Philosophy East and West

Economics of an Islamic Economy by Rauf A. Azhar is, apart from its ridiculous price, in every way an excellent book. For many years now it has been difficult to point to a good book on the topic of Islam and economics, and now we have one. It is full of interesting comments in addition to the main thrust of the argument, and readers will find a great deal of information here to do with the theoretical basis of Islam quite unrelated directly with economics, and that is the author's main point. The notion of an Islamic economics can only be understood in relation to much wider issues, many of which have nothing directly to do with religion at all, such as the nature of society, how representative it is, what its views are on the redistribution of wealth, and so on. In particular, the author criticizes the prevalent idea that the Islamic economy should be highly dirigiste — something that has indeed often come about but has far more to do with local political conditions than anything essentially religious. There is no doubt that the Qur.an and many of the traditional sayings of the Prophet, and the legal judgments of leading Muslim thinkers, are based on the idea of a market, and so the main theoretical concepts of classical economics should not be abandoned when considering what the economy in an Islamic environment should resemble.

On the other hand, the fact that the Islamic economy is a market economy does not mean that it is capitalist in the same way that many other economies are; there is always scope for intervention on the part of communities to bring about desirable social and charitable ends, and indeed this has for a long time been enshrined in Islamic law. Also, it is important that individuals have the opportunity to participate freely in the market, and that there is a nexus of laws and sanctions to restrain the activities of those who do not act justly. Azhar is right in thinking that in much of the literature a hostility to the market and the freedom of the consumer often creeps in, especially when confronted by the inequalities that inevitably arise when people of different levels of skill and upbringing are in competition with each other for resources. A market can coexist with high levels of redistribution of wealth, provided that the market is allowed to operate. He suggests a bit unfairly that what is needed in Islamic jurisprudence is a theory of government, but that is probably not the place to look for it, whereas in Islamic political philosophy there is an extensive discussion of precisely that topic, so the resources do exist within Islamic literature for an account of how the state, and accordingly the economy, could be organized.

Here his treatment of the issue of the equivalence of riba, which is banned in the Qur.an, and interest is significant. Like several modern thinkers Azhar is not at all clear that interest as such is banned in Islamic law, as opposed to excessive interest. This brings out the contrast between an Islamic financial system and capitalism, where the former could be seen as embodying moral values through its regulation of the economy that is missing in the latter. The idea that interest is unearned money is certainly prevalent among many of the legal authorities, but if it is seen as merely deferred payment for goods and services it becomes far more acceptable. Interest [End Page 416] does not have to represent greed, since it could be regulated socially in the economy to ensure that both productivity and social cohesion are fostered. In any case, a refusal to offer interest would surely encourage the hoarding of wealth and discourage investment, and as a result society as a whole will be disadvantaged. It is not impossible to devise methods of regulating interest so that it does not burden borrowers and also hamstring them in the future if conditions suddenly change and...