The slides for this lecture are available from: http://bit.ly/IE2024L3 The video is embedded below and a writeup follows.
Timing: 0:00 - 1:30
Slides: 1-2
Content: The lecture begins with a brief introduction to the topic, "Resolving the Crisis in Islamic Economics." The speaker leads a Dua asking for guidance and beneficial knowledge, emphasizing the importance of seeking knowledge in Islam.
Transcript:
"Let me start by reciting the dua that is essential for every session. It's a dua asking for beneficial knowledge. The dua goes: 'Allahumma inni as'aluka ilman naafi'an wa rizqan tayyiban wa 'amalan mutaqabbalan.' This translates to 'Oh Allah, I ask You for beneficial knowledge, good provision, and deeds that are accepted.'
This lecture, titled 'Resolving the Crisis in Islamic Economics,' is part of a broader course on Islamic Economics, a field that aims to develop an alternative to the capitalist economic system. The focus today will be on the intellectual crisis within Islamic Economics, particularly on how it has deviated from its original goals. The lecture will discuss the root causes of this crisis and propose ways to address it."
Timing: 1:31 - 6:30
Slides: 3-4
Content: The lecture discusses the unique emphasis Islam places on knowledge. It highlights a Hadith that encourages being a scholar, student, listener, or lover of knowledge. The importance of "meta-knowledge" or epistemology, which involves understanding the origins and purposes of knowledge, is introduced.
Transcript:
"In Islam, knowledge holds a central position. It is not just any knowledge that is valued, but knowledge that leads to action—'ilm that benefits. There is a hadith which says: 'Be a scholar, or a student, or a listener, or a lover of knowledge, and do not be anything else, for you will perish.'
Islam emphasizes the importance of understanding the origins and purpose of knowledge, which is referred to as 'meta-knowledge' or epistemology. This is a critical concept in Islam because knowledge is not just about accumulating facts; it's about understanding how and why we know what we know. This understanding is rooted in divine revelation, which provides guidance on how to interpret and apply knowledge in the real world. Islamic epistemology differs significantly from the Western conception, where knowledge is often seen as a product of human reason and empirical observation alone."
Timing: 6:31 - 11:00
Slides: 5-7
Content: The speaker examines how historical experiences, such as colonization, shape both the colonizers' and the colonized's understanding of the world. This section emphasizes the need to interpret experiences through correct theories, particularly those derived from the Quran.
Transcript:
"One of the key ideas we need to understand is how historical experiences shape knowledge. The way we interpret our experiences is deeply influenced by the theories and frameworks we use. This is crucial because the same event can be understood in completely different ways depending on the theory applied.
For instance, colonization did not just bring political and economic changes; it fundamentally altered the way people in colonized countries understood the world. The colonizers imposed their own theories and interpretations, which led to a significant shift in the knowledge structures of the colonized. This is why it's important to recognize that knowledge is not derived purely from experience; rather, experience is interpreted through a lens provided by pre-existing theories.
These theories are not neutral; they are shaped by the social, political, and economic contexts from which they emerge. Thus, the dominant theories of the colonizers, which were based on their own historical experiences, became the lens through which the colonized were taught to understand their own experiences. This led to a distorted view of reality, one that often served the interests of the colonizers rather than the colonized."
Timing: 11:01 - 14:00
Slides: 8-9
Content: Islamic epistemology is discussed, focusing on the link between knowledge and action. The speaker explains the concept of useful, useless, and harmful knowledge, advocating for the teaching of knowledge that leads to beneficial action.
Transcript:
"In Islamic epistemology, there is a strong link between knowledge and action. The purpose of acquiring knowledge is not just to understand the world, but to act upon it in a way that aligns with Islamic principles. This concept is encapsulated in the idea of 'useful knowledge'—knowledge that leads to correct and beneficial action.
The Prophet Muhammad (peace be upon him) taught us to seek refuge from knowledge that does not benefit. In other words, knowledge that does not lead to positive change or that is not applied in a beneficial manner is considered useless, or even harmful. This contrasts sharply with the Western concept of knowledge, which often emphasizes knowledge for its own sake or for the purpose of controlling nature and society.
Islamic knowledge is meant to guide us in our actions, ensuring that what we do is in accordance with divine will and contributes to the well-being of the community. Therefore, the value of knowledge in Islam is measured not by how much one knows, but by how effectively that knowledge is put into practice to achieve good outcomes."
Timing: 14:01 - 20:00
Slides: 10-13
Content: This section critiques Western epistemology, particularly the Enlightenment's rejection of revealed knowledge in favor of secular reasoning. The speaker argues that this has led to a misinterpretation of historical experiences, resulting in flawed theories that dominate modern thought.
