Presidential Address at 34th AGM, PSDE, 12-14 Dec 2018
By: Asad Zaman, VC PIDE, Writeup: https://bit.do/az34agm Video: https://bit.do/az34pr
The tragedy created by the Global Financial Crisis, which made millions jobless, homeless, and hungry, was caused by false economic theories which lulled economists into complacency even though clear warning signs of impending crisis were present. We cannot calculate the cost of the enormous amount of damage caused by these false theories, which have polluted the land, air, and the sea, destroyed the environment, created massive inequalities, and have caused misery for billions of humans living beneath the poverty line. While the need for a revolution in economics is obvious to many, the direction which it must take is not clear. This essay explains how Islamic Economics offers a radical alternative.
The teachings of Islam created a revolution in world history 1450 years ago, catapulting the ignorant and backwards Arabs from the depths of darkness to positions of world leadership within a short period of time. The early Muslims launched a civilization which enlightened the world for a thousand years, and gave shape to distinctly Islamic forms of literature, poetry, philosophy, as well as the natural sciences. It was the light of knowledge contained in millions of books in the libraries of Al-Andalus, acquired via the re-conquest of Spain, which ended the dark ages of Europe and brought about the European Enlightenment. The effects of this revolution are still with us today in the form of billions of adherents of the faith, as well as in the origins of all the physical and social sciences known today. The burning question for us today is: Are these teachings still relevant for us today? Does Islam have the same capability to launch a revolution today which it demonstrated 1450 years ago?
My thesis is that even though these teachings are just as powerful today as they were 1450 years ago, Islam has become a stranger to the Muslims (as prophesied) and hence Muslims do not recognize its revolutionary potential. The reasons for our failure to grasp and benefit from the teachings of Islam lie in the process of colonization and Western hegemony, which has shaped our minds in conformity with Eurocentric frameworks for understanding the world. At the beginning of the 20th century, people of European origin controlled 85% of the planet, and this power was directly reflected in the conquest and colonization of Muslim minds, from which the Ummah has yet to recover.
An effective antidote to the shock and awe created by European domination is learning to laugh at some of the ridiculous and absurd notions which are central to the Western Social Sciences. For instance, a little introspection immediately reveals the falsity of the idea that my behavior is predictable via mathematical formulae, or that the desire for goods and services is my sole and strongest motivation. The idea that the purpose of our human lives is to maximize the pleasure we obtain from consumption of goods and services is not only contrary to Islamic teachings, but is also a deep mis-understanding of human motivation across cultures and religions. We can label economic theory as the “Coca-Cola theory of happiness”: a hot and thirsty man experiences a jolt of pleasure from the cool and sugary drink, and comes to the conclusion that he has found the formula for a lifetime of happiness.
Similarly, a lot of the discussion and debate within economics takes place on notions which are so absurd that serious engagement dignifies them; instead, we should just laugh at them. For example, consider the prisoner’s dilemma. In societies where the poisonous philosophy of individualism has not destroyed communities, overcoming the impulse to betray someone in our social sphere for personal gain is part of childhood training. For economists to puzzle over why everyone does not behave in an infantile, immature, and short-sighted way is itself a puzzle. The concept of subgame perfect equilibrium is similarly disgusting. It requires us to ponder over all over social commitments made in the past, and break any one of them if it suits our present interests. Economists take this as the norm of ideal rational behavior and are deeply puzzled by the findings of psychologists and behavioral economists that human beings generally stand by their commitments even when this conflicts with their individual selfish interests.
There is a two-way barrier of mutual incomprehension between economists and normal human beings. Economic theories cannot understand honesty, integrity, commitments, love, compassion revenge, gratitude, fairness, and host of other human emotions, while normal human beings cannot understand how one can be human and fail to understand these drivers of human behavior. At the source of all the catastrophes created by economic theory listed earlier is this cruel and inhuman model of human behavior. This complete disregard of human experience in construction of theories of human behavior is not at all natural, and can only be explained by certain unique aspects of the European historical experience. In the interests of brevity, we compress this complex story spanning centuries into a single paragraph.
