMALS, BIRDS, INSECTS AND THE ENVIRONMENT EVERY ASPECT OF LIFE, INCLUDING THE ECONOMIC, HAS TO BE ORGANIZED AND REFORMED IN SUCH A WAY THAT IT CONTRIBUTES TOWARDS THE REALIZATION OF THIS GOAL 1

2. WHAT IS WELL-BEING?  SATISFACTION OF BOTH THE MATERIAL AS WELL AS SPIRITUAL NEEDS  BOTH THESE NEEDS ARE INTERDEPENDENT. THEREFORE, IF WE IGNORE EVEN ONE OF THESE NEEDS, THE FULFILLMENT OF THE OTHER WILL ALSO SUFFER ULTIMATELY 1

3. MATERIAL NEEDS BIOLOGICAL NEEDS EDUCATION EMPLOYMENT OR SELF-EMPLOYMENT EQUITABLE DISTRIBUTION OF INCOME AND WEALTH ECONOMIC DEVELOPMENT FINANCIAL STABILITY ECOLOGICAL BALANCE 2

4. SPIRITUAL NEEDS PRAYER AND NEARNESS TO GOD MORAL UPLIFT MENTAL PEACE AND HAPPINESS FAMILY AND SOCIAL HARMONY ABSENCE OF CRIME AND ANOMIE INDIVIDUAL FREEDOM 3

5. SATISFACTION OF MATERIAL AS WELL AS SPIRITUAL NEEDS MATERIAL AS WELL AS SPIRITUAL NEEDS MUST BOTH BE SATISFIED ADEQUATELY ALL THESE NEEDS ARE MUTUALLY INTERDEPENDENT AND NECESSARY FOR HUMAN WELL-BEING IF BOTH THESE NEEDS ARE NOT SATISFIED, THERE WILL ULTIMATELY BE INDIVIDUAL AND SOCIAL PROBLEMS 1

6. PROBLEM RESOURCES AVAILABLE AT THE DISPOSAL OF HUMAN BEINGS ARE LIMITED HOW CAN WE ENSURE THE WELL-BEING OF ALL IN SPITE OF LIMITED RESOURCES? WE NEED A COMPREHENSIVE MORAL, SOCIO- ECONOMIC AND POLITICAL SYSTEM FOR THIS PURPOSE PLACING OUR RELIANCE ONLY ON THE ECONOMIC SYSTEM IS NOT SUFFICIENT 4

7. IDEAL ECONOMIC SYSTEM (1)  WHAT IS AN IDEAL ECONOMIC SYSTEM?:  A SYSTEM THAT HELPS US USE EFFICIENTLY AS WELL AS EQUITABLY THE RESOURCES THAT WE HAVE AT OUR DISPOSAL WITH THE OBJECTIVE OF SATISFYING THE NEEDS OF ALL, ENSURING THEIR WELL-BEING AND, THEREBY, HELPING REALIZE THE MAQASID AL- SHARI‘AH  A SYSTEM THAT HELPS US CREATE AN ISLAMICALLY ACCEPTABLE EQUILIBRIUM BETWEEN THE SUPPLY OF RESOURCES AND THE DEMAND FOR THEM  AN ISLAMICALLY ACCEPTABLE EQUILIBRIUM IS ONE THAT HELP US REALIZE THE MAQASID AL-SHARI‘AH 5

1 S D  THE SYSTEM DOES NOT LOOK ONLY AT THE AGGREGATE DEMAND AND SUPPLY. IT ALSO LOOKS AT THEIR CONSTITUENTS  EVERY EQUILIBRIUM IS NOT NECESSARILY ACCEPTABLE ISLAMICALLY. IT HAS TO BE AN EQUILIBRIUM THAT HELPS REALIZE THE MAQASID AL-SHARI‘AH P Q

8. IDEAL ECONOMIC SYSTEM (2) A SYSTEM THAT HELPS US ANSWER, IN THE LIGHT OF MAQASHID AL-SHARI‘AH, THE THREE WELL- KNOWN QUESTIONS OF:  WHAT TO PRODUCE  HOW TO PRODUCE, AND  WHO GETS, TO WHAT EXTENT, THE GOODS AND SERVICES THAT HAVE BEEN PRODUCED 6

9. IDEAL ECONOMIC SYSTEM (3) IT PROVIDES A PROPER STRATEGY FOR:  FILTERING  MOTIVATION  SOCIO-ECONOMIC AND POLITICAL RESTRUCTURING  THE WORLDVIEW OF THE SOCIETY HELPS DETERMINE THESE THREE INGREDIENTS OF THE STRATEGY 7

10. FILTERING CENTRAL PLANNING? NO! SECULAR MARKET SYSTEM AIMING AT THE MAXIMIZATION OF INDIVIDUAL SELF-INTEREST? NO! MARKET SYSTEM FOUNDED ON MORAL VALUES, SOCIAL SELF-HELP AND COOPERATION? YES! IF VALUES ARE NECESSARY FOR FILTERING, THEN THERE ARISES THE QUESTION OF WHO CAN GIVE THESE VALUES? HOW TO ENSURE THAT THESE VALUES ARE FAITHFULLY OBSERVED BY ALL  MOTIVATING SYSTEM  THE ROLE OF THE FAMILY, THE SOCIETY, THE EDUCATION SYSTEM AND THE GOVERNMENT 8

11. MOTIVATING SYSTEM FORCE? NO! THE USE OF FORCE HAS TO BE RULED OUT. IT HAS NEVER WORKED AND WILL NOT WORK INCENTIVES AND DETERRENTS  SELF-INTEREST? IF WE ACCEPT THE SERVING OF SELF- INTEREST, HOW WILL SOCIAL INTEREST BE SERVED?  SOCIAL INTEREST?  COMPETITION?  REGULATION:COST OF ENFORCING?  MORAL VALUES: SELF-ENFORCEMENT? COOPERATION AND SACRIFICE? THE CONCEPT OF HEREAFTER  SOCIAL PRESSURES AND GOVERNMENT VIGILANCE 9

12. SOCIO-ECONOMIC AND POLITICAL RESTRUCTURING NATIONALIZATION AND REGIMENTATION? NO! PRIVATE PROPERTY (A TRUST), MARKET MECHANISM AND COMPETITION BASED ON A MORAL FOUNDATION IMPROVEMENT IN THE QUALITY OF HUMAN BEINGS MORAL REFORM EDUCATION FAMILY AND SOCIAL SOLIDARITY SOCIAL SELF-HELP PROGRAMMES  ZAKAT, SADAQAT, AWQAF, INHERITANCE SYSTEM AND OTHER WAYS OF HELPING THE VULNERABLE  REFORM OF THE FINANCIAL SYSTEM  ROLE OF THE STATE 10

13. THE MUSLIM MALAISE 11

14. STRATEGY FOR REFORM IN THE MUSLIM WORLD

13 THANK YOU