Transcript:
"The Enlightenment period in Europe brought about significant changes in the way knowledge was perceived and used. Enlightenment thinkers sought to explain the world through reason and empirical observation, rejecting the role of divine revelation in the process of understanding. They believed that by relying on human reason alone, they could develop a universal science of knowledge.
One of the critical mistakes made by Enlightenment thinkers was their interpretation of centuries of religious wars in Europe. They incorrectly concluded that religion itself was the primary cause of these conflicts. As a result, they promoted secularism as a solution, arguing that by removing religion from the public sphere, society could avoid future wars.
However, this was a simplistic and ultimately flawed conclusion. The twentieth century, with its two world wars and numerous other conflicts, demonstrated that secular societies could engage in even more destructive wars than those motivated by religious differences. The Enlightenment's rejection of revealed knowledge led to a misinterpretation of human experience, as it failed to recognize the deeper, more complex causes of conflict that go beyond religion."
Timing: 20:01 - 26:00
Slides: 14-17
Content: The development of modern economic theories is traced back to the historical context of class struggles in England. The lecture critiques the notion that economics is a universal science, arguing instead that it is a product of specific historical and social conditions.
Transcript:
"The development of modern economic theories is deeply rooted in specific historical and social contexts, particularly the class struggles that took place in England during the Industrial Revolution. These economic theories were not created in a vacuum; they were a response to the social, political, and economic conditions of that time.
One of the key points made in the lecture is that it is a mistake to consider modern economics as a collection of universal truths. Economic theories are often presented as objective and applicable to all societies, but in reality, they are shaped by the specific circumstances in which they were developed. For example, the focus on individualism and market-driven economies in Western economic theories reflects the historical context of capitalist development in Europe.
When these theories are applied to different contexts, such as in non-Western societies, they can lead to significant distortions. The attempt to universalize Western economic models ignores the fact that these models were designed to address the needs and challenges of a particular historical moment in Europe. As a result, they may not be suitable for societies with different cultural, social, and economic realities."
Timing: 26:01 - 39:00
Slides: 18-23
Content: The lecture delves into Karl Polanyi’s analysis of the rise of capitalism, focusing on the Industrial Revolution's role in transforming society. The speaker discusses the commodification of land, labor, and money as central to capitalist production.
Transcript:
"Karl Polanyi's analysis of capitalism, particularly in his work The Great Transformation, offers a critical perspective on how the rise of capitalism fundamentally changed society. Polanyi argues that the Industrial Revolution led to the creation of a market economy where land, labor, and money were treated as commodities.
In a traditional society, land, labor, and money were not commodities; they were integral parts of social relations. However, capitalism transformed these essential elements of life into things that could be bought and sold in the market. This commodification had profound social and political consequences.
For instance, when labor became a commodity, human lives were effectively put up for sale. This shift made money the ultimate goal in society, as people had to sell their labor to survive. As a result, wealth became the primary measure of success and status, driving the social and political structures to support the accumulation of wealth.
Polanyi highlights how this commodification process disrupted traditional social relationships and led to significant changes in the way people lived and interacted with each other. The transformation was not just economic but also social, as the pursuit of wealth became the dominant force shaping society."
Timing: 39:01 - 45:00
Slides: 24-27
Content: The section explores how money became central to capitalist societies, contrasting it with moneyless or less monetized societies. The speaker explains how the commodification of essential aspects of life, such as labor and land, has led to environmental and social crises.
Transcript:
"In capitalist societies, money plays a central role, but it's important to understand that money is an 'artificial commodity.' Unlike goods like food or clothing, which have intrinsic value, money's value is purely a social construct. It's created by society to facilitate trade, but in a capitalist system, it takes on a much more significant role.
Money becomes the means by which all other commodities are measured and exchanged. This gives it immense power, as everything—including human labor and natural resources—can be bought and sold with money. As a result, money becomes the ultimate prize in capitalist societies. The pursuit of money becomes the primary objective, often overshadowing other values like community, ethics, and even personal well-being.
This transformation has deep social implications. When money becomes the dominant measure of value, it reshapes social relationships and structures. People begin to view their relationships and actions through the lens of financial gain, leading to a society where wealth accumulation is the primary goal. This focus on money can lead to social inequality and environmental degradation, as the pursuit of profit often overrides other considerations."
Timing: 45:01 - 55:00
Slides: 28-32
Content: The lecture examines how wars, particularly the World Wars, have shaped modern economics and politics. It argues that the central role of wars in shaping economic and social theories is often overlooked in mainstream economics.