The flagrantly immoral behavior of a sequence of sixteenth century popes, led to the protests of Martin Luther, and the reformation of the Church. The extremes of violence and cruelty between Christian factions, and the misery inflicted by religious wars, led to a general dis-enchantment, and eventually, the rejection of religion in Europe. This loss of faith in God, and in an ordered and meaningful universe, was a traumatic experience for European intellectuals. All major European philosophers grappled unsuccessfully with the question of how to find meaning in life, in absence of religion and God. The depths of this trauma are reflected in writings of many leading European philosophers. Most 19th century European social thinkers suffered from nervous breakdowns. Nietzsche talks about the madman who rushed out into the streets crying that “we have killed God”. Durkheim talks about how the meaninglessness of life makes suicide the only serious philosophical question. Nihilism, absurdity, Da-daism, were just a few of the reflections of this loss of purpose on literature, philosophy and the arts in the West. Most important, and directly relevant to the puzzle of how economists came to believe in absurd theories of human behavior, is the effect of the trauma of loss of faith on the father of Western philosophy, Rene Descartes.
Let us reflect on the enormity of the statement “I think, therefore I am”. Normally, human beings would find it absurd to ponder ‘whether or not I exist?’. The question itself reflects the depth of trauma – having lost faith in our deepest certainties about God and Creation, we can even question our own existence. Now suppose that some deep existential tragedy led me to question my own existence. How would I re-assure myself? When I reflect on myself, I am directly and immediately aware of my breathing, my heartbeat, the tingling of my skin, and a thousand other sensations which show me that I am alive. But, the traumatized Descartes refuses to trust his own direct and lived experience. After all, it was this experience that misled him. It was his heart that told him to trust in God, and this turned out to be a lie. Henceforth, we will no longer trust our own inner experiences, and we will only trust in our faculty of reason, and the objective realities, visible and sensible in the external world. It is this rejection of our own inner lived experiences as a source of knowledge which is the basis for the catastrophically wrong foundations of modern Western social sciences.
We are now in a position to explain both why Islamic Economics provides a radical alternative, and also why those indoctrinated into Western conceptions of knowledge are unable to see this alternative. Islam gives central importance to the heart as an instrument of cognition – our hearts can know God, and the purpose of our lives is to purify our hearts. There are many verses in the Quran which mention the eyes, the ears and the heart, showing that all three are sense organs. The following verse is very explicit:
(22:46) So have they not traveled through the earth and have hearts by which to reason and ears by which to hear? For indeed, it is not eyes that are blinded, but blinded are the hearts which are within the breasts.
If our hearts are blind, then we will be unable to see the signs of the presence of God. The entire edifice of Western social science rejects the conception of the heart as a sense organ, as a valid producer of knowledge about the external realities. It is for this reason that the social sciences of the West are blind to the nature of human beings, that they have hearts and souls. Rejecting the heart and soul as integral components of human beings leads to current Western (mis)conceptions about human beings and societies which lie at the foundations of the modern social sciences. Rejection of God and Faith is intimately related to rejection of heart as an instrument of knowledge.
It is this firm denial of heart and soul which leads to absurd theories of human behavior, and a complete misunderstanding of human societies, purpose, and welfare, which form the basis of modern social scientific theories. Economic theories assume that human beings are cold, calculating and callous – they have no emotions, they have no compassion, sympathy or love for others, and that they make decisions purely on the basis of rational calculation about maximum profit or pleasure. Whereas the greatest sources of human welfare lie in social realm, and with appropriate training of the heart in terms of love, gratitude, contentment, etc., economists believe and teach that human welfare lies in maximization of pleasure obtained from consumption of goods and services. This leads them to a disastrously wrong understanding of the purpose of our lives as being the maximization of consumption. This leaves economists extremely puzzled when confronted with realities of human experience, such as the Easterlin Paradox. This shows that massive gains in material welfare have not had any significant impact on human happiness.
