Capitalist Economic System for Muslim World: Misdiagnosis and Maltreatment
Asad Zaman* and Rafat Mahmood**
Abstract
Current efforts to improve economic conditions in Muslim societies focus on making minimal modifications to dominant and prevalent Capitalist economics systems to accommodate Islamic principles. In the present paper we argue that the idea that Islamic economic system can be achieved by making minor modifications to existing systems is a misdiagnosis of the economic problems faced by Muslim countries. Correspondingly, solutions proposed on this basis are maltreatments likely to exacerbate the disease instead of solving the problem. We elaborate our views by focusing on the contrast between neoclassical economic theories and Islamic economic theories, the practical limitations of Western economic system. We also discuss why, despite many apparent conflicts with Islamic principles, Muslims remain inclined towards borrowing an economic system from the west.
Keywords: Islamic Economics, Capitalism, Neoclassical theories, Wealth
Contents
1. Introduction 2
The section focusses on the need to recognize the need for borrowing economic system from the West as misdiagnosis of the economic maladies faced by the Muslim world; correspondingly, the solution proposed i.e. tailoring the conventional economic systems according to Islamic principles in order to achieve development is a maltreatment likely to exacerbate the disease instead of solving the problem.
2. Contrast between Neoclassical and Islamic Economics 3
Because economic systems are adapted to and function together with social and cultural systems, they do not operate independently. This section focusses on the very foundation of the two systems, rooted in historical contexts of their emergence that give rise to fundamental differences between neoclassical and Islamic economic systems that cannot be reconciled.
2.1. Basis for Social Organization 3
As a consequence of a long historical process the Western societies gave up on religion as a basis of social organization and opted for “freedom” and “wealth” as being prized social values of an individual whereas Islamic society is built on the idea of a community of believers who are enmeshed in bounds of social responsibilities as well duties towards God and other humans.
2.2. Epistemology of Economics 4
The tremendous prestige of physical sciences in Europe led social scientists to attempt to imitate the methodology of the physical sciences. Treatment of Economics as a positive science, in reaction to lack of tolerance for scientific advancement displayed by Catholic Church, rendered it void of the discussion of values otherwise essential in understanding a social science. Islamic societies, in contrast, have historically displayed substantially greater tolerance and goes against the divorce of social science from moral values.
2.3. Goals of Economic System 5
The prime defining feature of any system is the goal that it is meant to address. The present section highlights that market societies have goals so different from Islamic Societies that any debate on the appropriateness of tools employed by the systems is worthless.
2.3.1. Wealth is an end in itself in Neo classical economics 5
The starting point of capitalism is the pursuit of wealth; no matter how the final yardsticks are modified in post-modern era, the prime objective still remains the accumulation and augmentation of assets.
2.3.2 Wealth is a means to an end in Islam 6
In Islam, economic activity is a means to an end, and not an end in itself. It does not allow human beings to set accumulation of wealth as a fundamental objective in life. Instead, Islam emphasizes spending on others, and simplicity in lifestyle
3. Practical Limitations of Western Economic Theory 7
Through focusing on results of Western economic experiments, this section addresses the question of whether the use of theories suited to market societies and capitalists help us to progress towards goals considered desirable for Islamic societies.
3.1. Applying economic theory to achieve development 7
The contention of conventional economists that development requires merely pumping in of capital, when put into practice, failed to achieve rapid development along the indicated lines, necessitating serious rethinking of development theory.
3.2. Economics Theories do not match observed behavior 8
In nearly every field, the assumptions of economic theory do not match observed behaviors as substantiated by discussion of consumer theory, behavior of firms, demand and supply, international trade, and failure of predictions.
4. Borrowing a System Rather than Developing One, Why? 11
Lack of confidence in Muslim scientists, Western influenced teaching and research institutions, fear of losing temporal and monetary investments in learning conventional system, mistaking native brilliance for beauty of economic theory, psychological submission to propositions of West, and neglect of Islamic heritage has led to failure in developing our own economic system.
5. Conclusion 12
The Western system was developed for a secular society, where common goals and cooperation could not be assumed whereas Islam assumes common social goals, and commands us to cooperate. If we can return to the values and principles promoted by Islam, we can enjoy the best of both worlds.