Transcript:
"Wars have played a critical role in shaping economic theories, a fact that is often overlooked in mainstream economics. Throughout history, major wars have not only caused immense human and material destruction but have also led to significant changes in social and political structures. These changes, in turn, have influenced the development of economic theories.
For example, the World Wars in the twentieth century dramatically altered the global economic landscape. The massive government interventions required to support the war efforts led to the development of new economic theories that emphasized the role of the state in managing the economy. This was a departure from the laissez-faire principles that had dominated before the wars.
However, despite the profound impact of wars on economic thought, this connection is often downplayed or ignored in mainstream economic discourse. Economic theories are frequently presented as neutral and timeless, but in reality, they are deeply influenced by the historical and social contexts in which they emerge. The lecture emphasizes the need to recognize the role of wars in shaping economic theories and to understand that these theories are not universal truths but products of specific historical moments."
Timing: 55:01 - 1:10:00
Slides: 33-38
Content: The discussion shifts to the development of Islamic economics in the post-colonial era. The speaker critiques the "coconut class" that took over after independence and the failure to establish a truly Islamic economic system.
Transcript:
"Islamic Economics initially emerged as a key component of the ideology driving liberation efforts in Muslim countries during the colonial era. The First Generation of Islamic Economists (1GIE) envisioned a post-colonial world where newly independent states would replace capitalist systems with an Islamic economic model rooted in justice and equity, aligned with Islamic principles. This vision was a central promise of the liberation movements, which aimed to break free from the exploitative capitalist systems imposed by the colonizers.
However, after independence, this promise was not fulfilled. Instead of establishing an Islamic economic system, the political leadership that emerged—often referred to as the 'coconut class'—slid into power. This class was trained by the colonizers and had absorbed Western values and ideologies. They admired and sought to emulate Western models of governance and economics, which led them to continue many of the exploitative policies that had been in place during the colonial period. As a result, the anticipated revolutionary transformation of the economic system did not occur, and the capitalist structures established by the colonizers were largely maintained."
Timing: 1:10:01 - 1:18:00
Slides: 39-44
Content: This section critiques the second generation of Islamic economists for attempting to modify capitalist economics rather than developing a distinct Islamic economic system. The failure to achieve significant results is discussed in the context of the Global Financial Crisis of 2007-08.
Transcript:
"Following the unfulfilled promise of establishing an Islamic economic system after independence, the Second Generation of Islamic Economists (2GIE) emerged. This generation took a more pragmatic approach in response to the political realities of the time. After the efforts of political Islam to capture governments and implement a comprehensive Islamic system had largely failed, the 2GIE sought to work within the existing frameworks.
Instead of pursuing a revolutionary overhaul of the economic system, the 2GIE aimed to Islamize the existing capitalist framework. They believed that by making incremental modifications—such as incorporating Islamic principles like the prohibition of riba (interest) and the promotion of zakat (charitable giving)—they could transform capitalism into a system compatible with Islamic values.
However, this approach represented a significant compromise. The 2GIE accepted the underlying structure of capitalist economics and sought to adapt it rather than replace it entirely. This pragmatic compromise meant that the deeper issues and injustices inherent in the capitalist system were not fully addressed. The Global Financial Crisis of 2007-08 starkly revealed the limitations of this approach, as it exposed the vulnerabilities and ethical shortcomings of the capitalist system that the 2GIE had attempted to Islamize."
Timing: 1:18:01 - 1:25:00
Slides: 45-50
Content: The speaker calls for a new approach to social science, one that studies social change and the evolution of theories together. The importance of disrupting the existing educational system to create a truly Islamic methodology is emphasized.
Transcript:
"The failures of the Second Generation of Islamic Economists highlighted the need for a new approach to Islamic economics. It became clear that simply trying to modify or adapt capitalist systems with Islamic principles was not enough. What was needed was a fundamentally different methodology that could truly reflect Islamic values in the economic sphere.
The lecture argues that this new methodology must start by recognizing the importance of social change. Instead of focusing solely on economic models or policies, the new approach should emphasize the process of social transformation. This means understanding how societies evolve over time and how Islamic principles can guide this evolution toward a more just and equitable economic system.
One of the key points made is that Islamic economics should not just be about creating alternative financial instruments or avoiding interest. It should be about creating a system that genuinely reflects the ethical and moral values of Islam. This requires a deep understanding of both Islamic teachings and the social realities of the modern world. The new methodology should therefore be interdisciplinary, combining insights from economics, sociology, history, and religious studies to develop a comprehensive and dynamic approach to Islamic economics.