Islamic theories are founded on the understanding that the heart is the central driver of human actions. The value and effect of our actions depends on the purpose within our hearts. To understand the tides of human history, we must look into the hearts – that is, the motivations which shaped human actions. Throughout history, drivers of great changes have been changes in the heart. The greatest developmental episode in human history was the rise of Islam. The source of the revolutionary effect of Islam was the spiritual development of the early Muslims, created by the purification of the hearts. Just as the lowly atom has the capability to explode and destroy entire cities, so the heart of man is built with the potential of changing the entire external world. The Quran attests to this potential when it call the saving of a life as being equivalent to the saving of the entire humanity. The drivers of great transformations throughout history have been changes in the hearts of people, which created the passion and drive to struggle against tremendous odds. Weber and Tawney have both emphasized how religion played a central role in the development of modern capitalism. Similarly, far-sighted thinkers predicted the fall of the West due to the increasing indulgence in hedonism and individualism, and the rise of East Asia due to the revival of the spirit of Confucianism. The ethos of Islam provides a far more powerful basis for regeneration of the Islamic Civilization, if it can be revived in the pure form it took at the origin. Confirming the idea that internal change is driver of external change, the Quran states that
13:11: God does not change the conditions of a people, unless they strive to change themselves.
It is only after all this preliminary work, we can turn to the main question, posed at the very beginning of this essay. How can we use the teachings of the Quran to launch a revolution today, like the revolution that these teachings created 1450 years ago?
As already discussed, modern economic theory creates misconceptions about the nature of human beings which are obstacles in the path of understanding the Islamic solutions. The first of these is the concept of homo economicus, the idea of man as a robot, who mechanically seeks to maximize pleasures from consumption during his lifetime. To oppose this, Islam offers a normative ideal which some have called homo Islamicus. This ideal was personified by our Prophet Mohammad SAW –
107 of Surah Al-Anbya “And We have not sent you, [O Muhammad], except as a mercy to the worlds.”
Al-Ahzab verse 21, “Verily you have in the Prophet of Allah an excellent model.”
Even though conventional modern economics claims to be descriptive and positive, behavioral economists have established conclusively that homo economicus does not describe actual behavior of people. In fact, it is proposed as an ideal form, a standard for perfectly rational behavior. What economists think of as rational behavior is actually the behavior of the lowest of the low, a person who pursues only the desires of the Nafs, without thinking of the higher goals of our existence. Both homo economicus and homo islamicus are polar extremes, ranging the lowest form of behavior to the highest form. As the Quran says:
(95:4,5) We have created the human being in the best form Then we reduced him to the lowest of the low.
Actual human behavior ranges between these two extremes. Islam provides us with the training required to make spiritual progress from the lowest of the low – homo economicus – towards the highest of the high – home islamicus. It is important to note that Islam does not measure success by arrival at the destination; no one can actually hope to achieve the ideal form. Rather, it is to make our maximal efforts, to strived to achieve the ideal form that is demanded of us. In contrast, conventional economics assumes every human is forever stuck at the bottom stage of spiritual development, with no hope of progress.
Taking the heart and soul of man into account changes our understanding of the supposedly central concept of “scarcity”. As our prophet SAW said, “True richness is contentment of the heart”. Deep studies of human behavior, welfare, show that human beings are amazingly adaptable – they can become content in amazingly difficult circumstances. Scarcity is really an attitude, a state of the heart where the glass is always half full. A recent Harvard survey of 4000 millionaires showed that they were generally quite unhappy. Even in terms of money, 75% of them felt financially insecure. Our prophet demonstrated abundance thinking – being contented with whatever we have been given creates generosity. Under the influence of his training, the companions gave to others while being themselves in need, earning the praise of the Quran (76:8) And they feed, for the love of Allah, the indigent, the orphan, and the captive.
The famous Easterlin paradox affirms the Quranic admonition that:
(57:20) Know that the life of this world is but amusement and diversion and adornment and boasting to one another and competition in increase of wealth and children … And what is the worldly life except the enjoyment of delusion?.