Furthermore, there is a need to disrupt the existing educational system, which often reinforces the status quo. The new methodology should focus on producing scholars who are not only well-versed in Islamic teachings but also capable of critically engaging with modern economic theories and practices. This approach aims to create a new generation of Islamic economists who can lead the way in developing a genuinely Islamic economic system."
Timing: 1:25:01 - End
Slides: 51-53
Content: The lecture concludes with a call to action, urging the creation of educational institutions that produce students with an Islamic mindset and worldview. The speaker advocates for disruptive innovation in education to achieve this goal.
Transcript:
"The lecture concludes with a strong call to action. It emphasizes that resolving the crisis in Islamic economics requires a collective effort to rethink and rebuild the discipline from the ground up. This isn't just about making superficial changes or slight adjustments to existing models; it's about developing a new framework that is firmly rooted in Islamic principles and capable of addressing the challenges of the modern world.
The key takeaway is that Islamic economics must move beyond the limitations of the past. The focus should be on developing a comprehensive system that integrates ethics, justice, and social welfare—core values of Islam—into the economic sphere. This involves not only academic work but also practical steps to implement these ideas in real-world policies and institutions.
The lecture also calls for a transformation in the way Islamic economics is taught and studied. It urges educational institutions to break away from traditional methods that often perpetuate outdated ideas. Instead, they should adopt a more dynamic and critical approach that encourages students to engage deeply with both Islamic teachings and contemporary economic challenges. The goal is to cultivate a new generation of thinkers and practitioners who can lead the way in creating an Islamic economic system that is not only viable but also exemplary in its justice and fairness.
In summary, the crisis in Islamic economics can be resolved by returning to the roots of Islamic knowledge, embracing a new methodology that focuses on social change, and committing to a long-term process of intellectual and practical transformation. This is the path forward for those committed to realizing the true potential of Islamic economics."
Ibn Khaldun: Effects of Conquest
Work Referenced: Muqaddimah
Summary Link: Recep Şentürk lecture series on Ibn-e-Khaldun’s Approach to Social Science
Polanyi, Karl: The Great Transformation: The Political and Economic Origins of Our Times
Summary Link: Summary of The Great Transformation
Related Article by Asad Zaman: The Rise and Fall of the Market Economy (March 15, 2009), Review of Islamic Economics, Vol. 14, No. 2, 2010, pp. 123-155.
Article Link: SSRN: The Rise and Fall of the Market Economy
Zaman, Asad: The Origins of Western Social Sciences (March 11, 2009), Journal of Islamic Economics Banking and Finance, Vol. 5, No. 2, pp. 9-22, 2009.
Article Link: SSRN: The Origins of Western Social Sciences
Zaman, Asad: Anti-Poverty Policies and Anti-Poor Philosophies.
Article Link: SSRN: Anti-Poverty Policies and Anti-Poor Philosophies
Zaman, Asad: An Islamic Approach to Inequality and Poverty.
Article Link: SSRN: An Islamic Approach to Inequality and Poverty
Zaman, Asad: Power/Knowledge and Economic Theories (2011), Lahore Journal of Policy Studies, Vol. 4, No. 1, pp. 71-78.
Article Link: SSRN: Power/Knowledge and Economic Theories
Rabin, Matthew & Thaler, Richard H.: The Psychology of the Near Miss: A Model of False Narratives, Perceived Control, and Recklessness (2001).
Referenced Study: Behavioral psychology insight into the "Near-Miss Effect."
Zaman, Asad: First Flaw of Enlightenment.
Blog Post Link: First Flaw of Enlightenment
Zaman, Asad: Colonization as Conquest of Knowledge.
Blog Post Link: Colonization as Conquest of Knowledge
World Economics Association: Flames of Revolution Put Out After GFC 2007.
Link to Article: WEA: Quo Vadis?
Zaman, Asad: Blindfolds Created by Economic Theories.
Blog Post Link: Blindfolds Created by Economic Theories
Zaman, Asad: The Rise and Fall of the Market Economy. Review of Islamic Economics, Vol. 14, No. 2, 2010.
Article Link: SSRN: The Rise and Fall of the Market Economy
Zaman, Asad: Islamic Approach to Humanity: Three Dimensional Methodology of Social Change.
Blog Post Link: Islamic Approach to Humanity
Wael Hallaq: The Impossible State: Islam, Politics, and Modernity's Moral Predicament (2012).
Referenced for the conflict between modern nation-states and Islamic ideology.