As Easterlin and other researchers have shown, overwhelming increases in wealth and material comforts have not brought about corresponding increases in happiness, or feeling of satisfaction and welfare. The Easterlin paradox reflects something which we all understand intuitively. Except at low levels where it satisfies basic needs, additional consumption brings pleasure only in relation to others – the competition, referred to in (57:20) above. The pursuit of growth and riches is an illusion – if everyone increases their consumption, happiness levels remain the same as before, because the standard for comparison rises.
A deeper understanding of capitalism shows that massive over-production is at the heart of the system. The only way to sustain the perpetual growth it requires is to create idle desires, and to make people consume vastly more than they need. Conspicuous consumption, and envy, both prohibited by Islam, are at the center of the consumer society created by capitalism. This mad pursuit of growth which brings misery to billions and concentrates wealth in the hands of a handful of people, is stripping the planet of resources at an unsustainable rate, putting the future of humanity into peril.
Understanding the insight of the Quran, that the pursuit of riches is just the enjoyment of a delusion, leads to radical changes in our economic policies. Islam prohibits us from pursuing idle desires, whereas economics encourages us to do exactly that. We can achieve happiness by pursuing simpler lifestyles, as per Islamic teachings. There is plenty of resources to amply satisfy the needs of everyone. Environmental economists are recommending de-growth as the only way to save the planet; this is exactly in accordance with the Islamic principles of simple living. Also, Islam teaches us not to envy others, and not to be deceived by the appearances of pomp and luxury. These principles of training the heart are needed to combat the desire for more and more that capitalism strongly encourages and requires. The fundamental economic problem of scarcity can be solved by the Islamic strategy of simple living with no envy and generosity – those who have more than what they need should give to others who are in need.
A central element of the inner transformation that revolutionized the world was the creation of unity among the Muslims. As the Quran testifies:
And hold firmly to the rope of Allah all together and do not become divided. And remember the favor of Allah upon you - when you were enemies and He brought your hearts together and you became, by His favor, brothers.
Today the weakness of the Muslims is due to the divide-and-rule strategies being so effectively used against us. The Quran (8:46) warns us not to dispute with each other “lest you lose your courage, and your strength departs … ”
While modern economics is based on competition and greed, the economics of an Islamic society is organization along the lines of cooperation and social responsibility, compassion, caring and generosity. For a thousand years, there was no concept of paying for education, or for health care. It was understood that the society as a whole was responsible for all the children and all those who were unable to take care of themselves.
Because the concept of purpose and meaning was lost in the Western Social Sciences, the fact that the institutional structure of a society reflects the collective social goals has been lost from sight. The collective social and individual goals of an Islamic society are radically different from those of modern capitalist society, which are focused on accumulation of wealth, power, and pleasure at individual and social levels. We can illustrate the different spirit at the heart of the structures for a few institutions.
Accumulation of wealth is the spirit of capitalism, which is reflected in the banks designed for this purpose. Islam, on the other hand, asks us to spend excess wealth on others. This is reflected in the Waqf, an institution used by Muslims to promote social welfare. About one third of the registered lands in the Ottoman empire were Waqf properties for social causes like education, health, taking care of orphans etc. When firms are motivated by service, then a guild which collectively serves the needs of the society is socially beneficial. Collective provision of service makes for greater efficiency, as demonstrated by the vibrant guilds of the Ottoman Empire, as well as Al-Andalus. However, when firms are motivated by profits, than a monopoly can squeeze maximum profits out of the public and competition is a better structure to protect the consumer from their greed. The difference in spirit and purpose is reflected in all institutional structures of the society, from family to judiciary, government, social, political and economic structures.
To conclude this essay, it is important to note that the external structures are just stepping stones to the internal transformations and spiritual progress that is the goal of all our struggles. All our struggle and sacrifice and living and dying is solely for the sake of Allah, and the only success is the success of the hereafter. Once this is understood, we engage lightly with this world and live like a traveler, passing through. We give away the things we love most, to purify our hearts of the love of material things, and fill it with the love of Allah, His Prophet, and His Deen. Obviously, the economic system that would emerge as a result of the cleansing of the hearts and spiritual progress would be radically different from the capitalist system.